The proposed FY 2009 general revenue request of $3.3 billion represents a 2.9 percent reduction from the FY 2008 revised supplemental budget.  As presented the budget proposes, for the first time since 1993, a year-over-year reduction in spending.  This is a significant change from previous years and signals recognition of the historic growth of spending.The FY 2009 state budget proposed by the Governor balances the fiscal year by substantial reductions in spending and limited non-tax revenue increases, laying the foundation needed to move the state away of the historical trend of using one time revenues to balance the operating budget.

The proposed budget is before the House Finance Committee which is planning on taking the budget up shortly. Fundamental fiscal reforms are needed if Rhode Island is to sustain necessary services, provide affordable educational and health care opportunities, and maintain the state’s credit worthiness.  Budgets must be realistically balanced and out-year projected deficits eliminated in order for the Ocean State to have the resources to invest in initiatives that will grow the state’s economy.  If Rhode Island is to successfully compete for jobs, grow its economy and sustain necessary government programs, it is essential that the state adopt a structural response to the budget crisis it faces.  

RIPEC suggest a two-step approach ed budget that accounts for the needs of the state while maintaining current revenues. To address some of the concerns, develop a back-up plan and outline a longer-term approach to government, RIPEC recommends a series of steps for the state to undertake as it implements its FY 2009 budget. To achieve this, RIPEC’s report calls for a “Fiscal Discipline Plan” that includes two parts: short-term spending control and long-term fiscal discipline.

Short-term spending control includes:

• Addressing personnel costs
• Conducting a purchasing review
• Responsibly reforming Medicaid

Long-term fiscal discipline requires the state to:

• Use an investment-based budgeting approach that focuses resources on programs that support educational initiatives so Rhode Island’s workforce has the skills to compete for 21st century jobs;
• Define a sustainable and affordable safety net that examines the appropriate means-testing criteria for entitlement programs and whether these criteria should vary by program, and determines what impact changes to human service initiatives will have on other state-supported programs;
• Develop a personnel system that places greater emphasis on performance, review the current classification system, and explore the feasibility of a defined contribution retirement plan;
• Explore alternative non-tax revenues such as fee- and fine-based income, and determine the adequacy of charges for services, the need for charges, and whether the state can expand alternative revenues; and
• Reform and refine the tax system in a comprehensive manner that ensure that revenues are adequate, sustainable and equitable.