RI financial crisis looks even worse

PROVIDENCE, RI (WPRI) - Just when you thought it couldn't get any worse, Rhode Island's financial crisis has taken yet another downward turn.

A study released Monday reveals the state will be $372 million in the red by the end of the fiscal year - a much bigger deficit than state budget officials first thought.

That number surprised even Governor Donald Carcieri, who said in a statement, "We expected revenues to be down due to the current economic climate. But, we did not anticipate the shortfall would be this great. The gravity of the situation is going to require more dramatic steps."

One local economist said things are probably going to get worse.

"As the national and global economies sink even faster starting in October, you're going to see Rhode Island go down faster. We have no insulation, we have a negative margin for error," said Len Lardaro, Economics professor at the University of Rhode Island

The numbers don't get much better for the coming budget year, which begins July 1, 2009. The state then faces a projected deficit of about $450 million.

Governor Carcieri said he plans to meet with leaders of the General Assembly next week to discuss a plan to deal with the deficit. He said it may involve cutting aid to cities and towns, and reducing pension costs. However, Carcieri has said he opposes raising personal income, sales or business taxes.

“For too long, the state has promised more to its residents than the revenue system can provide. These structural deficiencies are only exacerbated by economic downturns, placing the state in its current position,” he said. “We simply cannot afford to wait to address our economic situation. Now is the time for everyone to work together, and may require the General Assembly to take immediate action.”

In a previous interview, former General Electric CEO Jack Welch said Rhode Island's financial woes should serve as a tale of caution for the rest of the country.

"It's not a right to work state. It's driven all big business out of the state. Eighty percent of the businesses in the state employ 20 people or less," Welch said. "It's actually a very nice state, nice coastline, nice everything. But, they tax the hell out of you, and you don't want to be there."