Rhode Island Budget Snapshots for Fiscal Year 2004

Expenditures by Source of Funds

The money that pays for the state’s business comes from dozens of different taxes, user fees, fines, and penalties, as well as grants from the federal government. All monies spent as part of the state’s annual budget fall into one of four categories:

1. General Revenue is money received by the state which can be used for any purpose. Examples include receipts from the state income tax and general business tax.

2. Federal Funds are monies received by the state from the federal government. These funds usually take the form of either block grants or matching funds.

3. Restricted Receipts can be used only for the specific purposes outlined by law. For example, insurance companies pay an assessment each year for the Infant-Child Immunization Account. These funds can be used only for the Department of Health’s childhood immunization activities.

4. Other Funds include all budgetary resources other than general revenues, federal funds, and restricted receipts. For example, employer contributions for unemployment insurance go to the Employment Security Fund, which pays only for unemployment benefits.

Sixty percent of general revenues receipts come from the sales and use tax and the personal income tax. Collections from these revenue sources depend greatly upon economic conditions. As a result, Rhode Island’s economic outlook shapes the state’s fiscal environment and plays a central role in the budget-making process.

Expenditures by Function

The work of state government is performed by more than 15,000 employees in forty-eight different agencies.Some agencies are quite large. The Department of Mental Health, Retardation, and Hospitals, for example, has more than 2,000 employees and spend over $450 million dollars every year. Agencies can be as small as the Commission on Judicial Tenure and Discipline, which has one employee and a budget of $100,000.

In total, the state will spend about $5.7 billion this year. Human service agencies account for forty-two percent of this amount, or $2.4 billion. Roughly speaking, the state’s human service agencies form the social safety net. They offer medical and cash assistance to low-income families, serve the developmentally disabled, operate public health programs, protect abused and neglected children, and provide health care for patients at state hospitals. Fifty-five percent of the funding for these agencies comes from the federal government.

More than a quarter of the state budget, or roughly $1.6 billion, is spent on education. More than half (57%) of this amount is distributed as aid to cities and towns. Most of the remaining expenditures are for the state colleges and university.

The General Government category includes most elected officials, the legislature, regulatory agencies, and the agencies that perform administrative functions. Together, they account for almost one billion dollars of state expenditures, or eighteen percent of the total. One-third of this spending, however, is for just two items. All of the state’s debt service costs, and all amounts budgeted for aid to cities and towns (other than education aid), are included in the budget of the Department of Administration. Adjusting for these two numbers, total spending by agencies in the General Government category is just twelve percent of the state total.

Added together, the remaining three functions of government account for thirteen percent of all state spending. The public safety function includes the state judicial system, corrections, and state law enforcement agencies. Agencies in the natural resources category provide parks, water, and environmental protection programs. Lastly, the Department of Transportation builds and maintains highways and provides transit programs.

Spending by Major Category

Another way that state spending can be broken down is by type of expenditure. Dividing the budget this way, one sees that about forty-four percent of all state expenditures are used for assistance, grants and benefits.

Through its participation in the federal Medicaid program, the state purchases health care services for approximately 180,000 individuals. The cost of these and other medical services account for about two-fifths of all spending in this category. The remaining grants and benefits are distributed by a variety of smaller programs, including those that assist the developmentally disabled, the elderly, low-income individuals and families, and unemployed or temporarily disabled workers. Financial aid for students at state institutions of higher learning also falls into this category.

Another nineteen percent of state revenues are distributed as aid to cities and towns. Sixty-eight percent of this amount is used to help finance elementary and secondary schools. Much of the remaining aid to is distributed to cities and towns according to formulas. General revenue sharing, for example, is distributed to local governments based on their tax effort and per capita income.

Thirty percent of the state budget is spent on personnel and other operating costs. Personnel costs include the salaries and benefits for state employees, as well as the cost of all the consulting services (legal, medical, etc.) used by the state. Operating costs are the day to day expenses of running state government. They include office expenses, utilities, rent, state vehicle maintenance, and supplies. Debt service and capital improvements make up the remaining seven percent of state expenditures.