Carcieri forecasts years of deficits for R.I.

THE ANNUAL DEFICIT IN Rhode Island's state budget is projected to grow from 12.2 percent of state spending in fiscal 2012 to 13.1 percent in 2015. /
THE ANNUAL DEFICIT IN Rhode Island's state budget is projected to grow from 12.2 percent of state spending in fiscal 2012 to 13.1 percent in 2015. /

PROVIDENCE – Rhode Island’s state government faces years of red ink if it continues with the policies outlined in the $7.5 billion budget proposed Tuesday by Gov. Donald L. Carcieri.

“Frankly, this problem is so huge right now, it’s very difficult to resolve,” Rosemary Booth Gallogly, the state budget officer, told reporters on Tuesday.

The deficit in Rhode Island’s budget – meaning the shortfall between how much the state expects to spend and how much revenue it expects to take in – is projected to be $362.2 million in fiscal 2012 and increase each year after that. The deficit would reach $535.7 million by fiscal 2015, the last year for which the administration offered projections.

In percentage terms, the deficit would equal 12.2 percent of state spending in fiscal 2012 and 13.1 percent in fiscal 2015. State spending is forecast to rise at an average rate of 6.3 percent per year, triple the expected rate of inflation.

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The main drivers of the projected deficit for the 2012 fiscal year – which starts in July 2011 – are the withdrawal of federal stimulus dollars and extra Medicaid support; the cost of employee concessions, such as a delayed pay raise, which the administration negotiated last fall; and the cost of replenishing the capital projects fund, Gallogly said.

While acknowledging that its proposal would not balance the budget, the Carcieri administration argued that at least it would not exacerbate the problem.

“Although the five-year financial projections show serious deficits in fiscal 2012 and beyond,” Carcieri’s proposals “do not worsen the long-term projections,” the administration said in its budget blueprint.

By definition, forecasts are educated guesses – they can surprise on either the upside or the downside. The administration said the biggest risk Rhode Island faces is that the state economy will take longer than expected to rebound from the recession, keeping tax revenue low even as demand for services stays high.

On the other hand, Gallogly said the forecast does not include potential savings from the Medicaid waiver the administration has received from the federal government. She also said the projected growth in tax revenue is conservative, and thus could top expectations.

Carcieri also tried to find a silver lining in the fiscal crisis plaguing state government.

“As dismal as the current situation appears, this challenging time can also be viewed as a period of great opportunity,” the budget document says. “The strain being felt by many Rhode Islanders has caused leaders to examine state and local government more critically to see if all of the services provided are needed and, if so, if there are more cost-effective ways to provide the necessary services.”

Additional information, including the full budget document, is available at budget.ri.gov.

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