Budget crisis bad for RI, good for governor

PROVIDENCE, R.I. (AP) - Rhode Island's $422 million budget deficit gave Republican Gov. Don Carcieri an unusual amount of leverage to push his cuts to welfare programs and the state's work force through the legislature.

Democrats hold a veto-proof majority in the General Assembly and can rewrite Carcieri's spending plans at will. But a party that prides itself on protecting the working class, poor and organized labor approved the major cuts to welfare benefits, removed 1,000 adults from state-subsidized health care and pressured three-dozen labor unions to make concessions with Carcieri.

Carcieri signed the budget Thursday. "I think everybody up here understood that our options are few, that we need to dig in, really dig in deeper than we've ever dug in, and make some major, major changes," Carcieri said at a signing ceremony while standing beside Democrats.

Rhode Island is facing its worst financial crisis since the state bailed out failed banks and credit unions nearly two decades ago. With a tiny and shrinking Republican caucus in the legislature, Carcieri cannot force his way in the Statehouse.

Many of his proposals might have failed were it not for a spending shortfall equal to nearly 12 percent of expected state spending and a shared commitment with Democratic leaders not to raise personal income, sales or business taxes as unemployment soars and state revenue slumps.

"I don't think that the working class people of Rhode Island, with the economic shape the state is in right now, could afford to increase taxes," House Speaker William Murphy, a Democrat, said this week.

The long-term effects on Carcieri's popularity remain unclear. A telephone poll of 400 voters conducted in April by Rhode Island College showed strong support for limiting welfare benefits, but opposition to cutting state funding for cities and towns and releasing prisoners early.

"It's a bittersweet victory because he was able to get most of his proposals adopted, but many people are not going to like the cuts affecting them," said Darrell West, a political scientist at Brown University.

In a compromise with Carcieri, lawmakers agreed to limit lifetime welfare benefits from five years to four years. They also banned welfare recipients from getting more than two years of continuous welfare payments in a five-year period.

Democrats also gave Carcieri sweeping permission to save $67 million by negotiating with the federal government to change how the state runs its Medicaid program for the needy, disabled and elderly. Lawmakers approved the plan even though Carcieri won't have a final draft ready for another month.

Democratic lawmakers partially reversed one Carcieri proposal to eliminate state-subsidized health insurance for 7,400 adults. They trimmed costs by requiring health care recipients to take less-costly generic drugs and used the savings to restore health insurance for all but 1,000 people.

Another Carcieri victory came at the expense of state labor unions. In October, the governor announced plans to eliminate about 1,200 state jobs through layoffs and attrition. In the end, Carcieri fired about 220 workers, but he used the layoff threat as a bargaining chip to force other changes.

Earlier this year, Democratic lawmakers voted to reduce retirement benefits for state workers, which created a flood of retirees. Hundreds of those positions may remain vacant since Carcieri said he must eliminate 300 to 400 more jobs to balance the budget.

In return for halting the layoffs, union leaders agreed last week to a tentative deal that would force their members to pay more for health insurance and forgo a pay raise next year. As part of the terms, unions leaders supported a bill scaling back restrictions that make it extremely difficult for Carcieri to replace state workers with nonunion private contractors.

It passed last week. AFL-CIO Secretary Treasurer George Nee said the deal was the best the unions could get. Spending cuts were inevitable because even a modest tax increase would not have fixed the deficit.

And an existing job is better than no job at all. "Nobody had a magic solution to get out of this year without pain, cuts to people," he said.

(Copyright 2008 by The Associated Press. All Rights Reserved.)