Rhode Island has posted another budget surplus, and that is surely good news. But, as we have seen many times in recent years, it’s hardly the end of the story.
What the state has for the fiscal year that ended June 30 is a surplus of $45.5 million. Though every little bit helps, most of this money is already spoken for. State lawmakers were expecting a surplus of $31.3 million, and they used that amount to help close the gap between revenues and expenses in this year’s budget. The added surplus dollars that have since materialized will no doubt be put to use before long.
For Rhode Island, this is an annual rite. The reason: Even as the state adopts balanced budgets each year, it faces structural budget deficits in the years ahead, based on projections that show state expenses are rising faster than revenues. Despite this year’s balanced budget, there is a projected deficit in the 2019-2020 budget year, which begins next July, and the projected gap reaches more than $200 million by the 2022-2023 budget year.
Those gaps are an added challenge each spring as lawmakers try to balance the numbers and adopt a new budget. And even as the surpluses help, and while they can be an indication of good management or stronger than expected tax revenues, the projected deficits show that the state is struggling to pay for the generous level of services it provides.
Assuming those services are maintained, or even expanded, the only real solution beyond efficiencies in state government is growth in the private sector.
Rhode Island’s elected leaders have taken some steps in recent years. They have reduced the corporate minimum tax, eliminated the sales tax that businesses paid on utility bills, overhauled the state pension system, adopted and embarked on a plan to fix the state’s crumbling bridges, and lured high-profile companies with taxpayer-funded incentives. Rhode Island’s economy has also benefited from a stronger national economy. The state now has a record number of jobs — more than half a million — and its unemployment rate was 4.1 percent as of last month.
But as we and others have said many times, the national economy will not always lift Rhode Island. The state's elected leaders should be building the foundation for a stronger economy through a more competitive tax and regulatory climate, and better public schools. Entrepreneurs tend to shy away from states known for high taxes, onerous regulations, and schools that leave students behind their peers in other states.
These are not easy steps to take. But they would truly make Rhode Island stand out as a place that is serious about jobs and education and opportunity — a message that would surely make it more attractive to the businesses it seeks, and one that would do right by the thousands of poor and minority students who are missing out on the opportunities their peers enjoy in nearby suburban schools.
It’s time for Rhode Island’s leaders to stand up to these challenges, so that the state can truly stand out.