State Deficit 2012: $750,000,000

This year’s deficit was $220 million. 2011 stands at $440 million. But three quarters of a billion dollars is the number for 2012. Gubernatorial candidate John Robitaille revealed this startling and grim projection last night at the East Providence Super Spring Spectacular.
It’s being called the Medicaid Cliff. In two years, federal stimulus monies stop flowing into the state but the obligations which accompanied those funds – namely, expanded Medicaid eligibility guidelines – carry on, at which point, state tax dollars must pick up the slack. Mr. Robitaille explained to me after his public remarks that the General Assembly can change eligibility guidelines in 2012 as the obligation goes away with the federal stimulus dollars. But, if I understand correctly, even if they act immediately to modify eligibility and eliminate the entire Medicaid deficit, those changes would not go into effect until 2013, leaving 2012 as a crunch year.
I turned on the radio this morning just in time to hear Minority Leader Bob Watson upbraid General Assembly Democrats for postponing local aid and pension payments to mid June, effectively pushing the 2010 budget problem off to another year. (Hey, at least their willing to allow cities and towns to take in this irresponsible approach to their own budget probs.)
So … 2010 is being postponed. 2012 we fall off a cliff. Puts a lot of pressure on FY2011, people.

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mangeek
mangeek
11 years ago

Oh Man. Even if we -do- have a massive ‘house cleaning’ on Smith Hill this November, it’s going to be -really- hard for the new folks to get any good footing. Telling constituents that you had a massive mess to clean up only gets you so far.

Ragin' Rhode Islander
Ragin' Rhode Islander
11 years ago

These things don’t occur overnight. But there’s no question: Rhode Island’s fiscal collapse is well underway.

Tommy Cranston
Tommy Cranston
11 years ago

It is far worse than you say.
FY 12 begins July 1 of next year.
The new governor’s FY 12 budget is due in January.
In other words, 2012 is 7 months and 3 weeks away away.
To paraphrase that famed theologian Reverend Wright-76 years of progressive chickens are finally “coming home to……roost”.

Mike Cappelli
Mike Cappelli
11 years ago
Stuart
Stuart
11 years ago

I must admit to not following the state budget too closely – maybe one of you can educate me.
A cursory look shows about a 3 billion dollar yearly budget, which means that a 300 million shortfall or even a 600 million dollar shortfall is only 10 and then 20%.
I’m not saying that is a good thing, but compared to such liberal hotbeds as Arizona, Nevada, Oregon, Florida, New Jersey,Oklahoma, Colorado etc, the percent of RI state budget which is not being made is less……
Am I missing something?
Ragin, if RI is collapsing, are you then claiming that about 1/2 of the states in the US are also doing that?
I don’t think RI will collapse. More likely the economy will slowly improve at the same time that they cut or hold the line on spending.

BobN
BobN
11 years ago

States are supposed to run balanced budgets. One problem is that they have been saddled with so many unfunded Federal mandates that much of their spending is out of their control. In effect, Washington is forcing tax increases through the state budgets so it can claim it isn’t raising taxes. And yes, the bulk of state spending is the Progressive wealth distribution of “social services” which for most of our history, until the 1960s, was not considered a legitimate function of government by most people. One of fundamental problems of this kind of spending is that the amount of spending is not determined by the available funds, it is a function of “need, i.e. demand for free money from the government. That’s why fundamental reform of the “entitlement” system is necessary. Medicaid in particular is bankrupting the states. The Feds forced the states to increase their Medicaid programs as part of the Porkulus bill; the increase is permanent but the Federal funding only lasts two years. The state deficit crisis will be one of the biggest stories of the coming year, as taxpayers will refuse to pony up for Washington’s demands. We are very close to a tipping point where moderate economic recovery cannot make up for the debt load or the uncontrollable spending. And then we look like Greece, or Spain, or the America of Atlas Shrugged. It can happen here. Economic laws, like the laws of nature that they are, are universal and cannot be defied without consequences. States that try to raise taxes rather than reform spending will find an increasing exodus of their “best customers”, the highest-income taxpayers, who will move to other states. Perhaps the Progressives will propose building a wall to keep them in, or a confiscatory tax of their assets if they try… Read more »

Bill
Bill
11 years ago

Correction: I think you meant “Hey, at least they’re willing . . .” Just because the state is becoming more insolvent each year (is that possible?) it doesn’t mean that we have to give up our claims to decent grammar, lol.

Ragin' Rhode Islander
Ragin' Rhode Islander
11 years ago

Stuart, by the standards of Democrat politicians, a 10% reduction would be a disaster, and a 20% reduction inconceivable catastrophe, particularly when used to 8 (and last year 13%) increases in their spending.
Add in increasing demands to fund the pension system.
And off course, the tax base will keep shrinking as businesses continue to flee / avoid RI, and upper middle class taxpayers throw in the towel and relocate.
RI is collapsing. It’s not the only state — CA, MI, NY and NJ are in similar dire straits — generally for the same reason: Democrat-progressive control feeding the tax monster unions and poverty industries.
In turn, all this is a preview of what Obama is accelerating (but didn’t create) when Medicare / Medicaid / Social Security and other unsustainable “entitlements” collide with fiscal and economic reality.

Stuart
Stuart
11 years ago

OK, so step one…..
RI is not anywhere among the worst…..
I know all about balanced budgets and most states – and the reason most are having problems is more about the recession than it is about spending, although spending ALWAYS needs to be looked at and cut where possible…
But I am starting to wonder if the problem with RI righties is simply negativity – or more accurately, lack of optimism. There are often two ways of looking at these things!
States like our neighbor, Ma., got spending in line only after things got ridiculous. Ma. went from being one of the top 5 states as far as taxation, to being in the middle of the pack – which is a good position for a crowded and urban New England state (costs are high here).
And in much the same way, RI people and politicians are going to now get the hint that spending increases cannot go on at the same pace as before.
Don’t they say that the darkest hour is right before the dawn?
I think history may show the same in RI. In my view, which in the case of total RI budget and politics is not very educated, I think the worst is over and the future depends on our ability to work on it.
That’s my Sunday Sermon, unlike Justins which contains the usual rant about homos.
Speaking of….I was watching him on TV and I did have the though….maybe he is fighting certain tendencies, if you know what I mean!

Ragin' Rhode Islander
Ragin' Rhode Islander
11 years ago

>>RI is not anywhere among the worst….. Actually it is among the worst for per capita unfunded pension liabilities and per capita debt. >>I know all about balanced budgets and most states – and the reason most are having problems is more about the recession than it is about spending Actually Rhode Island has committed to structural deficits long before the recession, e.g., the Democrat General Assembly peed through the tobacco money — selling it at a discount to raise quick cash — long before there was the recession. >>And in much the same way, RI people and politicians are going to now get the hint that spending increases cannot go on at the same pace as before. The Democrats who run RI have a decades long record of incompetence and corruption. That is the prevailing culture throughout that Party, and there is no indication of any internal faction that seeks to reform it. Unions have a track record of driving their employers into the bankruptcy ditch rather than grant necessary concessions — then the union bosses can claim to the rank and file that the bankruptcy judge forced it on them. Meanwhile the learned helplessness of the poverty industry “clients” and unmarketability of the “skills” of their “advocates” ensures that they won’t go down without a fight. Let’s face it, with 50 states to choose from (much less other countries in many cases, as Obama is making the U.S. far less attractive), what employer in its right mind, when it has a choice of locale, would choose to invest in RI with its taxes, corruption, lousy public education system (run as a union perma-employment program rather than as an educational endeavor) and cultural hostility to the “rich” business executives? And without more jobs, particularly more skilled / better paying… Read more »

Stuart
Stuart
11 years ago

Ragin, rants aside you are probably right about employers choosing RI….but there is much more to the story than that!
First of all, RI is a “city-state”. It simply does not have the size, resources and other “features and benefits” of most states. That is not always a bad thing or a good thing…it simply IS.
Industry has long ago died here – in the traditional sense. The same is true with most of Ma. and Ct, the exceptions being defense related and some medical and high tech related stuff.
My point is that the future for RI is not attracting more business (like the LNG terminal), but having a somewhat sustainable economy of productive people. However, in todays economy, productive does not mean another big business with an assembly line…that era is over!
RI is ideal for high tech and medical as well as many service industry and tourism. Add the boat building, real estate, an airport hub, a bunch of small biz and more to the mix and you will have a good economy.
And, yes, I’m always with you as far as taxation…RI needs to get the state income tax down to the 5% range (like MA.) and needs to take care of all the other fiscal problems. My point is that while you think the ship is sinking, it might just be bailing itself slowly and then righting.
I’d bet on the later. But success depends on the state having a plan. A very informed person told me the other day “when you don’t have a plan, chances are that you are part of someone else’s”……if nothing else, RI needs good leaders…

Mike Cappelli
Mike Cappelli
11 years ago

Perhaps the one thing that distinguishes RI from many of the others is the makeup of the tax base. RI has lost virtually all of its manufacturing. There are few companies located here to hire people at good wages. The punishing taxes repel companies form locating here. Now, perhaps other states are close in their tax rates to ours, but they also have other intangibles that make paying the price worth it, ie, a nice climate, an intelligent workforce, other big companies located there, etc. RI offers none of that. Oh, we have a nice coastline, but please, that is meaningless. Great for tourism, but think of the jobs and pay that industry offers. RI has little to offer companies and individuals in terms of attracting them to locate here. One of the smartest comments I heard was when Steve Laffey said we should make RI a “right to work” state. Now that is something that would set us aside from all of our neighbors, and attract some manufacturing. Of course, with the union domination in the legislature, that is highly unlikely. Too bad. And that is exactly why RI is toast. The people who control things are not looking out for the greater good. Am I just being negative? I think is pretty simple common sense. Unfortunately for RI, we are more and more coming under the grip of the “progressives”. (I laugh at that term, because they are anything but.) We have a state that repels those who pay the bills, and attracts those who suck off the system. A perverse system indeed.. Who can be surprised we have a disaster. When the state has to give out tax breaks to attract companies ie Fidelity, the progressives all rail against it, as though they really think the companies… Read more »

Ragin' Rhode Islander
Ragin' Rhode Islander
11 years ago

>>”RI is ideal for high tech and medical as well as many service industry and tourism. Add the boat building, real estate, an airport hub, a bunch of small biz and more to the mix and you will have a good economy. And, yes, I’m always with you as far as taxation…RI needs to get the state income tax down to the 5% range (like MA.) and needs to take care of all the other fiscal problems. My point is that while you think the ship is sinking, it might just be bailing itself slowly and then righting. I’d bet on the later. But success depends on the state having a plan. A very informed person told me the other day “when you don’t have a plan, chances are that you are part of someone else’s”……if nothing else, RI needs good leaders…” Granted that RI has great potential. But it has for decades, and continues to squander it. For RI to realize its potential, the RI Democrat Party will have to change, and in fundamental ways, so that the General Assembly that it controls will enact the major structural reforms that are required. Right now (besides its culture of direct corruption and acceptance of corruption by it members who aren’t yet direct participants), the RI Democrat Party isn’t so much a political party as a political spoils system attracting little-minded people who are merely out to get theirs (which in a chicken-and-egg is exacerbated by the dearth of private sector opportunities caused by the Democrats). In the get theirs brigade: politicians and their patronage beneficiaries; public sector unions and the poverty industry. They’re not suddenly going to see the light and sacrifice their own largesse in order to improve Rhode Island … their raison d’etre is to milk the system.… Read more »

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