Governor Carcieri signs the state budget at a State House ceremony where he was joined by the General Assembly leadership.

The Providence Journal Connie Grosch

PROVIDENCE — The Democratic leaders of the General Assembly joined Republican Governor Carcieri yesterday for the signing of a new $6.9-billion state budget that, one after another, they each hailed as “a victory” for Rhode Island’s beleaguered taxpayers because it does not raise sales or income taxes.

“The good news,” said Carcieri, “is that everyone understood the seriousness” of the state’s financial situation.

“This is the House leadership saying that we are not going to raise taxes,” chimed House Speaker William J. Murphy, D-West Warwick. “Working-class families in Rhode Island, the middle class have paid enough. We are paying over $4 a gallon for gasoline; we can’t afford to increase taxes in Rhode Island.”

Added Senate President Joseph Montalbano, D-North Providence: “Where I’m running for office, I think my platform is going to be: we didn’t raise taxes and my constituents are going to be happy about that. Small businesses are going to be happy about that. Large businesses are going to be happy about that and once again, we hope to live for a better day and the only way we get a better day is by improving the economy.”

Aimed at averting a potential $425-million deficit, the new tax-and-spending plan for the year that begins July 1 would freeze municipal aid at current-year levels, cut programs for the elderly, the poor and the disabled and reduce the state work force at the same time it provides the next in a series of income-tax cuts promised the state’s wealthiest taxpayers in rosier times.

Dropping the state’s flat-tax rate another notch will cost the state treasury an additional $5.3 million in the 2008-09 budget year that starts next week; $26.9 million a year after that.

Not everyone is happy with the budget package, and the decisions made to preserve those tax cuts.

A glum Henry Shelton sat in the audience at the State House news conference, bemoaning the dismantling of a two-year-old program aimed at helping the poorest low-income families pay their utility bills. Eliminating the legislation will save millions over the next few years: $4.2 million in fiscal year 2009; $8.6 million in 2010; $13.1 million in 2011; $17.8 million in 2012; and $18.5 million in 2013, according to an estimate by the House Finance Committee.

But the timing couldn’t be worse for those struggling with heating costs, which are expected to be hundreds of dollars higher next winter. “It’s a disaster,” said Shelton, coordinator of the George Wiley Center, a Pawtucket agency that lobbies on behalf of low-income families, recently.

With no raises in the offing and state employees being asked to pay more for their health insurance, Richard Ferruccio, president of the prison guards’ union, said, “I don’t think it’s a victory for anybody,” pitting the rich versus the poor makes it “a very divisive budget,” and “I know there’s still questions as to whether the budget is actually going to save the money that was necessary.”

Carcieri acknowledged for the first time yesterday that the state may have to cut twice as many state jobs to achieve a projected $97 million in personnel savings as previously anticipated.

The savings were hinged, in part, on the assumption that 3,000 or more state workers would retire this fall before new rules go into effect that hike the cost of health insurance for state retirees, and that 400 of those jobs would be left empty. Responding to a reporter’s question yesterday, Carcieri said it is not yet clear how many more jobs will have to go, “but it’s my judgment right now is that it is probably another 400 people, another 300 to 400 people would be required.”

Budgets are, in their own way, a political manifesto and legislative Republicans have been on talk radio claiming a disputed victory in the war over taxes-and-spending.

The entire General Assembly is up for reelection in five months. Lawmakers rushed to end the previous legislative session last week, in part so they could focus on the looming elections and file related paperwork due this week with the secretary of state’s office. One political observer believes Carcieri emerged from the budget debate looking the best.

“I think the budget is a big victory for Governor Carcieri,” said Brown University political science Prof. Darrell West. “He defined the terms of the debate and got the Democrats to approve much of what he requested.”

But University of Rhode Island political science Prof. Maureen Moakley says the General Assembly also scored political points with the electorate by resisting the temptation to plug the $425-million budget shortfall with tax hikes. “I think it was a win all around,” said Moakley. She acknowledged some of budget projections may be exaggerated, but suggested there will be little political fallout for leaving some of the tough decisions for next year.

“They still have options down the road when they come back in January and the election will be over,” she said.

But Carcieri’s wins extended beyond taxes.

He successfully pushed for the inclusion of budget language that creates a new class of public schools –– known as mayoral academies –– that are largely free of labor union bargaining and prevailing-wage standards. The budget also prohibits municipal health-care contracts from specifying a health-insurance provider.

Organized labor strongly opposed both proposals.

Moakley credits the governor’s newly hired director of the state Department of Revenue, Gary Sasse, with pushing the governor’s agenda through what had until recently been a hostile General Assembly.

Sasse, who is generally respected by leaders of both parties as the former head of the Rhode Island Public Expenditure Council, “provided the kind of cohesive force that kept all these people on the same page. Having him in the mix made a big difference,” Moakley said.

Instead of claiming a Republican victory yesterday, Carcieri opted to be magnanimous. Given the magnitude of the deficit, he said; “I think we all understood that we’ve got a huge problem and when you’ve got a huge problem the reality is you can’t nip around the edges, you’ve got to dig in and you’ve got to go to work and there are going to be difficult decisions…. and when you look at where we spend the money, of the $3.2 billion in general revenue, [$800 million] is people — personnel and benefits, $1 billion is human-service programs and … the largest piece [$1.1 billion] is just money that we all collect and pass back to the cities and towns, most of that for school aid.”

“So I think everybody up here understood that our options are few…. that we needed to dig in, really dig in deeper than we’ve ever dug in and make some major, major changes.”

“It’s a victory of cooperation,” said House Finance Chairman Steven Costantino. Asked if the lawmakers were setting the governor up for blame if the promised savings do not materialize, Costantino, D-Providence, said: “Certainly there’s a few issues within this budget that [are] going to take a lot of work by the administration to meet what they [told] us they would meet and we will be watching that.”

speoples@projo.com