FY 2008 Budget Press Conference

Governor Donald L. Carcieri

Wednesday, January 31, 2007

Good afternoon.

Today, I am submitting to the General Assembly my budget proposal for Fiscal Year 2008, as well as revisions to the Fiscal Year 2007 revenue and spending plan.

In my inaugural address and again in my State of the State, I promised to make education – and education reform – the focus of my second term as Governor. I firmly believe that providing Rhode Island communities with the resources they need to adequately instruct our children is one of the keys to the state’s current and future prosperity.

For too many years, budget concerns have forced us to put off these important infrastructure improvements. As a result, the state’s aging transportation system – and the thousands of Rhode Islanders who use it each day – have suffered the consequences. It’s time that we address this problem.

We will pay for these one-time transportation improvements with money derived from the national tobacco settlement the state signed in 1998. Some of you may remember that Governor Almond and the General Assembly tapped this source of revenue in 2002.

We believe we can secure another $160 million through the sale of additional tobacco bonds. But let me be clear about one thing. These tobacco settlement proceeds may only be used for capital projects. My plan would not use a one-time infusion of tobacco money to pay for ongoing, or recurring programs that are part of the yearly operating budget. We must not use it to pay for expenses that we know we will have again next year.

Instead, we will use this money for one-time, nonrecurring expenses like road paving and bridge repair.

My budget also makes important investments in a number of other important areas, including a $1 million fund for monitoring the health of Narragansett Bay and a continuation of the $7.5 million affordable housing program known as the Neighborhood Opportunities Program.

Finally, my budget plan fully funds the RIte Care program. While we have proposed changes to that program in the past, there is a statewide consensus that we must do more to reduce the rate of uninsured Rhode Islanders.

With the passage of several health care reforms last year, we have made a good start. The Well Care program will soon empower more small businesses to offer health care coverage to their employees. As a result, more Rhode Islanders will have the insurance they need. Maintaining RIte Care will help us achieve the larger objective of insuring more of our citizens.

But to make all these investments possible – and to ensure that Rhode Island schools receive the state funding that our children deserve – we had to make a number of very difficult choices.

As I said last night, this is the most difficult budget I’ve had to manage since I was first elected Governor. In putting together this spending plan, we had to overcome a combined, two-year budget gap of nearly $350 million. That’s the largest budget shortfall any Governor of Rhode Island has ever encountered.

Here is the problem we faced in putting this budget together. Although our revenues were projected to grow at the healthy rate of 4.3 percent, state spending was expected to grow by over 9 percent. In other words, we were scheduled to spend twice as much as we hoped to earn.

In my budget, I have reduced the growth rate in spending from that original 9% projection, to just over 3%, after factoring out a few one-time adjustments.

And we balanced this budget without any broad-based tax increases. In fact, we are continuing to phase out the car tax, capital gains tax, and inventory tax.

To eliminate the budget imbalance, and to fund the investments in education and transportation, we needed to achieve savings in nearly every department of state government. Much of the expected savings will be derived from reforms we will make to the state’s social welfare programs. These reforms and the associated savings fall into five broad categories.

We will save over $11.2 million by improving the integrity of Rhode Island’s social service programs, primarily by implementing new federal requirements regarding the verification of every beneficiaries’ citizenship.

We will restructure various programs to reduce costs while using the state’s purchasing power to negotiate better deals for the taxpayers. These reforms should save taxpayers approximately $40 million.

We will save nearly $13 million by operating and administering a host of state programs more efficiently.

We will better coordinate the services we are providing to clients in several different state departments. These efforts – especially the managed care initiatives – will reduce spending by nearly $6 million.

And we will redesign several state programs to target scarce state resources to the most needy Rhode Islanders. These reforms will save taxpayers another $36 million.

Some of these spending reductions were particularly difficult, and I want to address them as candidly as possible.

First, we are reducing the eligibility in the child care subsidy program from 225 percent of the federal poverty level to 150 percent. We are also delaying a scheduled increase in state reimbursement rates for child care providers.

We must target our limited resources at those who most need it. By limiting eligibility to those most in need, we can preserve the core program.

Second, we are reducing services being provided to young adults by the Department of Children, Youth and Families. Specifically, we will eliminate services to participants over the age of 17. DCYF currently serves young adults up to the age of 21.

The Health and Human Services Secretariat will work with that department to develop a plan to link adults who are aging out of the system – on a case-by-case basis – into similar services provided in other state and private agencies.

As many of you know, the Department of Corrections is responsible for one of the largest unexpected spending increases in the current fiscal year. The inmate population climbed by nearly 350 over projections, costing taxpayers $5.9 million.

I have spoken to Speaker Murphy, President Montalbano, and Chief Justice Williams about the need to slow the growth rate of the inmate population at the ACI. Over the next several months, my administration will work with the General Assembly and the Judiciary to outline a set of alternative sentencing and community corrections options that will enable us to reduce the number of inmates by 500 from the currently projected levels. This reform will save taxpayers approximately $3 million next year, and many millions more in the future.

Finally, we need to operate government more efficiently. That means reducing personnel costs and pushing new Big Audit initiatives.

We will save on personnel by privatizing food services and housekeeping at Eleanor Slater Hospital and the Veterans Home. Together, these measures will save $3.3 million and reduce the workforce by over 200 positions.

We will further reduce the entire state workforce by another 168 positions statewide through a targeted layoff, saving an additional $9.3 million. I have instructed my department directors to identify specific positions to be eliminated so that we can start the layoff process outlined in collective bargaining agreements immediately.

Seven statewide furlough days between this current fiscal year and next year will save another $10.8 million.

As I said before, this is the most difficult budget I’ve ever dealt with. It is also the most complicated.

As we put this together, I was determined to find a way to fund Rhode Island’s education needs. I also believe we must begin to address the backlog of highway and bridge maintenance projects. I’m very relieved we manage to do both.

In an effort to keep my remarks as brief as possible, I have only touched on a few of the larger highlights. I know that many of you received additional detail during yesterday’s briefing for the media.

Before I take questions, I want to thank Rosemary Gallogly and her entire team for the tremendous effort they put forward in recent weeks and months. They have worked nonstop to get this budget done, and I am indebted to their efforts.

I also want to thank the cabinet directors for working with me and the budget office to make the necessary choices. At the end of the day, they will be responsible for implementing these ideas.

Finally, I want to recognize the efforts of Jeff Grybowski, who played an indispensable role in completing this important project.