PROVIDENCE — The state budget proposal approved this week by the House Finance Committee would cut funding for the Rhode Island Economic Development Corporation in half.

The $7.76-billion spending plan passed by the committee on Wednesday slashes the EDC’s budget for the fiscal year that starts July 1 from its current $5.3 million to $2.65 million.

The reduction comes at a time when the state agency is trying to lead efforts to pull Rhode Island out of a deep recession. The state’s 12.1-percent unemployment rate is one of the highest in the nation.

A spokeswoman for the EDC called the budget cut “significant” and expressed concern about its potential effect on the agency’s programs.

“The EDC is disappointed in this cut,” Meaghan Wims said Friday. “Now more than ever we need to invest in economic development in Rhode Island.”

She would not speculate on any specific impacts on the EDC, saying that much could change between now and next Wednesday when the budget is set to go before the full of House of Representatives. In the meantime, however, she said officials with the agency would meet with House leaders to explain the importance of its role in these difficult economic times.

“Obviously we’re aware of the financial constraints that the state is under, but this is a significant proposed cut,” Wims said. “We’ll be working with the General Assembly over the next week to reinforce the importance of the EDC and the programs it provides.”

She could not say whether members of House Finance had given the EDC any indication before Wednesday’s vote that funding would be cut so dramatically. Governor Carcieri had proposed level-funding the EDC at $5.3 million. That figure is 15-percent less than the agency’s funding last year, which stood at $6.2 million.

Larry Berman, a spokesman for the House, said that House Majority Leader Gordon Fox met Friday with J. Michael Saul, interim executive director of the EDC, and Fred Hashway, the EDC’s director of government affairs, policy and innovation. During the meeting, Saul and Hashway made a case to Fox for restoring funding for the agency. Fox will discuss the issue with other members of the House and Senate leadership before a final decision is made, according to Berman.

Berman could not provide an explanation from House Finance Chairman Steven M. Costantino for the proposed reduction by The Journal’s deadline Friday evening.

For years, the EDC has come under fire for failing to attract new businesses to Rhode Island. Criticism came to a head in April when a special review panel issued a report that called the agency ineffective and recommended fresh leadership. The report said that in Rhode Island “economic development and job creation have been secondary to other public policy concerns.”

Following the report’s release, the head of the review panel said the state had started looking for a permanent replacement for Saul Kaplan, who resigned as EDC executive director last December.

Also in the report’s wake, Senate President M. Teresa Paiva Weed filed legislation to overhaul the EDC. Her bill would expand the agency’s board from 8 members to 13 and allow Carcieri, who is chairman of the board, to dismiss current members in February.

The bill would also move the EDC director into the governor’s Cabinet, giving the position more prominence in state government. The Senate is scheduled to vote on the legislation next Wednesday.

akuffner@projo.com