The FY 2012 budget provides an opportunity for the state to refocus its investments, realign its priorities and focus on long-term investments. The past three years have seen historic revenue declines that put significant pressure on the state’s budget. However, the state’s structural budget deficit – expenditure growth that exceeds revenue growth – has been a perennial problem that must be addressed. The state’s past budgeting practice of relying on one-time revenues and short-term solutions has done little to address the structural budget deficit, and has led some investment companies to downgrade the state’s bond ratings. More importantly, continued deficits restrict the state’s ability to make strategic investments in Rhode Island’s future.
A number of new initiatives are included in the Governor’s FY 2012 budget, many of which require an ongoing investment on the part of the state. While these programs all may have merit, RIPEC recommends that policymakers first consider each new program or revenue proposal in the context of how well each program fits with the state’s priorities and capacity. The state’s ability to support program expansion, particularly without a specified plan of action with regard to long-term fiscal support, may require revaluation and reprioritization of these new programs, as well as examination of the state’s current programs.
As a second step, RIPEC recommends that policymakers determine whether aspects of the programs may be implemented without requiring additional revenues. For example, the reporting requirements of the MAST program do not require additional investment on the part of the state or municipalities. At the same time, the state should consider providing municipalities with the ability to modify pension and health care costs, the funding of which is at the core of the MAST proposal. Similarly, there are alternate means by which the state could fund the proposal to create a dedicated funding source for the DOT.
Funding of the state’s recently-enacted education funding formula should be a priority. In addition to fulfilling the statutory requirement to implement the formula in FY 2012, support of the education funding formula represents the kind of long-term investment RIPEC has advocated. However, ongoing support for the formula should come from ongoing revenues, for example, through a mechanism similar to the proposed MAST program.
See the report: Proposed FY 2011 and FY 2012 Budget Approach