By JIM BARON

PROVIDENCE — Residents of the state’s 39 cities and towns, and its 36 school districts, should expect to see either property tax increases or a sharp reduction of municipal services as Gov. Donald Carcieri is proposing to lop about $125 million in state aid in the middle of the fiscal year as part of his plan to plug a $220 million budget hole.

Also taking a hit are the state employees, school teachers, State Police and judges who would lose the cost of living allowance (COLA) in the pensions they plan to receive upon retirement, a move that would save the state about $25 million in the current year.
The governor delivered his revised budget plan to the House of Representatives Monday and the House Finance Committee will hold its first hearing on the document this afternoon. Future hearings will be held each day for the rest of this week and Monday and Tuesday of next week.
The automobile excise tax, which has survived two separate legislative attempts to phase it out, would be back under Carcieri’s plan.
The governor had already proposed withholding the fourth quarter reimbursement of the automobile excise tax from cities and towns, with an estimated savings of about $32.5 million. He now wants to withhold the third quarter reimbursement as well, for a total savings to the state of $65 million.
Budget Director Rosemary Booth Gallogly said the plan is to eliminate the car tax reimbursement entirely in the 2011 budget, which would give the state about $135 million a year to spend elsewhere.
That means cities and towns would once again be sending tax bills to owners of automobiles valued at $6,000 or less.
Residents who had been receiving tax bill for more expensive vehicles with the first $6,000 of value exempted will now have to pay a tax on the total
value of the car, unless the municipality can do without the state reimbursement, an unlikely scenario in most, if not all communities. The communities could also send tax bills to vehicle owners for the last two quarters of the current budget year, running from January 1 to June 30. If the tax would not increase the total hike of the tax levy by more than the state cap of 4.5 percent, the tax could be imposed by a simple majority vote of the city or town council. If the hike would make the municipality exceed the cap, a four-fifths majority of the council would be required.
Carcieri also proposes a 3 percent across-the-board cut in state aid to each of the state’s school districts, for an estimated savings of $20.5. If the General Assembly goes along with the plan to eliminate the cost of living from pensions, it would save the cities and towns $18.5 million, but the state is going to “scoop” that, too. Gallogly said that because the school districts are not going to have to spend that $18.5 million, the administration doesn’t consider it a cut to take it away.
Total school cuts, which do include that $18.5 million, will affect local communities as follows: Pawtucket will lose $3.3 million; Woonsocket, $2.3 million; Central Falls (100 percent state funded), $2 million; Cumberland, $952,000; Lincoln, $725,000; Davies, $07,000; North Smithfield, $377,000; Burrillville, $749,000; Glocester, $189,000, and Foster-Glocester, $360,000.
No specific figures were available for how much each community would lose from the withholding of the car tax reimbursement.
Administration Director Gary Sasse acknowledged that “there is no doubt this will create challenges for localities,” but both he and Carcieri spokeswoman Amy Kempe denied that the cuts will require property tax increases in the cities and towns.
Sasse said the municipalities can “take steps to restrain costs.”
He added that it is “not necessarily” an increase in a Rhode Islander’s tax burden because “state government held the line on taxes by making tough choices” and “there is room at the local level to make the same tough choices.
While the governor’s proposed budget allows a process for cities and towns to levy a supplemental tax, Sasse said that should be considered “a last resort.”
Among the steps communities could take, Sasse said, are “pay reduction days” similar to those bargained with most state employee unions, and renegotiate labor contracts to realize other savings, including requiring workers to co-pay at least 25 percent of their health insurance premiums.
The revised budget also includes several legislative articles, most of which were included in his original budget proposal this year but subsequently rejected by the General Assembly. These include:
--- Suspending the so-called “Caruolo Act,” which allows a school committee to sue its city or towns if they believe they were inadequately funded, in any year when there is a reduction in state aid.
--- Requiring city and town councils to approve teacher contracts bargained by school committees before the contract can be ratified.
--- Eliminating minimum manning provisions from police and firefighters contracts.
--- Along with eliminating pension COLAs, changing the rules for a disability pension to include a smaller payout for those not totally disabled from taking other employment, and to establish a minimum age at which a retiree may actually receive pension benefits.
--- Require a minimum 25 percent co-payment for health insurance premiums by all municipal employees.