PROVIDENCE, R.I. – The Rhode Island Public Expenditure Council released today an analysis of “How Rhode Island Compares” to the U.S. and New England on state and local revenues and expenditures, using the most recent data available from the U.S. Census Bureau (fiscal year 2018). In addition to comparing the Ocean State’s revenues and spending to the nation and region on a per capita basis and per $1,000 of personal income, historical comparisons are made with FY 2013 data.

“Rhode Island’s revenue and spending patterns are in good part determined by policy choices, and so policymakers should take note of the areas in which we diverge from the nation and region,” commented Mike DiBiase. “The state diverges from the nation in several areas, including our relatively high reliance on property taxes and comparatively high spending on K-12 education,” he continued.

Highlights of RIPEC’s report, and findings for policymakers to consider, include:

• Rhode Island’s total state and local revenues of $13.6 billion in FY 2018 were the second highest in New England on a personal income basis and fourth highest in per capita terms.

• In FY 2018, Rhode Island had a higher reliance on tax revenues than the U.S. (45.0 percent of total revenues compared to 43.1 percent) but was less tax reliant than any other New England state. Rhode Island’s reliance on tax revenues has increased since FY 2013, and, at the same time, the state’s comparatively outsized reliance on lottery revenues has declined. Policymakers should consider shifting Rhode Island’s revenue mix to rely more on non-general revenue sources to lessen its reliance on taxes.

• Like other New England states, Rhode Island has an outsized reliance on property taxes relative to the U.S. (42.3 percent of total tax revenues, compared to 32.8 percent). The share of total taxes attributable to property taxes fell from FY 2013 in large part because of the 2010 education funding formula, which has decreased the share of local dollars going towards K-12. Policymakers should consider further reducing the state’s reliance on property taxes, as it presents a challenge to equitably funding K-12.

• Education expenditures make up the largest portion of Rhode Island’s total expenditures (27.2 percent). Like the New England region generally, Rhode Island overspends compared to the U.S. on K-12 education (13.1 percent higher on a per capita basis) but underspends on higher education (29.9 percent lower on a per capita basis). Despite investing more on K-12 than the national average, Ocean State student proficiency test scores are on par with or below the nation overall, with particularly poor outcomes for students in urban schools, raising a serious question as to the state’s return on its investment. Rhode Island’s relative under investment in higher education also raises concerns, since economic development and growth are tied closely with education levels. 

• In FY 2018, social services and income maintenance expenditures were the second largest spending category in Rhode Island (26.7 percent of all expenditures) and somewhat high relative to the nation (6.0 percent higher on a per capita basis). Expenditures in this category grew at a rate far exceeding total expenditure growth (38.1 percent vs. 16.1 percent) between FY 2013 and FY 2018, in large part due to the expansion of Medicaid under the 2010 Affordable Care Act.

• Public safety expenditures made up only 8.3 percent of Rhode Island’s total expenditures in FY 2018, but the Ocean State spent more in this category than any other New England state. Compared to the U.S., Rhode Island spent 22.8 percent more in per capita terms. Spending in this category was driven largely by Rhode Island’s high police and fire protection expenditures (the Ocean State’s fire protection expenditures are the highest in the nation). Public safety spending moreover grew at a higher rate than total expenditures between FY 2013 and FY 2018 (20.1 percent vs. 16.1 percent). State and municipal policymakers should focus on at least slowing the growth of public safety expenditures to bring them more in line with regional and national benchmarks.

• Rhode Island’s transportation expenditures made up 4.6 percent of all state and local spending in FY 2018 and were low for the nation but relatively typical for New England. Rhode Island’s roads and bridges are among the worst in the nation, but the state has embarked on an ambitious RhodeWorks program to invest more in roads and bridges, and the impact is already evident as transportation spending grew at a higher rate than total expenditures (22.5 percent vs. 16.1 percent) between FY 2013 and FY 2018.

With “How Rhode Island Compares,” RIPEC is introducing the first in a series of interactive datasets on its website. 50-state breakdowns of key revenue and expenditure data that correspond with this report are available here.

An executive summary is available here

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