The budget impasse in Rhode Island is not an immediate concern for the state’s rating, according to S&P Global Ratings.
S&P did say the impasse would leave the proposed fiscal 2018 spending plan imbalanced absent additional revenues or expenditure cuts. Rhode Island, by state law, is operating under the fiscal 2017 budget.
Regardless of the status of the new budget, general obligation bond debt payments are paid if the prior year’s appropriations are enough to cover principal and interest payments, S&P said Thursday.
S&P rates Rhode Island AA with a stable outlook.
New revenues that would be provided under the fiscal 2018 plan are at risk including the proposed increase in the state’s cigarette tax by 50 cents per pack and the collection of online sales tax or reporting of sales to Rhode Island customers by remote sellers.
The cigarette tax is supposed to be implemented starting Aug. 1 and the online retailer tax 15 days after the enactment of the new budget. State officials expect the tax to create an additional $7.5 million in revenue while the remote-sellers tax would generate $19.7 million.
The proposed expenditures could be implemented later in the year if needed without affecting total funding, said S&P. The 2018 budget included an aid increase of $5 million in municipal aid to cities and towns.
Of that aid, direct municipal aid to cities and towns increased $3.2 million and pass-through aid to cities and towns grew $1.8 million. Total education aid throughout the state increased $45.5 million.
S&P says local governments and schools relying on higher aid could have “near-term liquidity pressures” if the budget impasse continues.
This week, Senate President Dominick Ruggerio, D-Providence, and House Speaker Nicholas Mattiello, D-Cranston, met this week for the first time since the impasse began June 30.
The two are expected to meet again shortly to try and end the debate that started when the Senate made last-second changes to the budget affecting Mattiello’s chief initiative, the phaseout of the state’s car tax.