The mayor cites a new report that projects a $176 million shortfall by 2026. Elorza cites the cost of pensions, health care and benefits, and significant state aid cuts since the Great Recession, as key factors in Providence's “financial imbalance.”

PROVIDENCE, R.I. — Without a correction, the city is headed for insurmountable financial burdens, Mayor Jorge Elorza said Monday, citing findings from a White House-funded report that projects a $176-million budget shortfall in 2026.

The cost of pensions, health care and benefits, and significant state aid cuts since the Great Recession, are key factors in Providence’s “financial imbalance,” according to a news release that the Elorza administration issued after receiving a draft of the report. Read a summary of the report here.

Growing costs of deferred maintenance to the city’s roads, bridges and schools are another key factor, says the release, which cites findings from a draft report compiled by the National Research Network, a White House initiative.

The city’s approach to budgeting “rewards short-term thinking and forces us to scramble for one-time fixes instead of focusing on the investments we need to succeed,” said Elorza.

“These challenges did not develop overnight but, rather, are the result of decades in a system that looks to one-time fixes,” he said, adding that the same system “makes it difficult if not impossible to budget for 2, 5 or even 10 years ahead.”

The report, says the administration, projects that without action, the city’s structural deficit will continue to widen until the city’s financial burdens become insurmountable.

It includes what the administration describes as a “comparative analysis” between Providence and a number of cities in the region such as Springfield, Mass. On pension expenses, for example, both Springfield and Providence are far behind others in the comparison, Elorza said.

The study was the first part of a project that Providence launched after securing a $225,000 grant from the White House to explore the city’s financial challenges and long-term budgeting options.

“We want to make sure that we have a very keen sense of where the finances are, and how we compare but most important of all, what do we do about it,” Elorza said.

The city has worked with the National Research Network and a group of experts in an effort to precisely diagnose the structural deficit and how to address it, Elorza said.

Elorza said his predecessor, Mayor Angel Taveras, resolved a cash-flow shortage, but passed on a structural deficit. A structural deficit is a shortfall between a city’s recurring revenues and recurring expenses.

A one-time source of revenue can fix a deficit, but not a structural deficit. The same shortfall will be there again the following year.

The study, which will be more than 100 pages and offer lots of options, projects that the widening gap between Providence's revenues and expenditures will balloon to $176 million by 2026 without corrective action, according to Elorza.

The city, said Elorza, must “work with urgency to make sure we have a long-term frame of mind. So we’re making investments today that lead us where we want to go.”

John Simmons, executive director of the Rhode Island Public Expenditure Council, said the findings of the study are not surprising. Other cities have faced similar challenges, he said.

—mreynold@providencejournal.com

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On Twitter: @mrkrynlds