Rhode Island faces $34.5 million budget shortfall instead of a surplus for current fiscal year

Rhode Island's new governor faces a $34.5 million shortfall for the current fiscal year instead of a surplus and a deficit that will likely continue growing, a public policy group said Wednesday.

The Rhode Island Public Expenditure Council said in a report that the budget for the 2015 fiscal year had projected a surplus of $500,000, but now the state faces a deficit.

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Executive Director John Simmons said the current fiscal year is a challenge for Democratic Gov. Gina Raimondo because the state is spending more on Medicaid than expected and agencies are overspending.

The report said Medicaid expenditures are projected to be $118 million more than budgeted, and Medicaid and cash assistance expenditures will require $37 million in additional state funds. It said state agencies are projected to overspend by a combined $42.2 million. The Department of Children, Youth and Families alone is about $13 million over budget, according to the report.

Simmons said the new administration needs to rein in costs for grants and benefits because structural deficits "loom over the state" for the next several years. The $34.5 million deficit is expected to grow to at least $172 million in fiscal 2016, and total expenditures will likely outpace general revenues through 2019, he added.

The outlook could worsen if lottery revenues decrease further as new casinos open in Massachusetts, Simmons said. Billions of savings are also at stake as the legal battle continues over the state's 2011 landmark pension overhaul.