RIPEC’s publication How Rhode Island’s State and Local Expenditures Compare – 2008 Edition compares Rhode Island’s expenditures – per $1,000 of personal income and per capita – with those of the other 49 states and the United States average. This year’s report includes data for both fiscal years 2006 and 1996, based on the United States Census Bureau, Government Finance data. FY 2006 is the latest year for which national data are available.
Rhode Island’s direct general expenditures in FY 1996 and FY 2006 were higher than the national average, both on a per capita, and per $1,000 of personal income, basis. Similar to prior years, the Ocean State spent more by either measure for public welfare programs, elementary and secondary education, and public safety than most other states. As is the case throughout the country, the two largest expenditure categories for state and local governments were Medicaid/vendor payments and Elementary/Secondary Education. However, in FY 2006 these combined expenditures accounted for 36.5 percent of all direct general expenditures nationally, while in Rhode Island they accounted for 44.7 percent of direct general expenditures.
Expenditures for Medicaid/vendor payments remain the primary driver of expenditure growth in Rhode Island – while they accounted for just 11.2 percent of the state’s budget in FY 1996, Medicaid/vendor payments were 21.0 percent of all direct general expenditures in FY 2006. Rhode Island’s Medicaid/vendor payment expenditures increased in relative terms as well; Rhode Island ranked 16th highest per $1,000 of personal income in FY 1996, whereas the state ranked 2nd highest in FY 2006 (only Maine had higher Medicaid/vendor payment expenditures). Medicaid/vendor payments in Rhode Island ranked the Ocean State 5th highest in FY 2005 per $1,000 of personal income.
Cash assistance payments continue to decline, primarily due to welfare reform efforts. Rhode Island’s ranking declined from 6th highest in the country ($5.60 per $1,000 of personal income) to 9th highest in FY 2008 ($3.21 per $1,000 of personal income). However, the rate of decline has been slower in Rhode Island than in other states, and the Ocean State continues to spend above the national average and above its neighboring states.
Rhode Island did not have high expenditures across the board. In FY 2006 the state ranked in the bottom ten states for expenditures per $1,000 of personal income on highways, higher education and parks and recreation. Furthermore, while the rest of the country has increased highway spending, Rhode Island has seen highway expenditures decline as a percent of the budget, and on a per $1,000 of personal income basis.
These expenditure trends reflect policy choices by the state over the past decade. However, the economic conditions facing Rhode Island, and the taxpayers of this state, require fiscal discipline; resources are strained and these policy directions may not be sustainable given the current economic outlook and budget shortfall.