Rhode Island Gov. Donald L. Carcieri Tuesday evening delivered his state of the state address calling for action to address a combined $550 million deficit for this year and next.

“The state of our state is at a tipping point. It is teetering, ready to move dramatically in one direction or another,” Carcieri said. “All of Rhode Island’s virtues, all of its assets, all of Rhode Island’s bright promises are overshadowed and, in fact, threatened by the budget crisis we face.”

Carcieri, a Republican, said Rhode Island is facing the largest budget deficit since 1991. While he said it was “time for action,” he was adamant about not raising taxes, noting that Rhode Islanders bear the seventh highest tax burden in the country.

The governor plans to propose a fiscal 2009 budget that is less than last year’s, which is the first time since the 1990s that a subsequent year’s budget is less than that of the previous year.

He proposed changes to Rhode Island’s “overly generous retiree health plan,” including moving toward a 401K-pension plan. He also said that next week, along with presenting a fiscal 2009 budget, he would propose an initiative called Consumer Choice Reform Plan to transform the state’s Medicaid program.

Carcieri also said the state’s Family Independence Program needed reform, as Rhode Island has “one of the poorest records in the country for getting people off welfare and into the workforce.”

Currently, 70% of families in the program have been on cash assistance for more than two years. Moreover, 50% of those families have been on assistance for more than five years, and 25% of those families have been receiving cash assistance for 10 years.

Carcieri said the system encouraged long-term dependence, and he would introduce a new program called Rhode Island’s Work First. Under his proposal, people enrolled in the program would be required to have an immediate employment plan, and the program would provide support for a maximum of two years.

Carcieri finished by saying that last year, the state provided $1.1 billion in municipal assistance, and almost $900 million of that was for schools. Rhode Island has 36 school departments overseeing 150,000 students. Carcieri noted that the Fairfax County, Va., with the same student population, has just one.

The governor proposed to remove various health care providers from all local contracts and instead allow one umbrella health care contract with one provider that would include all state, municipal, and school employees. By creating competitive bidding by health insurers, the state would achieve over $41 million in savings, he said.

Carcieri said his message to all municipal officials is that “this deficit is not just a state-government problem — it’s a statewide problem.”

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