The Obama administration will give Rhode Island $93.5 million tomorrow, the Ocean State’s first share of the $787-billion federal economic stimulus package that became law last week.

Although described as an increase in Medicaid funding, the money is largely free for state leaders to use as they wish.

President Obama announced the massive infusion of cash yesterday during a White House meeting with the nation’s governors, Governor Carcieri among them.

“This plan will also help ensure that you don’t need to make cuts to essential services Americans rely on now more than ever,” the president told the governors, according to a White House statement.

Overall, Rhode Island expects to receive more than $1 billion over the next two years in stimulus funds for various projects such as infrastructure, local education and higher unemployment benefits. An increase in the federal share of subsidized health care, known as Medicaid, will funnel $470 million to the state over that time and represents the largest piece of discretionary funding in the stimulus.

Tomorrow’s payment covers the first two quarters of the Medicaid increase, retroactive to last October.

“There are no restrictions on the funds since they are retroactive,” said Sen. Jack Reed spokesman Chip Unruh. “This is reimbursement for past Medicaid expenditures, money that the state has already spent.”

The state is facing a deficit of at least $357 million for the current year. And while Reed’s office said the money is meant to reduce the deficit, Rhode Island officials — Carcieri and the General Assembly — will ultimately decide what to do with it.

“He would like to use some stimulus funding, if possible, to cut taxes,” Carcieri spokeswoman Amy Kempe said yesterday. “But he also indicated that some of the stimulus money will have to be used to help close the budget deficit.”

The governor hopes to meet with legislative leaders later in the week to shape a plan.

“A lot of this is very fluid right now,” Kempe said. “We will have a clearer indication by week’s end of how this will be distributed.”

The legislature believes it has the legal authority to appropriate stimulus dollars, despite Carcieri’s recently established Office of Economic Recovery and Reinvestment, which is charged with managing the funds.

Wednesday’s payments have been set up in special Treasury accounts so that states can start drawing on them immediately, according to the White House.

speoples@projo.com