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RIPEC report shows dire state finances

With Rhode Island facing a $290 million budget shortfall, the Rhode Island Public Expenditure Council released a report last week on the state's financial outlook. Though the information in the report is not new to officials, it provides a comprehensive overview of the fiscal challenges facing the state.

"I don't think anything in the report is necessary a surprise," said Ashley Denault MPP'07, policy analyst for the non-profit public policy organization. "What we've done is kind of outlined a way that we think the state needs to start approaching the budget, taking a longer-term look."

Rhode Island is the highest spending state per enrollee in Medicaid, according to a study by the Kaiser Family Foundation. Growth in Medicaid has exceeded growth in other areas of the state's budget.

Denault attributed high expenditure rates to the structure of Rhode Island's Medicaid program. Due to rapidly increasing medical costs, Medicaid takes up an increasing share of Rhode Island's budget. But decisions made at the state level can control the growth of Medicaid spending, she said, adding that reducing Medicaid expenditures requires determining better ways to fund Medicaid for both the state and its patients.    

The report also suggests Rhode Island avoid tax increases that would put it at a disadvantage compared to neighboring states. The state's tax policy should not be merely a short-term attempt to increase revenue, but rather focus on efforts to "attract and retain business," according to Denault.

The three largest outlays in Rhode Island's budget are human services, employee and operating costs and local aid, the report found. The first two categories have grown substantially over the past decade. Local aid, which includes state support for municipalities and education aid, has been cut in recent years due to chronic deficits.

The  council emphasizes "realigning the state's priorities with regard to the expectations of local government" to cope with cuts in funding for the state's 36 municipalities, Denault said.

Gov. Lincoln Chafee '75 P'14 has studied the budget issue closely, said Samuel Levitt, Chafee's communications officer.

The governor seeks a "long-term investment-based approach" to spending that will balance competing needs to reduce deficits, maintain existing programs and promote economic growth, Levitt said.

But the current budget deficit is not just the result of the overspending by the state government.

Severe revenue declines due to a tough economy have exacerbated the state's deficit, Denault said. Since the recession hit Rhode Island before the rest of the country, its tax revenue saw declines earlier than other states.  

"We're seeing the revenues recover," Denault said, "but a lot of the current recession is related to the revenues, not necessarily to the expenditure."


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