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Rhode Island budget makers grapple with $800 million loss in projected revenue

Rhode Island House Finance Committee Chairman Marvin L. Abney spoke during a hearing on revenue estimates and federal funding Thursday.
Rhode Island House Finance Committee Chairman Marvin L. Abney spoke during a hearing on revenue estimates and federal funding Thursday.Screen shot

PROVIDENCE — In November, state fiscal advisers drew a straight line, projecting that Rhode Island wages and personal income would continue to grow at roughly 4 percent a year — a calm sea of placid progress.

But now, they have drawn a jagged line, reflecting a sharp plunge into negative territory followed by a spike upward before regaining equilibrium — a wild ride reflecting widespread economic and budgetary pain induced by the coronavirus pandemic.

“Those are clearly dramatic changes in the forecast,” House Fiscal Adviser Sharon Reynolds Ferland said Thursday as she updated the House Finance Committee on the state’s financial outlook.

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“I think that you see now that we have our work cut out for us,” House Finance Committee Chairman Marvin L. Abney, a Newport Democrat, said at the conclusion of a two-hour briefing. “It is doable, but we will need the perspective of everybody to make that happen.”

On Friday, the state’s Revenue and Caseload Estimating Conference slashed revenue estimated for this fiscal year and next by a combined total of nearly $800 million. On Tuesday, Governor Gina M. Raimondo said she does not see how the state government can avoid furloughs and layoffs given the size of that sudden budget gap.

And on Thursday night, the budget-writing House Finance Committee began to grapple with the details of those newly negative financial projections.

For instance, the latest projections call for state tax revenue for the current fiscal year to come in nearly $170 million or 5 percent below the November projections — including $83 million less from income taxes and $63 million less from sales taxes.

And the picture doesn’t get any prettier in fiscal year 2021, which begins in July.

The latest projections call for state tax revenue to come in $376 million below the November estimate — reflecting $200 million less from income taxes and nearly $131 million less from sales taxes.

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But that’s only part of the budgetary problem.

The COVID-19 outbreak forced Rhode Island to close the casinos in Lincoln and Tiverton that supply the state’s third-largest source of revenue. The latest projections call for gambling revenues to be down $108.5 million from November’s estimate, and they chop more than $130 million off the projection for next fiscal year.

It all adds up to one big budgetary crisis.

The latest projections slashed $281 million off the revenue estimate for the current fiscal year and nearly $516 million off the revenue estimate for the next fiscal year — for a grand total of $797 million less revenue.

A slide from Thursday's presentation by House Fiscal Adviser Sharon Reynolds Ferland.
A slide from Thursday's presentation by House Fiscal Adviser Sharon Reynolds Ferland.Rhode Island House of Represenatives

State officials are holding out hope that the federal government will provide more funding to fill at least part of that yawning budget gap.

Rhode Island is getting $1.25 billion from the federal Coronavirus Relief Fund — which equates to 12 percent of the state’s $10 billion budget. But state officials have said the money can’t be used to simply replace state revenue lost because of the pandemic; it can be used only for expenses related to COVID-19 incurred between March and December.

“So fairly limited,” Ferland said.

The money can be used to cover medical and public health needs and potentially for “secondary effects” — meaning “economic support to those suffering from employee or business interruptions," Ferland said.

But the money can’t be used to cover the state’s share of Medicaid expenses — something many states had hoped to do, she said.

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So state officials are looking to Washington for further funding that could plug the remaining budget holes.

Meanwhile, Ferland said the state’s “Rainy Day Fund” is seen as a potential solution to the current year budget gap.

That fund, which now contains about $200 million, is intended to be used as a last resort, and it can only be accessed under specific conditions — including if the current fiscal year revenues drop in May. But, she said, “Obviously, that has happened.”


Edward Fitzpatrick can be reached at edward.fitzpatrick@globe.com