Rhode Island not alone in short-term budget maneuvering

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In an unorthodox move, yet increasingly common among states during the COVID-19 pandemic, Rhode Island’s legislature approved a supplemental $11.8 billion budget for fiscal 2020 to buy some time.

The bill combines new federal funding, $120 million from the state’s rainy-day fund — roughly 60% of its balance — and unspent funds throughout state agencies to close about a $250 million budget gap largely due to revenue losses related to coronavirus.

The crisis "devastated our economy and the lost revenues placed tremendous stress on the current year budget, forcing us to make many tough choices," said House Speaker Nichlas Mattiello, D-Cranston.

After House of Representatives and Senate approvals of 60-13 and 31-7, respectively, on Thursday, the bill went to Gov. Gina Raimondo. Lawmakers, partitioned on the floor because of the virus, were convening in Providence for the first time in three months.

Overall, the supplemental budget increases the state budget from $9.97 billion to $11.79 billion, largely as a result of the expenditure of federal funding, most of which has already occurred.

The crisis “devastated our economy and the lost revenues placed tremendous stress on the current year budget, forcing us to make many tough choices in order to balance our books by June 30,” said House Speaker Nicholas Mattiello, D-Cranston.

Lawmakers intend to take up the fiscal 2021 budget over the summer when a clearer picture of rescue funding from Washington could emerge, along with state income tax receipts after the filing deadline was moved to July 15. The gap for that budget could exceed $500 million.

“Once we receive further guidance on additional federal assistance to all states, we will work to enact a responsible budget for the next fiscal year with the appropriate investments in education aid, municipal assistance and programs to strengthen our economy,” Mattiello said.

Republicans, heavily outnumbered in both chambers, accused the Democrats of rushing the budget bill, which passed within a week.

“The vast majority of people in that room have no idea what’s in it, so if you break it, you buy it,” House Minority Leader Blake Filippi, R-Charlestown, told reporters. “Everyone who votes yes owns what’s in this bill, and whatever comes out in the months ahead is theirs.”

Several states, in wait-and-see mode as the U.S. Senate considers the $3 trillion HEROES Act — Washington’s latest rescue package — are engaging in what Volcker Alliance senior vice president William Glasgall called “real-time budgeting.”

“States are passing budgets that are designed to be reviewed after three months, four months, five months,” Glasgall said Thursday on a webcast hosted by the Volcker Alliance and the Penn Institute for Urban Research. “There are fiscally stressed states doing this, and there are fiscally very sound states like Vermont that are essentially doing this.”

Rhode Island’s budget also accounts for $1.4 billion in new unemployment claims, with federal funds covering most of it.

The bill distributes $50 million of the state’s $1.25 billion in CARES Act funding to school districts, weighted toward those with high concentrations of low-income students. This funding is in addition to $41.7 million already earmarked by Congress for schools in the CARES Act funding, which the budget assumes will replace part of the state’s obligations to local school districts.

In addition, the bill shifts about $35 million in personnel costs to CARES Act funding for state employees whose duties shifted to pandemic response. Similarly, state higher education institutions will receive $29.5 million of CARES Act funding, enabling the state to reduce its support by $15 million.

Reallocated unspent funds from agencies include $17.8 million from the Rhode Island Infrastructure Bank, $300,000 from Department of Environmental Management bond issues, $500,000 from forfeited assets collected by the Department of Behavioral Healthcare, Developmental Disabilities and Hospitals, and $15 million from the Rebuild RI tax credit program.

Part of the state’s budget gap is attributable to billing and compliance problems at the Eleanor Slater Hospital psychiatric facility.

From August until February, the hospital fell out of compliance with federal Medicaid rules. Other patients could not be billed through Medicaid or Medicare as expected, resulting in $50.1 million in revenue losses that had to be accounted for in the supplemental budget. Unresolved prior billing problems account for another $14.6 million.

The state could face an additional $12.2 million in costs if the Executive Office of Health and Human Services does not meet a June 30 deadline to address the billing concern, which Raimondo is working on.

Moody’s Investors Service rates Rhode Island’s general obligation bonds Aa2. Fitch Ratings and S&P Global Ratings rate them AA.

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State budgets Rhode Island Coronavirus State of Rhode Island Gina Raimondo