RIPEC Releases Analysis of Fiscal Year 2015 Preliminary Closing

Rhode Island Public Expenditures Council

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RIPEC Releases Analysis of Fiscal Year 2015 Preliminary Closing

PROVIDENCE, R.I. (November 2015) – Today, the Rhode Island Public Expenditure Council (RIPEC) released an analysis of the preliminary, unaudited closing statement for Fiscal Year (FY) 2015. According to the preliminary closing statement, the state ended FY 2015 with a free closing surplus $47.8 million greater than anticipated in the FY 2015 revised budget. After accounting for a slightly larger transfer to the Budget Reserve and Cash Stabilization Fund, or “rainy day fund,” the state will have $46.4 million in additional resources available for FY 2016. The full report is available here.

The larger-than-anticipated FY 2015 closing surplus resulted from a combination of general revenues exceeding final estimates and state agencies spending less than they were appropriated in the FY 2015 revised budget. General revenues exceeded final estimates by $23.9 million, including $4.8 million in business corporation tax collections, $9.5 million in sales and use tax collections and $3.3 million in lottery revenues. Overall, total general revenues of $3.64 billion were 0.7 percent greater than the final estimate of $3.62 billion.

In addition to general revenues exceeding final estimates, general revenue expenditures by state agencies were less than was appropriated in the FY 2015 revised budget. Agencies with general revenue expenditures below their final appropriations included the Executive Office of Health and Human Services ($9.2 million), Department of Administration ($5.3 million) and the Legislature ($4.4 million). In total, general revenue expenditures of $3.46 billion were $21.5 million (0.6 percent) less than the FY 2015 revised budget’s total appropriation of $3.48 billion.

RIPEC’s report includes three considerations for policymakers as they weigh how to utilize the $46.4 million in additional resources available in FY 2016. First, RIPEC urges the state to avoid using the funds to establish programs that will require an ongoing financial commitment, but to instead consider using them to finance one-time expenses or projects that will contribute to economic development in Rhode Island. Examples of expenses or projects that fall into this category include investments in infrastructure requirements, such as information technology, road or bridge work, or other capital items. Reallocating the additional funds for capital projects could avoid the need to borrow money or complete projects sooner than anticipated.

The second consideration for policymakers included in RIPEC’s report is the potential for expenditure uncertainty in FY 2016 and beyond. Several state agencies, including the Executive Office of Health and Human Services, Department of Children, Youth and Families and Department of Behavioral Healthcare, Developmental Disabilities and Hospitals, exceeded their initial appropriations from the FY 2015 enacted budget and required supplemental funding later in the fiscal year. Additionally, testimony during the first day of the November 2015 Revenue and Caseload Estimating Conference indicated that general revenue expenditures for the Medicaid program are currently above budgeted amounts. In sum, policymakers must be aware that state agencies may require supplemental funding above the amounts included in the FY 2016 enacted budget, and that the additional resources may be needed for this purpose.

A final consideration for policymakers concerns the size of the state’s rainy day fund. Currently, the Rhode Island Constitution limits the size of the rainy day fund to 5.0 percent of unencumbered general revenues in each fiscal year. A recent research study released by the New England Public Policy Center housed at the Federal Reserve Bank of Boston found that Rhode Island’s rainy day fund is not large enough to protect the state budget against revenue downturns. With additional funds available, now may be an opportune time for policymakers to reassess the state’s rainy day fund to determine if it is appropriately sized or if changes are needed.