Rhode Island Gov. Donald Carcieri yesterday proposed a $7.5 billion fiscal 2011 all-funds budget that would close a $405 million budget deficit. The proposal would reduce local aid to municipalities sharply to $838.7 million from $1 billion in the enacted budget in the current fiscal year.

The Republican governor has already sought to reduce local aid in a supplemental budget proposal — introduced but not enacted by the Democratic-led General Assembly — to close an existing $218 million deficit in the current fiscal year.

“This budget controls spending and is balanced without raising taxes,” Carcieri said in a press release.

The budget proposal counts on $2.7 billion of federal funds, including $455.7 million of stimulus funds.

The budget calls for the issuance of $105 million of general obligation bonds in fiscal 2011 and $75 million of bonds to finance the state’s obligations under its now discontinued historic tax-credit program, which gave properties owners tax credits to restore and preserve historic buildings and homes.

The proposed budget calls on the General Assembly to approve the issuance $28.3 million of debt for hospital consolidation, $28.1 million for energy conservation projects at the University of Rhode Island and the Community College of Rhode Island, and $68 million for the Rhode Island Turnpike and Bridge Authority.

Carcieri also called for two general obligation bond referendums to appear on the November ballot. One would authorize the issuance of $88.9 million for higher education facilities and the other would authorize $85 million for transportation projects.

The governor also asked the legislature to approve the tolling of Sakonnet bridge. Under the proposal, the Turnpike and Bridge Authority would share revenue with the state. Budget documents project that tolling could bring $156.6 million to the state over 10 years to fund bridge repair.

Carcieri’s budget would also cut some business taxes and offer tax credits to firms that hire new employees. On the revenue side, he proposed new fees including motor vehicle-related fees and fees on hospitals.

The state has grappled with high unemployment and falling revenues in the recession.  Rhode Island unemployment was the second highest in the nation after Michigan in December at 12.9%, compared to 10% nationwide, according to the U.S. Bureau of Labor Statistics.

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