Why Washington’s cuts will squeeze Rhode IslandFebruary 11th, 2011 at 12:31 pm by Ted Nesi under General Talk
There’s more grim budget tidings for Rhode Island in this article from today’s Wall Street Journal, as I’ll explain in a minute:
Both President Barack Obama and House Republicans are moving to rein in federal spending by reducing aid to states and cities, which would deepen their fiscal woes just as economic-stimulus funds from Washington are drying up. …
The 2009 federal stimulus bill helped plug state and local budget holes early in the recession and recovery, but those funds are waning. The states received $89.4 billion in federal stimulus funds for 2011, but will get $23.3 billion in 2012 and $14.3 billion in 2013.
Much of the stimulus went to fund state Medicaid programs, state departments of education and transportation and infrastructure projects. That freed up state funds for public safety, the courts, environmental protection and human service programs.
This could be a big problem for Rhode Island. Here’s why:
As the chart shows, the share of Rhode Island’s state budget paid for by the federal government has jumped from 28% to 37% since the recession began; over the same period, the share paid for by state tax revenue (the ol’ General Fund) fell from 49% to 37%.
Put another way, state funds are covering $2.94 billion of Rhode Island’s budget this year while federal funds are covering $2.90 billion. In a $7.9 billion budget, that’s basically a rounding error – Rhode Island is leaning heavily on Washington to balance its books.
Update: Governor Chafee’s spokesman, Mike Trainor, tells me this is a major concern of the new administration as it tries to close an estimated $295 million shortfall in next year’s budget.
“The sharp decrease in federal funding as ARRA [stimulus] funds end greatly intensifies the challenges that this administration faces,” he said. That’s why Chafee’s team “is looking at how much can be done on the expense side vis-a-vis reductions, as well as prospects for relief on the revenue side, such as the governor’s proposed idea of extending the sales tax,” he added.
(I teased Trainor for that artful phrasing about higher taxes – “relief on the revenue side” – but in fairness to him, he did say “tax” at the end of the quote there.)
Chafee’s budget proposal for 2011-12 is due on March 10.