State is running out of cash

PROVIDENCE — State government in Rhode Island is “weeks, not months” away from running out of money to pay its bills and payroll amid the COVID-19 public health emergency, according to state General Treasurer Seth Magaziner.

“I am completely committed,’’ Magaziner said in an end-of-week interview, ”to making sure that that does not happen and that state agencies have the funding that they need to do their work servicing people in this very important time.“

“That being said, we are clearly in a very serious situation, financially” both short-term and potentially long-term, he said.

“The short-term problem is that, in the absence of action, the general fund could run out of cash within a matter of weeks ... . [But] we are acting to make sure that that does not happen.”

Democrat Magaziner said he is not ready to lay out a plan, but it will likely rely on an infusion of cash from three directions:

• The federal government, to shore up the unemployment benefits fund and “help pay for the emergency spending that the state and the hospitals are needing to take on in order to help people during this time.”

“To be blunt about it, I don’t think that any state is going to be able to get through this crisis completely without federal assistance. That is absolutely vital,’’ Magaziner said.

•Temporary “loans” from other state accounts, including potentially the state’s $203.8 million “rainy-day” account and $14.8 million highway trust fund. (The only no-no: delaying payments to the state pension fund.)

•Borrowing in both traditional and non-traditional ways (such as lines of credit from private lenders) in anticipation of delayed tax payments such as the income tax, now not due until July 15.

He said the state’s separate unemployment and temporary-disability funds “have enough funding to make it through the next couple of months.

“But the claims volume that we are seeing of people signing up for unemployment, signing up for TDI either because they are sick or they are home to care for a loved one is truly unprecedented, and within a matter of months, that could put strain on those programs in the absence of corrective action.”

With 5,222 more applications for unemployment benefits on Friday, the number of claims since March 9 has now reached 37,075, according to the Department of Labor and Training. The number of TDI claims during that same period: 6,270.

“The claims that have come in just in the last few days are coming in much more rapidly than they did even during the Great Recession,’’ Magaziner said.

Beyond that, he said: there is the state budget, which was already facing a deficit — estimated at $200 million — “before this crisis began.”

(Even before the COVID-19 pandemic froze many segments of the Rhode Island economy — including the casinos — state lawmakers had effectively rejected many of Gov. Gina Raimondo’s proposals for plugging the hole.)

Magaziner said he does not know the date the state hypothetically runs out of money because “things are changing very rapidly.”

For example, he said, the state is still awaiting word on how much money it might receive from the federal bailout package still taking shape in Washington.

He said Rhode Island is hopeful of getting a temporary, multi-million increase in federal Medicaid dollars, based on information provided to the state’s Executive Office of Health & Human Services about the likely availability of extra money to states grappling with COVID-19 costs.

Spokesman David Levesque elaborated: “A bill passed on Wednesday night that will provide a 6.2% increase to the Federal Medical Assistance Percentages. ... We're estimating the increase will result in an additional $25 million per quarter ... while the nation faces this public health emergency.

“The state is still working through how the additional funds could best be used,’’ he said.

Asked about the potential for a tax increase as well, Magaziner said, “In the absence of federal support," the payroll taxes that finance the unemployment fund would go up automatically.

“We are still working through what the full range of options are, not only which one can be helpful financially but also what the legal steps would be ... because some of these things potentially could be done administratively. ... Others would require legislative action.”

Magaziner said he hopes to have more specifics within days.

— kgregg@ providencejournal.com

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On Twitter:@kathyprojo