Uh oh – Providence budget gap looks C. Falls-sized

The big report from Mayor Taveras’ Municipal Finances Review Panel isn’t coming out until tomorrow morning, but a preview released earlier today has already caused a lot of jaws to drop.

Providence faces a two-year structural budget deficit of $180 million – $70 million this current fiscal year, which ends June 30, and another $110 million in 2011-12.

The city is currently on track to finish this fiscal year with an actual shortfall of as much as $29 million. (Without the full report, I can’t say why the actual deficit is forecast to be less than half the structural deficit.)

To give you a sense of just how big those numbers are, keep in mind the size of Providence’s actual budget: $638 million this fiscal year. Based on these early numbers, the structural deficit is equal to roughly 11% of the budget this year and 17% of it next year. That’s a huge gap to close.

One instructive and worrying comparison is between Providence and Central Falls.

The latter city’s budget shortfall was also pegged at about 17% when it filed for receivership during its 2009-10 fiscal year. But because of its small size, the actual amount of Central Falls’ deficit was only $3 million – a rounding error compared with Providence’s $110 million gap.

RIPEC executive director John Simmons cautioned against leaping to any conclusions based on this morning’s sketchy advisory, saying it’s impossible to really understand the Providence projections without knowing how the review panel defined “structural deficit.”

He also said the early numbers released by Central Falls when the city made its first, unilateral receivership filing probably understated its predicament.

Still, while Central Falls is significantly smaller than Providence, Simmons did see “common themes” between the two cities, notably a basic gap between money in and money out. But Providence is “one of the engines of the economy activity, and having a structural balance in the capital city is important for the state as a whole,” he said.

Update: Anchor Rising’s Marc Comtois points out I should have disclosed that Simmons was former Providence Mayor David Cicilline’s director of administration from 2003 through 2007.

Update #2: PBN got some clarification on why this year’s actual deficit is so much lower than the structural one:

Spokesman David Ortiz said that one-time fixes lowered the projected deficit this year from $70 million to $29 million. Without those fixes, Providence would have ended the year $70 million in the red, he said.

$41 million in one-time fixes is quite a big sum. I’d like to know more about what that includes.

2 thoughts on “Uh oh – Providence budget gap looks C. Falls-sized

  1. This is happening all over the country right now.

    Taxpayers in the private sector are on the hook for the $1 Trillion (with interest that’s the amount) in borrowed funds that was spent to bailout the public unions and construction semi public unions (when a company makes almost all their money from government contracts what is it really?).

    All that did was delay the inevitable.

    The piggy bank is dry.

    Bernanke stated he will not bail out cities and states. That is reserved for the royalty here – the big banks that own the Fed.

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