By JIM BARON

PROVIDENCE — An unapologetic Gov. Donald Carcieri, defending the deep cuts made in state aid to cities and towns in his revised budget for the current year, called on city employees and school teachers to take a 3 percent cut in pay and open up labor contracts for other savings as unionized state workers have.

“If everyone takes a little bit of a haircut,” Carcieri told reporters at a Statehouse news conference the day after details of his supplemental budget were released, “we can keep everyone working, which is the goal. Some of our cities and towns have done that, but a lot of them have not.
“If people give a little bit, this year and next year, hopefully we'll get through this.” he said. “And when the economy starts strengthening and employment starts strengthening, our income will rise. It will.”
On the other hand, he added, “I will not support an effort at the state level to raise statewide taxes to avoid the kind of hard choices and hard decisions that have to be done across the board in all our communities.”
Carcieri's mid-year budget correction calls for drastic cuts in state aid to cities and towns and school districts. As part of his plan to close a $220 million budget hole, the governor proposes a 3 percent across the board cut to school districts and to eliminate both the third quarter and fourth quarter reimbursement to cities and towns for revenue they do not collect because of the phase out of the automobile excise tax. He wants to eliminate the car tax reimbursement entirely in the budget year that starts July 1, which means many people who have not received a car tax bill for years may start receiving one for the second half of the current budget year and for the full year starting next year. Currently, the first $6,000 of a vehicle's value is exempt from the excise tax and the state reimburses the municipalities for the revenue they forgo as a result.
Already, mayors and school officials across the state are decrying the cuts that come at the middle of their budget cycles.
According to figures supplied by the state Budget Office, the withholding of the car tax reimbursement will affect local cities and towns as follows:
Pawtucket would lose $5 million; Woonsocket, $2.7 million; Central Falls, $739,000; East Providence, $3 million; Cumberland, $1.4 million; Lincoln, $1.5 million; North Smithfield, $1 million; Burrillville, $1.4 million and Glocester, $609,000.
Carcieri’s proposal also resuscitates several initiatives to allow cities and towns to cut costs that the General Assembly rejected earlier this year, including, requiring all municipal employees and teachers to pay at least 25 percent of their health insurance costs; eliminating automatic cost-of-living increases to pension payments, reducing disability pensions for those able to do other work, and changing the age requirements for retirees to start collecting pension payments, and suspending the Caruolo law, which allows school committees to sue their cities and towns if they believe they are not properly funded, during years when state aid is cut to school districts and eliminating minimum manning provisions from police and firefighters’ contracts.
Those steps alone, Carcieri told reporters, would allow cities and towns to save approximately $120 million a year, more than making up for the money they will lose in the cuts to school aid ($20.5 million) and car tax reimbursement ($65 million). 
“If the General Assembly gives those tools to the municipal leadership that we describe here, virtually all of that could be offset with savings.”
The usually upbeat Carcieri predicted a gloomy economic outlook for the foreseeable future.
“There is not a lot of signs that this is going to turn around or improve rapidly,” he said. “The consensus is, there is no feeling of strength for the employment side of the economy going forward. I would be amazed if this turned around quickly and 2011 or 2012 were going to be substantially different.”
Education Commissioner Deborah Gist said after the governor’s press conference that “We are very concerned about these reductions in education aid. I think it is terribly concerning that there is going to be a difficult situation for our school districts to handle, but these are extraordinary times. These are economic conditions that none of us could have expected.
“Our commitment is that any reductions that are made are made in ways that have the least effect on students directly,” Gist said.
She said she is not more concerned about less affluent districts more than wealthier ones, adding, “it affects each district a little bit differently because each district is in a different position based on whatever budget challenges they were already having or the academic challenges they are already having.”
The governor’s proposals must be approved by the General Assembly, but the initial reaction from the chairmen of the key committees in the House and Senate foretell rough sledding for Carcieri’s plan.
“I am very concerned about having a mid-year tax increase,” if cities and towns decide to start sending out auto tax bills for the second half of the year, House Finance Chairman Steven Costantino told The Times after his committee got a briefing on the budget from Administration Director Gary Sasse and Budget Officer Rosemary Booth Gallogly. “It’s one thing I think the original proposal was the last quarter and now you are hearing two quarters on the car tax. And then the plan is as was said in the hearing to eliminate it in 2011.
“Of more concern is the immediate year and how cities and towns are going to be able to absorb that kind of cut without a property tax increase,” Costantino said, noting that cities and towns will have to come to the General Assembly to get approval for a property tax increase above the 4.5 percent cap imposed by state law.
“I am disappointed,” Costantino told Sasse and Gallogly, that very few of these ideas solve the 2011 problem.
Costantino said he would have liked to see more ideas for consolidating state functions and departments, at the same time the governor is urging municipal consolidations. “Quite frankly, I don’t think it’s enough to say it is coming in 2011.
The chairman suggested that the state could be run with five departments, “maybe six or seven,” while there are currently about 40 departments and agencies throughout state government.
Costantino said there are also “too many gimmicks” and “one-time fixes” in the budget, such as selling several state properties, including Veterans Memorial Auditorium.
Senate Finance Committee Chairman Daniel Da Ponte, who represents portions of East Providence and Pawtucket, issued a statement saying, “As a corrective action plan, this is entirely ineffective and shortsighted. I see no reorganization for future sustainability. This is little more than short-term Band-Aids that will do no nothing to help Rhode Island in the very difficult economic times ahead.”