rhode island budget summit

Budget PresentationBudget PresentationBudget PresentationBudget Presentation

State of Rhode IslandState of Rhode IslandState of Rhode IslandState of Rhode Island

December 17, 2010

2

Revenues and Expenditures Over TimeRevenues and Expenditures Over TimeRevenues and Expenditures Over TimeRevenues and Expenditures Over Time

$2,979.0$2,883.5

$2,917.9

$3,364.0

$2,993.6$3,080.2

$3,237.8$3,295.7

$3,164.3$2,983.7

$2,862.4

$3,753.5

$3,676.1

$3,535.3

$3,410.6

$3,298.0

$3,001.2

$3,405.3

$2,600

$2,800

$3,000

$3,200

$3,400

$3,600

$3,800

$4,000

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Mill

ions

Total Available General Revenues General Revenue Expenditures

3

General Revenue (Deficit)/Surplus Over Time General Revenue (Deficit)/Surplus Over Time General Revenue (Deficit)/Surplus Over Time General Revenue (Deficit)/Surplus Over Time

$17.7

($371.0)

($43.0)($62.2)

($4.7)

($295.0)

($330.4)

($438.3)($457.8)

$(500.0)

$(400.0)

$(300.0)

$(200.0)

$(100.0)

$-

$100.0

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Mill

ions

4

ARRA Offsets to General Revenues ExpendituresARRA Offsets to General Revenues ExpendituresARRA Offsets to General Revenues ExpendituresARRA Offsets to General Revenues Expenditures

FY 2010Actual

FY 2011Enacted

Human Services $207,189,617 $215,395,948

Education $44,182,425 $18,645,522

Public Safety $9,749,056 $0

Total $261,121,098 $234,041,470

5

Where it Comes FromWhere it Comes From

6

FY 2012 All General Revenue SourcesFY 2012 All General Revenue SourcesFY 2012 All General Revenue SourcesFY 2012 All General Revenue Sources

Other General Revenues*

7.9%Departmental

Receipts11.0%

Personal Income Tax

30.8%Sales and Use Tax

26.8%

General Business Taxes12.2%

Lottery11.4%

* Other General Revenues consist of Excise Taxes, Other Taxes, Other Miscellaneous Revenues, and Unclaimed Property

7

Changes in All General Revenue Sources Over TimeChanges in All General Revenue Sources Over TimeChanges in All General Revenue Sources Over TimeChanges in All General Revenue Sources Over Time

$813.3 $870.2 $979.1 $996.8 $1,065.4 $1,073.6 $940.5 $898.1

$777.4$822.9 $847.7 $869.2 $873.2

$844.2 $807.9 $803.4

$236.5$281.1 $307.5 $323.9 $321.0

$354.3 $337.5 $344.7

$229.9$246.2 $302.6 $366.4 $360.9

$374.8$362.3 $381.5

$290.3$285.0 $268.0 $287.3 $277.8

$356.5$318.8 $333.1

$409.8 $261.9 $300.2 $296.9 $313.4 $425.5 $258.1 $254.8

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

Personal Income Tax Sales and Use Tax Lottery

General Business Taxes Departmental Receipts Other General Revenues

$2,757.2 $2,767.3 $3,005.1 $3,140.5 $3,211.7 $3,428.9 $3,025.1 $3,015.6

8

Personal Income Tax Revenues and GrowthPersonal Income Tax Revenues and GrowthPersonal Income Tax Revenues and GrowthPersonal Income Tax Revenues and Growth

0.7%

7.0%

12.5%

1.8%

6.9%

0.8%

-12.4%

-4.5%

$-

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000


-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Personal Income Tax Revenues Growth Rate

9

Sales and Use Tax Revenues and GrowthSales and Use Tax Revenues and GrowthSales and Use Tax Revenues and GrowthSales and Use Tax Revenues and Growth

-0.6%

-4.3%

-3.3%

0.5%

2.5%

3.0%

5.9%

4.2%

720,000,000

740,000,000

760,000,000

780,000,000

800,000,000

820,000,000

840,000,000

860,000,000

880,000,000

900,000,000


-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Sales Tax Revenues Growth Rate

10

Lottery Transfer Revenues and GrowthLottery Transfer Revenues and GrowthLottery Transfer Revenues and GrowthLottery Transfer Revenues and Growth

2.1%

-4.7%

10.4%

-0.9%

5.3%9.4%

18.9%

10.5%

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000


-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Lottery Transfer Revenues Growth Rate

11

General Business Tax Revenues and GrowthGeneral Business Tax Revenues and GrowthGeneral Business Tax Revenues and GrowthGeneral Business Tax Revenues and Growth

28.9%

7.1%

22.9%21.1%

-1.5%

3.8%

-3.3%

5.3%

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

450,000,000


-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

General Business Tax Revenues Growth Rate

12

Departmental Receipts and GrowthDepartmental Receipts and GrowthDepartmental Receipts and GrowthDepartmental Receipts and Growth

4.5%

-10.6%

28.4%

-3.3%

7.2%

-6.0%

-1.8%

19.3%

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000


-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Departmental Receipts Growth Rate

13

Other General Revenues and GrowthOther General Revenues and GrowthOther General Revenues and GrowthOther General Revenues and Growth

-0.8%

-36.1%

14.6%

-1.1%

5.5%

35.8%

-39.3%

-1.3%

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

450,000,000


-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

Other General Revenues Growth Rate

14

Personal Income Tax Components Over TimePersonal Income Tax Components Over TimePersonal Income Tax Components Over TimePersonal Income Tax Components Over Time

$(400,000,000)

$(200,000,000)

$-

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

Estimated Finals Refunds Withholding

Pure Piggyback System Across-the-Board 10.0 Percent Tax Rate

Reduction

Alternative Flat Tax

15

The 2010 Personal Income Tax ReformThe 2010 Personal Income Tax ReformThe 2010 Personal Income Tax ReformThe 2010 Personal Income Tax Reform

Takes effect for tax years beginning after December 31, 2010

Replaces both the current progressive rate and the alternative flat rate income tax systems

Reduces the number of tax brackets from five to three

Reduces tax rates for all brackets above the first bracket

TY 2009 Old System TY 2011 PIT Reform

Taxable Income

Tax Rate Taxable Income

Tax Rate

> $0 but ≤ $39,550 3.75% > $0 but ≤ $55,000 3.75%

> $39,550 but ≤ $82,250 7.00%> $55,000 but ≤ $125,000 4.75%

> $82,250 but ≤ $171,550 7.75%

> $171,550 but ≤ $372,950 9.00%> $125,000 5.99%

> $372,950 9.90%

Allows dependent and personal exemption amount of $3,500

16

The 2010 Personal Income Tax ReformThe 2010 Personal Income Tax ReformThe 2010 Personal Income Tax ReformThe 2010 Personal Income Tax Reform

Disallows the use of itemized deductions

Replaces the current standard deduction with a larger standard deduction

TY 2009 Old System TY 2011 PIT Reform

Filing Status Amount Filing Status Amount

Married Separate $4,750 Married Separate $7,500

Single $5,700 Single $7,500

Married Joint or Qualifying Widow(er) $9,500

Married Joint or Qualifying Widow(er) $15,000

Head of Household $8,350 Head of Household $11,250

Personal and dependent exemption amounts and the standard deduction phase-out at incomes above $175,000:

For each $5,000 of income above $175,000, personal and dependent exemption and standard deduction amounts are reduced by 20.0% and are completely phased out for incomes of $200,000 and more

17

The 2010 Personal Income Tax ReformThe 2010 Personal Income Tax ReformThe 2010 Personal Income Tax ReformThe 2010 Personal Income Tax Reform Allows the use of eight tax credits against the personal income tax liability

Non-Refundable Credits– 25.0% of the federal Child and Dependent Care Credit– Contributions to Scholarship Organizations– Motion Picture Production Company Credits– Historic Structures Tax Credits– Credit for Income Taxes Paid to Other States

Refundable Credits– Property Tax Relief Credit

» $300 maximum credit– Earned Income Tax Credit

» 15.0% of unused amount refundable– Lead Paint Abatement Tax Credit

» $15,000 maximum credit

18

Sales and Use Tax Components Over TimeSales and Use Tax Components Over TimeSales and Use Tax Components Over TimeSales and Use Tax Components Over Time

$-

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

$800,000,000

$900,000,000

Net Taxation Registry

Providence Place Mall Opens DEPCO Bonds Paid Off; All Sales Tax to General Revenues

Effective Sales Tax Rate of 6.4%

Effective Sales Tax Rate of 7.0%

19

Sales Tax Base Erosion and State Tax RevenuesSales Tax Base Erosion and State Tax RevenuesSales Tax Base Erosion and State Tax RevenuesSales Tax Base Erosion and State Tax Revenues

State’s sales tax base has eroded over time

Since 1992, nearly 20 exemptions to the state’s sales and use tax law have been enacted

Establishment of Retail Outlets on Massachusetts / Rhode Island border has increased opportunities for cross-border shopping

Bruce and Fox (2001), estimate that Rhode Island’s sales tax base as a percentage of personal income has declined from 27.6 percent in 1996 to a projected 24.7 percent in 2011 ignoring e-commerce losses

Bruce and Fox (2001) estimate that Rhode Island had or will have

– $19.5 million in new revenue losses from e-commerce in 2001



Bruce and Fox (2001) estimate that Rhode Island revenue losses as a percentage of state taxes from sales tax base erosion rose from 2.28% in 2001 to 4.75% in 2006 and are projected to reach 5.53% in 2011

20

Lottery Transfer Components Over Time: Traditional GamesLottery Transfer Components Over Time: Traditional GamesLottery Transfer Components Over Time: Traditional GamesLottery Transfer Components Over Time: Traditional Games

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

Games Keno

Statewide Smoking Ban, March 2005

State Loses Exclusive Rights to Powerball, February 2010

GTECH Master Lottery Contract, May 2003

21

Lottery Transfer Components Over Time: VideoLottery Transfer Components Over Time: VideoLottery Transfer Components Over Time: VideoLottery Transfer Components Over Time: Video

$-

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

VLTs

State Share Of VLT NTI Increased

Twin River Construction Completed

Twin River Master Video Lottery Terminal Contract Begins

State Share40.8%

State Share47.1%

State Share52.3%

State Share53.2%

State Share60.0%

State Share61.2%

State Share61.9%

State Share61.4%

State Share61.4%

State Share61.1%

22

Long-Term Risks to the Lottery TransferLong-Term Risks to the Lottery TransferLong-Term Risks to the Lottery TransferLong-Term Risks to the Lottery Transfer

Massachusetts Casinos

Twin River estimates that the construction of three destination resort casinos in Massachusetts would decrease VLT revenue by 27.1% in the casinos first full year of operation

Twin River estimates that the addition of table games to its VLT offering would increase Twin River’s revenue by 26.0% even with three fully operating destination resort casinos in Massachusetts

Native American Casinos

The U.S. House of Representatives has passed a rider to an FFY 2011 appropriations bill that would reverse a U.S. Supreme Court decision and allow the U.S. Department of the Interior to take land into trust for any federally recognized Native American tribe

If this bill passes and is signed by President Obama, then the Department of the Interior can take into trust on behalf of the Narragansett Tribe approximately 32 acres of land that could be used for, among other things, gaming purposes resulting in an adverse economic impact on Twin River and Newport Grand

23

General Business and Excise and Other Taxes Over TimeGeneral Business and Excise and Other Taxes Over TimeGeneral Business and Excise and Other Taxes Over TimeGeneral Business and Excise and Other Taxes Over Time

$-

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

$450,000,000

General Business Taxes Excise and Other Taxes

Cigarette Tax Increases from $0.71 to $2.46 per pack

Series of Large Business Tax Payments Occurs

24

Department Receipts and Other Revenue Sources Over TimeDepartment Receipts and Other Revenue Sources Over TimeDepartment Receipts and Other Revenue Sources Over TimeDepartment Receipts and Other Revenue Sources Over Time

$-

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

FY

199

3

FY

199

4

FY

199

5

FY

199

6

FY

199

7

FY

199

8

FY

199

9

FY

200

0

FY

200

1

FY

200

2

FY

200

3

FY

200

4

FY

200

5

FY

200

6

FY

200

7

FY

200

8

FY

200

9

FY

201

0

FY

201

1

FY

201

2

Departmental Receipts Other General Revenue Sources

Tobacco I

Tobacco II

Gas Tax to General Revenue

Stimulus I

25

2010 Report on Tax Expenditures for Tax Year 20082010 Report on Tax Expenditures for Tax Year 20082010 Report on Tax Expenditures for Tax Year 20082010 Report on Tax Expenditures for Tax Year 2008

A tax expenditure is “any tax credit, deduction, exemption, exclusion, credit preferential tax rate, tax abatement and tax deferral that provides preferential treatment to selected taxpayers”

The 2010 Tax Expenditures Report provides information on 227 tax expenditure items in effect as of January 1, 2009 that yield a total of $1.7 billion of foregone tax revenue for Tax Year 2008

The number of tax expenditures by item in descending order are:

Category Number of Tax Expenditure Items

Exemptions 93

Credits 41

Modifications 28

Exclusions 25

Deductions 23

Preferential Tax Rates 5

All Other Items 12

26


The value of tax expenditures by item in descending order are:

Category Value of Tax Expenditure Items

Exemptions $ 945,539,385

Deductions $ 283,097,770

Credits $ 242,206,316

Preferential Tax Rates $ 134,426,081

Exclusions $ 56,300,166

Modifications $ 9,421,675

All Other Items $ 1,681,535

The reliability of the foregone revenue estimates vary with those for Credits and Preferential Tax Rates being the most reliable

Changes in tax law since January 1, 2009 have impacted the estimates of foregone revenue reducing it substantially in some cases such as the preferential tax rates for capital gains income

27


Tax expenditures by tax type in descending order of TY 2008 forgone revenue are:

Tax Type Number of Tax Expenditure Items

TY 2008 Cost

Sales and Use Tax 83 $ 847,296,543

Personal Income Tax 83 $ 646,120,383

Corporate Income Tax 60 $ 79,449,513

Motor Fuel Tax 2 $ 56,252,431

Bank Tax 19 $ 6,987,297

All Other Tax Types 54 $ 6,838,019

Some tax expenditure items are either necessary for administrative and legal reasons or to achieve economically and socially beneficial outcomes

The wholesale repeal or reduction of all tax expenditure items is generally neither a feasible nor an economically and/or socially desirable option

28

Where it GoesWhere it Goes

29

FY 2011 Enacted - All Funds BudgetFY 2011 Enacted - All Funds BudgetFY 2011 Enacted - All Funds BudgetFY 2011 Enacted - All Funds Budget

FY 2011 Enacted by Category of Expenditure

Salary/Benefits$1,439.57

18.31%

Contracted Services$222.272.83%

Assistance and Grants $3,864.28

49.14%

Capital$266.943.39%

Repayment of Budget Reserve

$220.28%

Operating $633.178.05%

Operating Transfers $128.141.63%

Debt Service$233.832.97%

Aid to Local Units$1,053.95

13.40%

In Millions

30

FY 2012 Current Services - All Funds BudgetFY 2012 Current Services - All Funds BudgetFY 2012 Current Services - All Funds BudgetFY 2012 Current Services - All Funds Budget

FY 2012 Current Services Level by Category of Expenditures

Salary/Benefits$1,496.39

18.19%



50.16%

Capital$266.943.25%



Debt Service$260.993.17%Aid to Local Units

$1,091.8513.28%

In Millions

31

FY 2011 Enacted - General Revenue BudgetFY 2011 Enacted - General Revenue BudgetFY 2011 Enacted - General Revenue BudgetFY 2011 Enacted - General Revenue Budget

FY 2011 Enacted by Category of Expenditure


Operating $131.624.47%Assistance and Grants

$946.3732.17%

Capital$5.960.20%

Salary/Benefits$747.0225.39%


Repayment of Budget Reserve

$220.75%Debt Service

$158.165.38%

Aid to Local Units$875.8529.77%

In Millions

32

FY 2012 Current Services - General Revenue BudgetFY 2012 Current Services - General Revenue BudgetFY 2012 Current Services - General Revenue BudgetFY 2012 Current Services - General Revenue Budget

FY 2012 Current Services Level by Category of Expenditure

Salary/Benefits$799.2324.23%


Capital$5.960.18%



36.61%


Debt Service$185.325.62%

Aid to Local Units$913.7427.71%

In Millions

33

FY 2011 Enacted - All Funds BudgetFY 2011 Enacted - All Funds BudgetFY 2011 Enacted - All Funds BudgetFY 2011 Enacted - All Funds Budget

FY 2011 Enacted by Function

Human Services $3,121.90 39.70%

Education $2,101.21 26.72%

Natural Resources $98.94 1.26%

Public Safety $431.83 5.49%

General Government $1,681.37 21.38%

Transportation $428.89 5.45%

In Millions

34

FY 2012 Current Services - All Funds BudgetFY 2012 Current Services - All Funds BudgetFY 2012 Current Services - All Funds BudgetFY 2012 Current Services - All Funds Budget

FY 2012 Current Services Level by Function

General Government $1,699.84 20.67%


Education $2,143.48 26.06%



Transportation $433.18 5.27%

In Millions

35

FY 2011 Enacted - General Revenue BudgetFY 2011 Enacted - General Revenue BudgetFY 2011 Enacted - General Revenue BudgetFY 2011 Enacted - General Revenue Budget

FY 2011 Enacted by Function


Education $1,031.33 35.05%



General Government $434.60 14.77%

In Millions

36

FY 2012 Current Services - General Revenue BudgetFY 2012 Current Services - General Revenue BudgetFY 2012 Current Services - General Revenue BudgetFY 2012 Current Services - General Revenue Budget

FY 2012 Current Services Level by Function

General Government $452.74 13.73%


Education $1,073.60 32.55%



In Millions

37

Major DriversMajor DriversMajor DriversMajor Drivers

$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

$3,500.0

FY 1995 FY 2000 FY 2005 FY 2010 FY 2011 FY 2012

Mill

ion

s

FMAP

Human Services

Other Operations

General State Aid

Stabilization Funds

Education Aid

$1.641

$2.231

$2.927$3.124 $3.169

$3.298

38

Change in Major Drivers from 1995 to 2012Change in Major Drivers from 1995 to 2012Change in Major Drivers from 1995 to 2012Change in Major Drivers from 1995 to 2012

FY 1995 FY 2012 Increase

Human Services $449.1 $1,031.8 $582.7

General State Aid $31.6 $48.0 $16.4

Eduation Aid $435.8 $851.6 $415.8

Other State Operations

$724.5 $1,366.6 $642.1

Total $1,641.0 $3,298.0 $1,657.0

In Millions

39

Expenditures by Fiscal YearExpenditures by Fiscal YearExpenditures by Fiscal YearExpenditures by Fiscal Year

$2,2

31

$2,4

83

$2,6

52

$2,6

90

$2,7

26

$2,9

27

$3,0

73

$3,2

18

$3,4

05

$3,0

01

$3,2

98

$2,9

42

$2,8

62

12.10%

2.78%

9.54%

11.30%

6.81%

1.46%

1.34%

7.35%

5.00% 4.70%

5.83%

-11.87%

-4.62%

$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

$4,000.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012CSL

Mill

ion

s

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

Expenditures % Growth

40

Full Time Equivalent PositionsFull Time Equivalent PositionsFull Time Equivalent PositionsFull Time Equivalent Positions

Salary and benefit costs comprise 25.4% of state spending

Appropriations Act includes an authorized full time equivalent (FTE) cap for each agency

Enacted FY 2011 authorization was 14,827.6.0 FTE including sponsored research

Filled FTE positions total 13,763.4 (as of PP 12), or 1,064.2 under enacted cap

As a result of changes in retiree medical benefits and discussions about pension reform, between May 1, 2008 and October 1, 2008, there were 1,396 state employees who were members of the Employees Retirement System who retired.

The current filled FTE level reflects a reduction of 1,701 below the filled full-time equivalent positions December 2002

41

Filled FTEFilled FTE’’ssFilled FTEFilled FTE’’ss

12,000

12,500

13,000

13,500

14,000

14,500

15,000

15,500

16,000

16,500

Jul-9

4

De

c-9

4

Jul-9

5

De

c-9

5

De

c-9

6

Jul-9

7

De

c-9

7

Jul-9

8

De

c-9

8

Jul-9

9

De

c-9

9

De

c-0

0

Jul-0

1

De

c-0

1

Jul-0

2

De

c-0

2

Jul-0

3

Jan

-04

Jan

-05

Jul-0

5

Jan

-06

Jul-0

6

Jan

-07

Jul-0

7

Jul-0

8

Jan

-09

Jul-0

9

Jan

-10

Jul-1

0

Year

Fil

led

FT

E's

13,763.4

42

Total Costs of Employee CompensationTotal Costs of Employee CompensationTotal Costs of Employee CompensationTotal Costs of Employee Compensation

Wages are increased at times by step increases, longevity bonuses and educational bonuses. Combined, these can add 1.7-2.0% growth in compensation

Longevity is granted at intervals in years of service-5YOS (5%),11YOS (10%), 15YOS (15%), 20YOS (17.5%), and 25YOS(20%)

In addition to wages, the budget must take into account the cost of other payments and fringe benefits

This increases the cost of each state position by about 39% for those costs which are calculated as a percent of wages

Adding net state medical benefit costs can increase by another ten to twenty percent, for a total fringe costs equivalent to 58% of wages

Benefit Assumptions: FY2010 FY2011 FY2012Retirement 21.64% 20.78% 22.98%Retiree Health 5.62% 6.74% 6.74%FICA 7.65% 7.65% 7.65%Assessed Fringe 4.54% 4.00% 4.00% Total Benefits Applied to Salary 39.45% 39.17% 41.37%Weighted Average Medical Benefit Cost 12,877 15,246 16,498Less Employee Co-share (2,575) (3,049) (3,300)Weighted Average Medical Benefit Cost 10,302 12,197 13,198

43

Employee Compensation AdjustmentsEmployee Compensation AdjustmentsEmployee Compensation AdjustmentsEmployee Compensation Adjustments

Impact of Negotiated Concessions on Growth in Salary and Benefit Costs

It is important to understand the relevance of the contribution which state employees are making during FY 2010 and FY 2011 and the impact that they have on FY 2012.

As a result of the continued revenue decline, the Administration entered into negotiations with its collective bargaining units in the summer of 2009. Through a cooperative effort, the parties reached agreement which resulted in wage concession for FY 2010 and FY 2011 in exchange for a “no layoff” provision and language which provides for reassignment as a result of reorganizations.

In summary, the language provides an Appointing Authority (Agency Director/Head) with the right to transfer an employee between programs under his/her authority and/or from one agency to another due to transfer, reorganization, elimination or consolidation of functions, programs, units, divisions or departments within the Executive Branch. The language includes provisions regarding notice obligations, the opportunity for the union to present alternatives, the process for determining placement of the affected employee(s) across bargaining units/unions.

44


The concessions includes eight pay reduction days in FY 2010 and four such days in FY 2011, to apply to all non-union employees and the members of unions that have ratified the memorandum of agreement in FY 2010.

For each of these pay reduction days, the employees will be entitled to accrue one and one quarter (1.25) additional days of paid leave, for a maximum of 10.0 days in FY 2010 and 5.0 days in FY 2011.

Employees may request to discharge this additional leave day during any pay period following the payroll period in which it was earned and/or elect cash payment for four days upon termination from State service. Implementation of this measure will saved $17.2 million in salary costs in FY 2010, and $8.99 million in FY 2011, as well as associated fringe benefit costs.

45


The value of the concessions and corresponding budget reductions were roughly equal in FY 2010 and FY 2011. This results in a reduction of previously negotiated salaries of 3.1% in FY 2010 and 3.0% in FY 2011.

In FY 2012, salaries would increase back up to the previously negotiated levels. For an employee making $50,000 in FY 2010, their pay, after concessions would be $48,462 in FY 2010, $49,958 in FY 2011, and $53,045 in FY 2012. Salary only savings would be $1,538, $1,542 and zero in FY 2010, FY 2011, and FY 2012 respectively.

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In addition, the three percent (3%) across the board salary increase, which would otherwise have been effective July 1, 2010, shall not be effective until January 2, 2011 for all non-union employees and the members of unions that ratified the memorandum of agreement in FY 2010. Implementation of this measure will save $9.6 million in salary costs in FY 2011, as well as associated fringe benefit costs.

In the FY2011-2015 Five year Forecast, the projected 6% growth in FY2012 personnel costs was highlighted as significant as a result of the discontinued savings from the previous wage concessions.

Budgeted Cost of Salary and Benefits -Sample $50,000 Salary FY2010 FY2011 FY2012

FY2010 Salary 48,462 49,958 53,045Salary Only Dollar Growth 1,496 3,087Salary Only Percentage Growth 3.1% 6.2%

FY2010 Salary & Benefits 76,461 79,821 84,601Salary and Benefit Dollar Growth 3,360 4,780Salary and Benefit Percentage Growth 4.4% 6.0%

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Debt Service ObligationsDebt Service ObligationsDebt Service ObligationsDebt Service Obligations

Debt Service Projected to grow by $27.2 million in FY2012

General revenue funded debt service totals $158 million in FY2011

Includes general obligation bonds and other obligations subject to annual appropriation previously issued and expected to be issued

State issues approximately $100 million new general obligation debt each year

Includes $40 million of debt to provide match for federal highway funds

Additionally, the General Assembly authorized the issuance of $356 million of debt to fund Historic Structures Tax Credits when presented. To date, $150 million of debt issued was issued in FY2009

Timing of HSTC issuance is dependent upon project completion; this could be the largest area of projected growth in debt service, increasing from $18.6 million in FY2011 to $51.7 million in FY2016

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FY 2011 - First Quarter ProjectionsFY 2011 - First Quarter ProjectionsFY 2011 - First Quarter ProjectionsFY 2011 - First Quarter Projections

Enacted Budget included savings based on a six-month extension of Enhanced FMAP at the full rate in effect at the time

Congressional Action provided for a six-month extension, but at a rate lower than assumed in the budget, resulting in a projected $38.0 million shortfall in FY 2011.

November Revenue and Caseload Estimating Conference estimated increased revenues of approximately $16.5 million and reduced caseload costs of $9.5 million.

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FY 2011 - First Quarter ProjectionsFY 2011 - First Quarter ProjectionsFY 2011 - First Quarter ProjectionsFY 2011 - First Quarter Projections

Preliminary audit figures for FY 2010 show a projected surplus of $17.7 million, which will carry forward to FY 2011

First quarter expenditure projections identified overspending by agencies above their enacted budget levels of $41.6 million, which includes the restoration of funds associated with the lower FMAP rate

First quarter report is based on current law; thus, these projections do not include any withdrawal of education aid due to availability of Education Jobs Fund money

FY 2011 budget projected to be more or less in balance based on the First Quarter Report

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Thank YouThank You

rhode island budget summit

Economy & Finance

general business tax

ot general revenues

general revenues413

general revenues259

general business taxes374

total general revenues3

sales tax revenues

miscellaneous revenues