1999 Edition of the Tax and Spending Data Book Overview

Modest growth in State and local revenues (1.3 percent over FY 1995), a 2.0 percent reduction in expenditures, and a 7.9 percent increase in total personal income resulted in Rhode Island State and local government revenues and expenditures for fiscal year 1996 declining from fiscal year 1995, as measured per $1,000 of personal income.

Due to this relatively strong growth in total personal income, moderate growth in State and local revenues, and an actual reduction in total governmental expenditures, Rhode Islandís ranking compared to all other states changed, at times significantly, within several tax and spending categories when compared to FY 1995.

In FY 1996 Rhode Islandís State and local government general revenues of $199.76 per $1,000 of personal income represented a 7.6 percent reduction from FY 1995, when general revenues were $216.11 per $1,000 of personal income. As discussed later in the report, Rhode Islandís relative ranking fell from 21^st to 28^th in terms of general revenues per $1,000 of personal income. On a per capita basis, State and local general revenues remained relatively unchanged, declining by 0.3 percent, from $4,776 in FY 1995 to $4,762 in FY 1996.

Compared to FY 1995, State and local government spending in every major category declined in terms of expenditures per $1,000 of personal income. Total expenditures of $236.51 per $1,000 of personal income in FY 1996 fell 9.2 percent from the FY 1995 spending level of $260.44. Elementary and secondary education expenditures declined 4.3 percent, highway spending dropped 22.9 percent, and public welfare spending dipped 10.0 percent.

Given the increase in Rhode Islandís personal income from FY 1995 to FY 1996, per capita spending ñ as opposed to spending per $1,000 of personal income ñ may offer a more meaningful basis for analyzing state and local government expenditure trends, especially since the Stateís population remained stable from FY 1995 to FY 1996. As the table above indicates, total expenditures per capita declined by 2.0 percent, while elementary and secondary education spending increased 3.3 percent, public welfare spending dropped 2.9 percent, police expenditures increased 5.7 percent, and fire expenditures grew by 2.5 percent per capita.

A. REVENUES

All general revenues for Rhode Island State and local governments were $199.76 per $1,000 of personal income, placing the State 28^th, slightly below the U.S. average of $200.53. In FY 1995 Rhode Island governments received $216.11 per $1,000 of personal income, 21^st in the nation and 4.4 percent above the U.S. average.

In terms of own source general revenues, however, the Ocean State was 6.9 percent below the national average, generating $150.87 per $1,000 of personal income, compared to the U.S. average of $162.01, a ranking of 41^st in the nation.

Rhode Island governments received approximately $48.89 per $1,000 of personal income from the Federal government in FY 1996, an amount 26.9 percent greater than the U.S. average of $38.52. This placed Rhode Island 16^th overall in terms of Federal funds received per $1,000 of personal income. On a per capita basis, Rhode Island received $1,166 from the Federal government, compared to the national average of $885, ranking the State 8^th, over 31 percent above the U.S. average.

Total State and local taxes for Rhode Island were $114.85 per $1,000 of personal income, compared to the U.S. average of $112.99. This amount placed Rhode Island 20^th in the U.S., a drop from 14^th overall in FY 1995. The per capita tax revenue for the Ocean State was $2,738, while the national average was $2,597, which placed the State 13^th in the nation.

Property taxes continued to be the most significant source of revenue for Rhode Island governments, with $48.75 per $1,000 of personal income going toward property taxes, 41.9% above the US average. This placed Rhode Island 5^th overall, no change in its ranking from FY 1995. The amount of property taxes collected per $1,000 of personal income declined by 6.3 percent from the FY 1995 level of $52.00 per $1,000 of personal income. Four New England states were ranked among the top five in terms of property tax collections per $1,000 of personal income, while Connecticut was ranked 11^th and Massachusetts placed 17^th.

Individual income tax revenue was $24.60 per $1,000 of personal income, a figure that placed Rhode Island 28^th among the 43 states with a personal income tax -- 2.2 percent above the national average of $24.08.

Revenue raised through the general sales tax was well below the national average, with general sales tax collections of $19.71 per $1,000 of personal income, compared to the U.S. average of $27.73. This placed Rhode Island general sales tax revenue collections at 71.1 percent of the national average, a ranking of 40^th among the 46 states with a general sales tax.

Combining these three primary sources of revenue ñ property, individual income, and general sales taxes ñ Rhode Island raised approximately $93.06 per $1,000 of personal income, compared to the national average of $86.15. This placed the Ocean State 10^th in the nation, 8.0 percent above the U.S. average. On a per capita basis, these three sources generated $2,218, compared to the U.S. average of $1,980. Rhode Island was ranked 8^th in the nation, up from 9^th in FY 1995, and 12.0 percent above the FY 1996 national average.

Overall, the tax burden for Rhode Islanders declined from FY 1995 to FY 1996. On average, Ocean State residents saw 11.5 percent of their personal income collected by State and local governments, compared to the U.S. average of 11.3 percent, and compared to Rhode Islandís FY 1995 rate of 12.0 percent. This placed the Stateís tax burden in FY 1996 at 20^th in the nation, down from a ranking of 14^th in FY 1995.

The tax burden calculation requires additional explanation. In some states, the manner by which taxes are levied results in the exporting of some taxes to non-residents. Alaska, for example, reports a tax burden of 15.9 percent. However, the majority of tax revenues received in Alaska are derived from business taxes associated with oil extraction and other natural resource-based industries. With no individual income tax and a limited sales tax, Alaskan residents face a much less onerous tax burden than one might assume from this measurement. The same is true, although to a much lesser extent, in other states.

Comparing tax burdens based on per capita and per $1,000 of personal income are two ways to measure the impact of a particular tax. One may also compare effective tax rates or prepare taxpayer profiles to measure and compare tax burdens across jurisdictions. Each of these measures is useful, but all have their limitations.

B. EXPENDITURES

Rhode Island State and local government expenditures were 3.2 percent above the national average per $1,000 of personal income and 7.0 percent above the national average per capita. State and local governments reported total expenditures of $236.51 per $1,000 of personal income and $5,638 per capita, compared to the U.S. average of $229.20 and $5,268, respectively. This placed Rhode Island 20^th on a per $1,000 of personal income basis and 13^th on a per capita basis, down from 14^th and 10^th in FY 1995.

Education expenditures of $63.39 per $1,000 of personal income were slightly below the national average of $65.41, while per capita education expenditures of $1,511 were about even with the U.S. average of $1,504. This resulted in a ranking of 36^th and 25^th, respectively.

State and local governments in Rhode Island spent approximately $45.41 per $1,000 of personal income on elementary and secondary education (ranked 32^nd), while higher education expenditures of $13.68 per $1,000 of personal income were below the national average of $16.52 (43^rd overall).

Highway expenditures, which include all types of road-related projects, were $11.24 per $1,000 of personal income, compared to a U.S. average of $12.97. In per capita terms, Rhode Island spent $268 on highways, compared to the national average of $298. These expenditure levels placed the Ocean State 42^nd and 41^st, respectively.

Rhode Island remained the leader among all states in spending for fire protection, with per $1,000 of personal income expenditures of $5.23 and per capita spending of $125, compared to national averages of $2.90 and $67. The Ocean Stateís fire protection expenditures were over 80 percent above the national average - per $1,000 of personal income and per capita.

Police expenditures were below the national average, with spending of $6.95 per $1,000 of personal income and $166 per capita, compared to the U.S. average of $7.33 and $168. This spending level placed Rhode Island 16^th per $1,000 of personal income and 15^th per capita.

The Ocean State ranked 9^th in public welfare expenditures per $1,000 of personal income and 8^th per capita, with spending levels of $36.76 and $876, respectively. Included in the public welfare category are: direct cash payments to beneficiaries of public welfare programs, including SSI, AFDC, and all other welfare programs; and vendor payments (including Medicaid and other hospital care programs) made directly to private vendors for commodities and services provided under welfare programs (see Appendix for additional details on this and all other tax and spending categories).

Rhode Islandís public health expenditures ranked 3^rd in the nation at $10.38 per $1,000 of personal income, compared to the U.S. average of $6.59. In per capita terms, the State spent $247 (also 3^rd in the nation) compared to the national average of $151. The public health category includes outpatient health services, other than hospital care; public health administration; research and education; treatment and immunization clinics; environmental health activities (e.g., air and water pollution control); and school health and ambulance services, if provided separately from fire protection services.

The six tables that follow present information on the following:

• Details of FY 1996 revenues for Rhode Island State and local government and the average for all 50 states, showing Rhode Islandís figures as a percentage of the national average (Table 1);
• Details of FY 1996 expenditures for Rhode Island State and local government and the average for all 50 states, showing Rhode Islandís figures as a percentage of the national average (Table 2);
• Aggregate percentage of personal income remaining after all state and local taxes have been collected for all 50 states ñ FY 1996 and FY 1995 (Table 3);
• State and local taxes by source per $1,000 of personal income for all 50 states ñ FY 1996 (Table 4);
• State and local taxes by source as a percentage of total state and local tax revenue for all 50 states ñ FY 1996 (Table 5); and
• Tax rates for select categories effective January 1, 1999 for all 50 states (Table 6).