PROVIDENCE, R.I. (WPRI) – Rhode Island lawmakers got a very early Christmas present on Friday: significantly more money to spend as they write a budget this spring.
The number-crunchers who took part in the state’s semiannual Revenue Estimating Conference announced Friday afternoon that they expect state revenue to be $107 million higher in the current 2014-15 budget year and $37 million higher in the 2015-16 budget year than they projected last November, the last time the met.
Legislative leaders said the new revenue estimates, when combined with about $30 million in lower-than-expected spending on social services, will free up about $173 million in surplus funds that can be used over the next two years.
The more buoyant tax revenue means Gov. Gina Raimondo and lawmakers are looking at a less dire picture than they were when the governor unveiled her budget proposal in March. At the time her aides estimated the size of the state’s 2015-16 budget deficit at $190 million.
“We haven’t seen this for a while,” John Simmons, executive director of the Rhode Island Public Expenditure Council think tank, told WPRI.com.
In a statement issued just after the new estimates arrived, Senate President M. Teresa Paiva Weed outlined five priorities she thinks the new money should be put toward: exempting new and low-revenue companies from the $500 minimum corporate tax; increasing local aid to keep property taxes down; providing bridge funding to restructure Medicaid; and spending more on education and transportation.
“Rhode Island’s economy is gaining momentum,” Paiva Weed said. “The increased resources should be invested wisely in ways that will fuel continued economic growth now and in the long term.”
“When entrepreneurs turn a profit, they reinvest in their businesses for future success,” she added. “Rhode Island should do the same, investing surplus funds in long-sought reforms to make the state more competitive, and in the fundamentals that build a thriving economy: education, the workforce and infrastructure.”
Other possible uses for the new money: a bigger earned-income tax credit for low-wage workers, as suggested by Raimondo, and the elimination of her so-called “Taylor Swift tax” on expensive second homes, as urged by House Speaker Nicholas Mattiello. He also wants a tax break on Social Security benefits for middle-class retirees.
In a statement late Friday, Mattiello said he was “encouraged” by the new numbers. “In finalizing the new budget in the weeks ahead, we will continue on a path that promotes economic opportunities and makes us a more attractive state to do business,” he said.
The close of the May revenue meeting fires the starting gun on the always-frantic final weeks of the annual General Assembly session, as legislative leaders finalize a budget, their biggest undertaking of the year.
The governor and lawmakers are required to use the Revenue Estimating Conference’s forecasts when they put together the budget. The more rosy projections unveiled Friday give the House and Senate more flexibility as they put their own stamp on Raimondo’s proposal.
Simmons noted that income and business were both up, which could be a good sign. “What it shows is that the economy of Rhode Island has stabilized and actually has probably gotten a little stronger, if you look at where revenue is coming from this year,” he said.
Gambling revenue, however, is expected to decline sharply as new casinos open in Massachusetts and compete with Rhode Island. The official forecast is for gambling revenue to decline from $379 million in 2014-15 to $333 million in 2015-16, a 12% drop in one year.
The risk, Simmons said, is that the additional money will be used to paper over problems for a year or to create new programs that won’t have the necessary funding down the road.