The amount of money used to operate state government in Rhode Island has grown by 5 and a half billion dollars over the last 10 years, to $14.2 billion. Now, President Trump has put a spotlight on efforts to cut government agencies and reduce federal spending. Critics say Trump is dismantling vital services, while his supporters mostly tout this as a way to cut waste and fraud. The chainsaw approach embraced by Elon Musk is being felt here in Rhode Island, since almost $100 million in federal funding has already been cut. That’s a small amount in the context of the state budget. But it renews questions about why Rhode Island’s spending plan has grown so much, and whether the state is making effective use of taxpayers’ dollars. So does state government have enough of a focus on boosting efficiency and cutting waste? And how will cuts from the Trump administration affect Rhode Island? This week on Political Roundtable, I’m going in-depth with Brian Daniels, director of Rhode Island’s Office of Management and Budget.
TRANSCRIPT
This transcript has been edited for clarity.
Donnis: The Providence Journal reported this week that the Trump Administration has cut Rhode Island by about $92 million, so far. That’s a drop in the bucket in the context of Rhode Island’s $14 billion state budget, but it’s still nothing to sneeze at. How will that cut affect Rhode Island in its people?
Daniels: It’s a great question, Ian. It’s something that we’re working with our agencies right now. For the last few weeks we’ve been getting news from Washington about various federal awards that have been rescinded. One of the largest is one that was announced, I believe last week, about $30 million to the Department of Health. So that will have some effect on the operations that the department does, including in vaccinations and other type of public monitoring, public health response. So we’re working with them to understand the impact of that. When this happens, we work with the agencies to determine are there other possible ways of funding these activities. In some cases there are other federal awards that they can use. We’re also keeping an eye on what happens in Congress when it comes to larger cuts, possibly to Medicaid or other human services programs. So we’re also proactively working with departments to understand what might be coming and how we would plan for them.
Donnis: Supporters of President Trump seem to take him at his word, that this is about cutting waste and fraud. Critics, of course, have a very different view. They call it an effort to dismantle the federal government. What do you think of this process and how the administration is going about making these cuts regardless of whether pro or con on the cuts? Is this a good way to approach cutting government?
Daniels: Well within the Office of Management budget, we have the Office of Internal Audits, which has a unit that does fraud detection and prevention. And we like to say, we try to take a scalpel approach as opposed to a chainsaw approach. It means looking very closely at individual programs and finding out which ones are possibly not working as efficiently as possible. I will say as we start to look at some of these public health programs, these are, they were described as COVID response, but in many cases, these were also preparing for the next pandemic doing vaccination, immunization work. So we’re still assessing the impact, but we do think that there may be some public health impact.
Donnis: Rhode Island’s budget has grown dramatically over time from $8.67 billion in 2015 to the $14.2 billion proposed by Governor McKee in January. Why has the state’s budget grown so much?
Daniels: So a lot of that is because of the growth of federal dollars. So about 40% of t of the budget is federal dollars. So you mentioned the 14 billion dollars budget. It’s important to keep in mind that about 5 billion of that is federal money. So that is anything from grant awards to Medicaid match. Medicaid is one of the largest state programs that we administer, but some of it is also other components like the capital budget. We’ve had in the last, in recent years, post pandemic, we had a lot of one-time surpluses. So the governor and the general assembly put that into the capital budget. It will take some years to spend those dollars. So that’s what you’re seeing in some of that growth is some of the federal dollars and also some of the capital awards and highway transportation funds are also in that category. Overall growth of government is something we’re keeping an eye on. We’re trying to. grow general government pretty modestly. I think we grew just over 2% in the most recent budget. When you’re looking at the general revenue component, so the non-federal, non transportation component.
Donnis: Why is it so difficult to close the disparity between the growing cost of government and Rhode Island and the level of growth of revenue?
Daniels: Yeah, we spend a lot of time talking about that. So it’s important to realize that our revenues, our general revenues, so sales tax, income tax, those are growing at about 2.8% in the five-year forecast. That’s good. We have a relatively stable population, so we do have revenue growth. That’s, a good sign. The challenge is that. Two of our biggest areas of spending in government, human services and education are growing above that. So, grants and benefits is actually growing, projected to grow at about 5%, and education aid is growing at about 3.8%. So even though we have 2.8% revenue growth we do see some of these higher growth areas in grants and benefits and in education. Education is driven by the funding formula. It’s a, money follows the student. So we have limited ability to change that. And when it comes to grants and benefits, a lot of that is Medicaid. That is an entitlement program. If you qualify for it you may enroll in it. So we’re trying to find ways of, of controlling cost growth in those areas.
Donnis: We’re talking here with Brian Daniels, director of Rhode Island’s Office of Management and Budget. Brian, people might look fondly back on the last couple of years when Rhode Island was in the unusual situation of having consecutive budget surpluses. Now, legislators face a more familiar situation of perennial deficits. The deficits have to be wiped out by the end of the legislative session, but there’s a structural deficit that means these deficits stretch out as far as the eye can see. What is the consequence of that for the state?
Daniels: It means that every year we need to try a little harder to control our expenditure growth. Unlike the federal government, we have to have a balanced budget every year. So some of the things that we are doing this year in the governor’s proposed budget is taking a look at Medicaid provider fraud. I mentioned that our office does, we do waste fraud abuse, but it’s largely for human services beneficiary programs. We want to spend more time on the provider side. We’re also making investments in things that bend the cost curve when it comes to human services. So we have an investment to do some research into pharmaceuticals to see how we can control the cost of pharmaceuticals. And last year, DCYF renegotiated its provider contracts and the general assembly put $20 million in to beef up home-based services. And those are great because it means that we don’t have to do out-of-state placements for children in DCYF care. They don’t have to be in congregate settings. We bring them into Rhode Island, we bring them back to home. That is more cost effective and it’s better outcomes. So it’s those types of investments that we have to keep making year after year.
Donnis: During testimony a few weeks ago before the House Finance Committee, you talked about how the state was able to save money and boost efficiency due to, I think the office you referred to tell us a little bit about that.
Daniels: Sure. It’s important to realize, I don’t know that many people know what the Office of Management budget does, but in addition to preparing the governor’s budget and monitoring agency expenditures we also have a performance management unit which reviews agency performance data, works with them. We also have the Office of Internal Audit, and they do performance audits of agencies, but they also do review program for waste, fraud and abuse. We had seen a program called Cover All Kids, and this is basically if a child is not eligible for Medicaid because of immigration status or citizenship status we provide that benefit and it’s entirely state dollars. We saw the cost of that program going up and up, and we were curious as to why that was. And so I asked our team to go in and through data analytics and working with the Department of Human Services, they realized that it was really just a process error that children who actually qualified for Medicaid were being coded as Cover All kids. So we worked with DHS, we fixed the problem, and we saved ultimately about $3.7 million just for fixing that process error.
Donnis: Over the years, there have been various efforts to try and make government more efficient in Rhode Island. Don Carcieri had the big audit Governor Gina Raimondo had a commission on efficiency. Have these efforts really produced any meaningful results?
Daniels: I think we keep learning and we keep trying to apply. I like some of those past studies. I sometimes go back and look at them to find out if there are ideas that we haven’t implemented. In many cases, we have implemented them and we are trying to find new ways of saving money. I think it’s another reason why we need to invest in some of the components of the governor’s budget, really focusing on Medicaid provider fraud. And also again, trying to focus on home and community-based services. Those are more cost effective. Keeps people in their homes and reduces the cost of Medicaid and other social services programs.
Donnis: As you said earlier, a big part of the state budget goes for providing important social services for Rhode Islanders and education. Nonetheless, there are issues with how public dollars are spent in Rhode Island. We’ve seen how public schools have underperformed for decades. We’re all familiar with the questions surrounding the Washington Bridge. What do you say to residents who question how well state government is spending taxpayer dollars?
Daniels: Yeah, it’s a question. I’m glad that we’re talking about this because I want people to know that the Office of Management and Budget exists. I think that’s important to realize it was created in 2013 after the Great Recession. And one of the reasons it was created was because there was not a lot of data-driven decision making when it came to how we budgeted. So we do have the budget office, we have internal audit, we have performance management. We also have the Office of Regulatory Reform that does cost benefit analysis and small business impact for any state regulation. All of our information is publicly available, so I encourage people to go to our website, omb.ri.gov, and under the report section there’s lots of information about things that we’ve been doing to try to show how we’re containing costs how we’re monitoring costs and how we’re working very closely with our agencies.
Donnis: To come back to something you mentioned earlier, there are mixed signals coming out of Washington about what will happen with Medicaid, the in insurance program for low income people and makes up about a third of Rhode Island’s budget. What level of concern do you have that there will be sharp cuts to Medicaid?
Daniels: So it depends. The house budget resolution in Congress had some pretty aggressive cuts. In something that could be Medicaid or it could be something else. I spent 10 years on Capitol Hill. I think when you’re looking at those funding sources, Medicaid is a possible area. That would be challenging. We have more than 300,000 people in Rhode Island who benefit from Medicaid for various reasons. But it is something that we’re taking seriously. We are working closely with our Executive Office of Health and Human Services and the governor’s office to map out all of the ideas that have been discussed federally about possible changes, understanding the impact of what those changes could be and how we would react to them.
Donnis: About a dozen years ago, there were sharp financial crises in East Providence and some other municipalities. Your former director of the Rhode Island League of Cities and towns, how do you see the fiscal outlook for Rhode Island’s municipalities?
Daniels: Yeah, so we meet regularly with them as well. The governor, as you know, as a former mayor, I was, as you mentioned, the head of the League of Cities and Towns. So the governor cares very much about what’s going on at the municipal level. Our largest as I mentioned, one of our largest portions of the budget is education aid. So we want to make sure that we are providing sufficient support for our schools. But they are, they’re facing challenges as well. They have minimal, or limited ability to raise local taxes. So one of the things that we’ve worked on with them is seeing how we can reduce mandates. Are there ways that we can make their lives easier and, and cost less in local government.
Donnis: That’s all the time we have, so we need to leave it there. Thank you so much for joining me. Brian Daniels, director of Rhode Island’s Office of Management and Budget. Thanks for having me.
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Thousands of people plan to take part in a Providence protest Saturday, April 5 responding to the Trump administration. Coming on the heels of a marathon floor speech by New Jersey Senator Cory Booker, this shows how Democrats are searching for how to make an effective response to President Trump. You can read more about that in my Friday TGIF politics column posting around 4 this afternoon on X, Bluesky, Threads, Facebook, and at thepublicsradio.org/TGIF.
That’s it for our show. Political Roundtable is a production of The Public’s Radio. Our producer this week is James Baumgartner. Our editor is Alex Nunes. I’m Ian Donnis, and I’ll see you on the radio.
