RIPEC Brief Finds Governor's FY 2027 Budget Holds State Spending in Check as Key Tax and Borrowing Decisions Await General Assembly
On January 15, 2026, Rhode Island Governor Daniel J. McKee released his proposed state budget for fiscal year (FY) 2027, which begins on July 1, 2026, along with budget revisions for the current fiscal year, FY 2026. Over the coming months, the Rhode Island General Assembly will review the governor’s proposal and enact a final taxing and spending plan.
Key Takeaways
- Spending growth is relatively restrained after a period of extraordinary increases, with total expenditures rising by 3.6 percent and state general revenue spending growing by 2.5 percent. Spending from federal sources jumped 7.8 percent.
- A new proposed “millionaire’s tax”—at 8.99 percent on individual and business pass-through income over $1.0 million—would rank Rhode Island’s top income tax rate as the 8th highest among U.S. states.
- Totaling $600 million, the governor’s proposed bond referenda would be the largest in the state’s history, $200 million more than the next highest bond package approved by voters.
- Future projected deficits persist—rising from $237.4 million in FY 2028 to $537.0 million in FY 2031—driven by the use of one-time funds for recurring costs and projected spending outpacing revenues.
- Due to projected enrollment declines from eligibility changes in H.R. 1, Medicaid spending would slow considerably in FY 2027, increasing by 2.5 percent in the governor’s plan, after projected growth of 8.2 percent in FY 2026.
- The impacts of, and response to, H.R. 1 are a large focus of the governor’s budget proposal, with expenditures of $45 million for SNAP and Medicaid compliance and benefit maximization, $9.5 million for HealthSourceRI subsidies, and $10 million to hospitals for uncompensated care.
- General revenue spending on K-12 education is set to increase by $17.5 million (3.1 percent), but reliance on preliminary enrollment and student poverty counts will likely require substantial revisions to the funding plan once updated numbers become available.
