The coming Rhode Island budget crisis – Nick Landekic

The Coming Rhode Island Budget Crisis

By Nick Landekic, contributing writer

Governor McKee recently announced the proposed FY 2026 Rhode Island state budget totaling $14.2 billion. While it may appear to be a modest 2.2% increase over last year this also includes an assumed massive $5.1 billion of support from the federal government – which would account for a whopping 36% of the total budget.

This is not realistic. With President Donald Trump’s radical huge budget cuts and freezes already enacted and more to come, expecting the federal government will send Rhode Island over $5 billion is not likely. The announced expected budget shortfall of ‘only’ $223 million could end up actually being billions of dollars.

The Trump administration recently blocked the $220 million previously granted to Rhode Island towards replacing the Washington Bridge.  Of the $5.1 billion in counted on federal support in this year’s state budget, how much more will be held or clawed back?

Rhode Island has been on a sugar high for the past few years gorging on federal funding in part related to the COVID pandemic, ranging from $4.9-$5.3 billion per year since 2022.

That is now coming to an abrupt end at a time when our needs are great. The problem has been made worse by Rhode Island having used one-time funding to prop up deficits in recurring costs – which is like borrowing money from the bank to support a bad ongoing habit.

According to the American Society of Civil Engineers, Rhode Island has the highest proportion of structurally unsound bridges of all states in the country. Over 22% of our bridges are structurally unsound – nearly one in four – more than even in West Virginia (other surveys find somewhat varying numbers depending on definitions but Rhode Island is consistently at or near the bottom).

According to data from the U.S. Department of Transportation and Federal Highway Administration, Rhode Island’s roads are also in bad shape and rated the worst in the country.

The recent debacle with the Washington Bridge, and looming problems with the Mt. Hope Bridge, show the dire condition of our infrastructure – and underscore both what non-recurring federal monies could have been used for, and the impending need for future funding.

A cursory analysis suggests Rhode Island is not very efficient when it comes to spending money. Compared with other New England states Rhode Island spends more per capita than all others except one. We spend over 50% more per person than Massachusetts. Even a perfunctory and subjective look at conditions in Rhode Island – our roads, bridges, services, state support for public health, library budgets, consumer protection, etc. – intimates we don’t receive the same level of support as Massachusetts residents or other nearby states.

Rhode Island’s public health performance, from the perspective of COVID infections, is not impressive, with the highest number of reported COVID infections per capita of all states.

Rhode Island has the highest proportion of its population of all New England states relying on Medicaid benefits. How will the state make up for the shortfall in funding with the expected massive cuts in federal Medicaid support?

Why does Rhode Island spend so much per resident with relatively little to show for it? The state GDP (Gross Domestic Product) does not seem to support such a level of budgetary spending. On a per capita basis our GDP is on the lower end compared with other New England states, being almost 48% below that of Massachusetts. Again even a casual look could suggest bureaucracy, waste, and inefficiencies in Rhode Island’s operations as a factor.

There are 32 school districts in Rhode Island and 48 public libraries, distributed among 39 towns and municipalities. There are 158 fire stations in Rhode Island – more than either Los Angeles (106) or Chicago (92). All that bureaucracy results in duplicative, redundant organizational structures – and spending. Consolidation into a much smaller number of systems could save a great deal of money. For example, 5 school districts and library systems, one for each county, could eliminate dozens of duplicative cost structures. This is an expense that Rhode Island simply will not be able to afford going forward. This will be especially painful with the expected additional cost-cutting and elimination of federal support such as the closing of the federal Department of Education.

Perhaps even more expensive is the history and ingrained culture of corruption, graft, bribery, and payoffs in Rhode Island. It’s impossible to put a number on this. However, just from what are likely the tip of the iceberg reports on things such as wasted public money on falsified bridge inspection reports, multi-million dollar no-bid contracts, projects like the Pawtucket Soccer Stadium few seem to want but will cost state taxpayers $132 million for $27 million of actual construction costs, and questionable projects such as over $100 million in taxpayer money for a single building with no end in sight to cost overruns, it seems clear waste is a significant part of the Rhode Island budget.

The biggest impediment to greater clarity, integrity, and efficiency in the state budget might be Rhode Island’s resistance to change, embodied in the often heard and cultural attitude of “that’s the way we’ve always done it” (it could be the unofficial state motto).

Some tough love: that may be the way we’ve always done it, but it won’t work going forward.

Everything works until it doesn’t. The Trump administration and the heinous wrecking ball of Elon Musk’s DOGE means the days of unquestioned and lavish federal funding to states – especially to ‘blue’ states – are over. The horrific damage and massive cuts to the federal government just over the past few weeks should make that painfully clear. Our world fundamentally changed on January 20, 2025. Think of what it might be like a year from now.

One can only imagine the odious demands likely to be forced on states in exchange for any federal funding, such as pressure to work with ICE in deporting immigrants. How much leverage could the tiny state of Rhode Island have to push back?

Budgeting is actually very simple. When spending exceeds income, there are a few options: spend less, make more, or change how you work. For Rhode Island this means –

1. Major budget cuts. These are likely to be very unpopular especially given the relatively scanty services already provided.

• Major tax increases. These would also certainly be very unpopular and face tremendous pushback from voters.

• Eliminate redundancy, waste, and fraud. As logical as this sounds it would probably be the hardest for Rhode Island to accomplish – given expected resistance from those who may profit from it.

• Grow the economy. Everyone would love to see the state economy grow. However, Rhode Island is a tiny state with few natural resources and no major economic or industrial base to speak of. It’s sometimes said we’re a state of small businesses. While politicians often talk about ‘growth’ it’s hard to see how it would actually happen here. A recent WalletHub study ranked Rhode Island dead last among states for attractiveness to start a business:

There’s no easy answer and for Rhode Island it will likely take a combination of all of the above measures.

The reality of the new order we’re living in is states must become increasingly self-reliant and find ways to finance themselves without the federal government. A number of states have already achieved just that.

13 states have a net negative balance of payments to the federal government – meaning they send more money than they receive. Those states and the per capita balance they send are:

Notice that most of the New England and Northeast states contribute more than they receive.

In comparison Rhode Island receives $6,821 per resident in federal funding. This is the second highest of all states behind only Alaska. From a previous 26% of the state’s total budget Gov. McKee is assuming an increase for FY2026 to over 36% of the state’s total spending at $5.1 billion.

How likely is this to happen? We are sleepwalking into a potentially major financial crisis that could make Rhode Island a failed state.

If Rhode Island’s per capita state spending was closer to that of Massachusetts or Connecticut the total state budget would be about $9 billion – and, importantly, would not rely on federal subsidies. Whether we like it or not (and most people, especially in state government, won’t) this is what we must move towards.

The harsh financial realities being imposed on all states force a colossal task on all elected officials. Are Rhode Island’s leaders and legislators up to this critical challenge?

Unfortunately it’s not optional. It’s hard to see a future where federal funding to states isn’t significantly cut. States that have been highly reliant on this and incapable of adapting will be devastated. Given the blinding speed of what has already happened in Washington in just the past few weeks that time is coming. We will almost certainly be feeling the effects this year.

The favorite ploy of politicians is to kick the can down the road. That only works until you run out of road – which is going to happen very soon.

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Nick Landekic of Bristol is a retired C.E.O. and biotechnology entrepreneur who has spent more than 35 years working in the pharmaceutical industry.