Rhode Island’s budget basics
According to the National Association of State Budget Officers (NASBO), Rhode Island’s total expenditures in fiscal year (FY) 2019 were $10.1 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2019 were $2.1 trillion, ranging from $4.5 billion in South Dakota to $311.3 billion in California.
Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.
Per the US Census Bureau, Rhode Island’s combined state and local direct general expenditures were $10.9 billion in FY 2017 (the most recent year census data were available), or $10,302 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.
Rhode Island’s largest spending areas per capita were public welfare ($2,934) and elementary and secondary education ($2,376). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.
Rhode Island’s combined state and local general revenues were $11.2 billion in FY 2017, or $10,639 per capita. National per capita general revenues were $9,592. Rhode Island uses all major state and local taxes. After federal transfers, Rhode Island’s largest sources of per capita revenue were property taxes ($2,407) and charges ($1,348), such as state university tuition and highway tolls.
Rhode Island’s politics
Governor Gina Raimondo, a Democrat, was elected in 2018 with 53 percent of the vote. The next gubernatorial election is in 2022.
Democrats control both the House of Representatives (66 Democrats to 9 Republicans) and Senate (33 Democrats to 5 Republicans), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in Rhode Island. The entire legislature is up for election in 2020 because both representatives and senators serve two-year terms.
Rhode Island’s budget institutions, rules, and constraints
Rhode Island uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. Rhode Island further limits spending with a budget rule that diverts a percentage of revenue to the state’s rainy day fund, but the limit may be overridden by a simple legislative majority. Rhode Island also limits total authorized debt and debt service incurred by the state.
(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)
Rhode Island’s recent fiscal debates
- In 2011, Rhode Island made significant changes to its public pension system. The Rhode Island Retirement Security Act, pushed by then-treasurer Gina Raimondo, included limiting cost-of-living adjustments to only once every five years until the state’s fund is 80 percent of its projected expenditures; raising the retirement age for state workers; requiring public employees to contribute to an individual retirement account in addition to their pension (a hybrid plan); and allowing municipalities to suspend cost-of-living adjustments entirely if their plans were in “critical condition.” Labor unions strongly opposed the reforms and challenged the law several times in court; some cases took until 2019 to resolve. In 2014, as part of an agreement between the state and unions, the cost-of-living adjustments were moved to once every four years. In 2019, the state reported the pension fund was slowly growing and “on track” to meet liabilities. However, the state projects the pension fund will not reach the goal of 80 percent funding until 2031.
- Governor Raimondo called for legalizing and taxing marijuana in 2019. The governor’s plan recommended levying both a 10 percent excise tax and the state’s 7 percent general sales tax on recreational marijuana sales, plus enacting a weight-based tax on wholesale transactions ($10 per ounce for flowers; $3 per ounce for trim). Governor Raimondo pitched her plan as the “nation’s most restrictive adult-use marijuana legalization framework,” and said her proposal was made “with reluctance” and only because Rhode Island’s neighbors (Maine, Massachusetts, and Vermont) had legalized the drug. Still, the legislature did not include the proposal in its budget, and the House speaker said there was no desire among lawmakers to legalize marijuana.
Rhode Island’s current budget
Governor Gina Raimondo announced her proposed FY 2020 budget in January 2019. Her budget and 2019 state of the state address emphasized new education spending, including funds for school construction, universal preschool, an English-language learners programs, the Rhode Island Promise scholarship, and several job-training programs.
The legislature passed its budget in June 2019, but only after publicly criticizing the governor for not adequately controlling spending. The enacted budget included new funds for education programs but did not support many of the governor’s job training proposals. The governor signed the budget after considering a veto and lamented the legislature’s “shortsighted changes” in her signing statement.
For more on Rhode Island’s budget, see
Rhode Island’s economic trends
Rhode Island’s per capita income (per the Bureau of Economic Analysis) was $56,542 in 2019, ranking 19th among the states. It was below both the national average of $56,663 and the New England regional average of $70,683. The state’s median household income (five-year estimate) was $63,296 in 2018, ranking 18th among the states and above the national average of $60,293. Rhode Island’s poverty rate was 13.1 percent in 2018 (five-year estimate), below the national rate of 14.1 percent.
Although Rhode Island’s averages tell a story about the entire state, Rhode Island is composed of diverse localities. For example, the city of Woonsocket’s median household income was $39,932, and its poverty rate was 24.1 percent; the city of Warwick’s median household income was $70,490, and its poverty rate was 6.3 percent.
Rhode Island’s unemployment rate historically tracks the national rate. The state’s rate was above the national average in the years surrounding the Great Recession, but it has again paralleled the US rate for the past few years. (See how COVID-19 is affecting state employment and earnings data.)