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Rhode Island’s budget basics
According to the National Association of State Budget Officers (NASBO), Rhode Island’s total expenditures in fiscal year (FY) 2020 were $12.1 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 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 $11.3 billion in FY 2018 (the most recent year census data were available), or $10,641 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 $9,801.
Rhode Island’s largest spending areas per capita were public welfare ($3,006) and elementary and secondary education ($2,403). 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 $11.7 billion in FY 2018, or $11,061 per capita. National per capita general revenues were $10,071. Rhode Island uses all major state and local taxes. After federal transfers, Rhode Island’s largest sources of per capita revenue were property taxes ($2,431) and charges ($1,494), such as state university tuition and highway tolls.
Rhode Island’s politics
Governor Daniel McKee, a Democrat, assumed the office in March 2021, following the departure of former Governor Gina Raimondo, who left office after being confirmed as commerce secretary. Former Governor Gina Raimondo was elected in 2018 with 53 percent of the vote. The next gubernatorial election is in 2022.
Democrats control both the House of Representatives (65 Democrats to 10 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 2022 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.
- Former Governor Raimondo called for legalizing and taxing marijuana in 2019. The former 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). Former 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 Raimondo released her FY 2021 budget proposal in January 2020. The proposed budget included $10.2 billion in total spending, a 2 percent increase from FY 2020.
The legislature enacted the FY 2021 budget in December 2020. Before the budget was enacted, each month from July to December the state spent an amount equal to one-twelfth of the previous fiscal year’s expenditures. The enacted budget included $12.7 billion in total spending for the entire year, a $2.5 billion increase over the governor’s proposed budget. Around half of the additional expenditures were funded by federal CARES Act money. No tax or fee increases were included in the budget.
Governor Raimondo gave her State of the State address in February 2021, but left office shortly thereafter when she was confirmed as commerce secretary. Then Lt. Governor Daniel McKee assumed the office in March, and now Governor McKee released his FY 2022 budget proposal later that same month. The governor’s budget proposes $11.2 billion in total spending, less than what was enacted in FY 2021 but more than what Governor Raimondo proposed for the fiscal year before the pandemic. His spending plans do not include the federal funds Rhode Island will receive from the American Rescue Plan, which was passed at roughly the same time as the governor’s budget was presented. Governor McKee’s proposal does not include any major increases to existing taxes but does propose legalizing and taxing marijuana sales.
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 $60,837 in 2020, ranking 16th among the states. It was above the national average of $59,729, but below the New England regional average of $73,961. The state’s median household income (five-year estimate) was $67,167 in 2019, ranking 16th among the states and above the national average of $62,843. Rhode Island’s poverty rate was 12.4 percent in 2019 (five-year estimate), below the national rate of 13.4 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 $42,595, and its poverty rate was 21.8 percent; the city of Warwick’s median household income was $73,757, and its poverty rate was 6.2 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.)
Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Rhode Island, the average unemployment rate in 2020 was 8.6 percent for white residents, 9.4 percent for Black residents, and 15.2 percent for Latino residents.