PROVIDENCE R.I. (October 2018) – On November 6, Rhode Island voters will be asked to consider three ballot questions, which would authorize $589.5 million in additional debt costs, accounting for estimated interest and borrowing costs. Today, the Rhode Island Public Expenditure Council (RIPEC) released a report intended to assist voters as they consider these ballot initiatives. The report provides an updated look at the state’s FY 2019 budget and out-years, based on the preliminary FY 2018 closing, as well as Rhode Island’s current debt position. The purpose is to provide voters with information regarding the current financial position of the state and other related issues, which may be helpful when deciding whether to approve the referenda. The report also provides a summary of the 2018 ballot initiatives, and includes a set of questions for voter consideration.
Due to lower-than-anticipated expenditures in FY 2018, the state’s opening surplus for FY 2019 is now expected to be approximately $14.3 million higher than anticipated ($45.5 million as opposed to the anticipated $31.3 million in the FY 2019 budget as enacted). Despite this, the state continues to face significant deficits in the out-years as expenditure growth continues to outpace revenue growth. According to the most recent projections available from the House Fiscal Advisory Staff, the out-year budget deficit is expected to reach $191.9 million by FY 2023. Furthermore, there are multiple risks to the out-year budget forecast, including the uncertain fiscal implications of competition from casino gaming in Massachusetts; inflation, utilization and technological changes in medical services; demographic shifts associated with an aging population; and ongoing concerns regarding the status of the Affordable Care Act at the federal level. Unless Rhode Island’s structural deficit is resolved, the state will continue to face difficult decisions regarding investments, funding requirements and short-term financial fixes.
The report includes a summary and list of questions to consider regarding the three bond proposals that will be presented to voters in November. If approved, the three bond proposals combined would authorize the state to borrow a total of $367.3 million (roughly $589.5 million in total borrowing costs) for capital projects. “It is necessary to consider the three bond referenda proposals in light of the state’s structural deficit, overall debt position, and the fiscal implications of bond repayment,” remarked John C. Simmons, Executive Director of RIPEC. “Voters should also consider how the bond referenda may impact Rhode Island’s long-term policy goals, and to what extent public investment in the proposed projects is likely to strengthen the state’s economy overall.”
Capital investments provide infrastructure improvements, and help boost the state’s economy. However, how the state funds these projects – particularly with regard to increased debt – is an important consideration. Although the state has made significant improvements in debt management in recent years, it still ranks in the top third of the country for debt per capita and as a share of personal income. Ultimately, voters must weigh the benefits of capital investment against the long-term costs, especially given the state’s fiscal position.
RIPEC has traditionally not taken positions on bond referenda questions. However, RIPEC encourages taxpayers to consider the merit of the proposals themselves, in addition to whether bond financing is an appropriate funding mechanism.