What slowdown? RI revenues revised up $80M despite recession fears.

• Rhode Island revenue projections for this fiscal year and next have been revised upwards by nearly $80 million.
• Current-year revenue is expected to exceed expectations by $60.7 million, driven by increases in various taxes, while sales tax is projected to fall $22 million short.
• Despite the positive revenue news, legislative leaders remain cautious due to concerns about the national economy and potential future challenges.

Despite concern that the national economy is at risk of a recession, Rhode Island revenue collections have been revised up nearly $80 million for this year and next, according to new projections from state fiscal analysts.

The latest projections, released Friday, May 9, show state revenue for the year ending June exceeding expectations by $60.7 million.

And they predict revenue in the fiscal year starting July 1 to be $19.3 million higher than they expected last November.

The rosier-than-expected revenue forecast will take some pressure off House Democratic leaders writing a state budget for next year by eating into what had been a projected $250 million budget deficit.

Legislative leaders take a conservative stance

Despite state revenues continuing to climb, General Assembly leaders remained downbeat, at least in part to discourage their members from demanding lots of new state spending.

“The revenue results preview the effects of the weakening U.S. economy linked to turmoil in Washington, D.C., House Speaker K. Joseph Shekarchi said in an email. “Any short-term positive news is overshadowed by the magnitude of that uncertainty and the many related or unsolved budget issues.”

New Senate President Valarie Lawson and Senate Finance Committee Chairman Louis DiPalma said: “While we are pleased that revenue and caseload estimates remain relatively stable compared to the estimates made in November, we are experiencing a more challenging budget, and more difficult choices, than in recent years.”

Tax revenues climbing, with one exception

The new numbers from the twice-a-year Revenue Estimating Conference expect current-year revenue to reach $5.6 billion on increases in personal income tax, corporate tax, utility tax, insurance premium tax, cigarette tax, alcohol tax, estate tax and lottery profit. The major exception to the upward tax revisions was sales tax, which is now expected to come in $22 million short of the November estimate.

At the end of April, economists from Moody’s Analytics told the Revenue Estimating Conference that they expect the economy to slow in the years ahead and unemployment to rise, but stopped short of predicting recession.

Looking forward to next year, the revenue estimators predict collections of $5.7 billion on a modest increase in personal income tax, insurance tax and lottery collections. They expect sales tax to continue to slide back next year.