PROVIDENCE – On Wednesday, May 30, 2012, RIPEC will release its comments on the May 2012 Revenue and Caseload Estimating Conferences, and their projected impact on the FY 2013 budget. The May Conferences both significantly increased revenues and decreased projected medical assistance expenditures. Combined with a larger-than-expected FY 2011 surplus and changes in agency expenditures, the changes from the May REC/CEC resulted in a projected surplus of approximately $100 million for the current fiscal year. If the Assembly does not elect to use these funds in FY 2012, coupled with the net projected effect of the May changes, RIPEC estimates that the FY 2013 budget would open with a net positive of roughly $35 million.
As Rhode Island’s financial condition continues to improve, the state must consider the effect economic choices it makes today will have on its ability to weather an economic downturn in the future. It is often the case that when government experiences fiscal good times, state and local officials over-commit revenues in the form of increased spending or tax cuts. Unfortunately, when the economy cools, governments must then reverse these initiatives. When evaluating the FY 2013 budget, consideration should be given to which policies effectively position the state to become more competitive. The state is now positioned to pursue an investment-based strategy designed to bolster the state’s infrastructure, encourage job creation, and support investments in the state’s workforce. Moreover, these investments should be coupled with an aggressive agenda to streamline government and make it more effective and efficient.
Additionally, it appears that a significant portion of the projected surplus is related to one-time revenue sources, specifically, increased withholding from the state’s two lottery winners, one-time business corporation payments, and unprecedented lottery ticket sales due to a record Mega Millions jackpot. While these one-time revenues will provide a much-needed bridge for the state as it regains its fiscal footing, one-time revenues should be used to fund one-time expenditures and should not be used to restore cuts to programs that will require on-going funding. Reinstituting these programs, without ensuring adequate revenues will adversely impact the state, and could limit the options available to policymakers if revenues do not grow at their current pace or decline again.