PROVIDENCE –– By week’s end, the General Assembly will have completed a monumental task.

Lawmakers are on the verge of approving a state budget aimed at closing the largest deficit in almost two decades.

It’s unclear, however, if the budget is balanced, other than on paper, as required by the state Constitution. There are indications that tens of millions of dollars in budgeted savings are based on unrealistic assumptions.

That may leave the state with a tax-and-spend plan that exacerbates future deficits and puts off more difficult decisions for when lawmakers return in January.

“I don’t think we’ve exactly closed the deficit,” said Maureen Moakley, a political science professor at the University of Rhode Island. “There are some loose ends that will have to be dealt with.”

The Assembly budget proposal, which was approved by the House Finance Committee last week, is designed to close a $425-million shortfall for the budget year that begins July 1 without raising income or sales taxes. The plan increases education aid for cities and towns. And it partially restores health-care coverage and early childhood education for low-income Rhode Islanders.

Few are thrilled with every provision in the 254-page budget bill. The plan cuts subsidized health care for 1,000 low-income residents, caps welfare benefits at two consecutive years instead of five, and eliminates Head Start slots for more than 200 poor children.

But given the alternatives, many interest groups and elected officials –– from both political parties –– are breathing a sigh of relief that there were a few bright spots in an otherwise dreadful budget year.

“I think we are coming out of it looking good,” said Paul E. Moura, D-East Providence. “Any time in an election year you knock on someone’s door and you haven’t raised their taxes, it certainly makes the walk a lot easier.”

But Moura and others fear that the $6.89-billion spending plan may not be balanced at all.

The budget lists more than $60 million in savings from labor negotiations that are still ongoing. While labor leaders are close to inking a deal, lawmakers will probably vote to include the savings without knowing any of the details.

And the Assembly budgeted savings of $67 million by reshaping Rhode Island’s Medicaid system for poor, disabled and elderly residents.

The plan is largely modeled after Governor Carcieri’s proposal, which depends on the state being granted unprecedented authority from the federal government, known as a “global Medicaid waiver.” Even with the waiver, the administration has suggested it may have trouble saving $67 million.

But without the waiver, as is the case in the Assembly’s current budget, the state predicted saving $43 million at best, according to a memo released last month by the state Department of Human Services.

“We agree that it will be difficult to achieve the full $67 million in potential savings as the Medicaid reform proposal currently stands in the House Finance Committee budget plan,” said the governor’s spokesman, Jeff Neal. He added that the governor’s office was working with Assembly leaders to re-shape the Medicaid plan to meet the budgeted figure.

But at least one key lawmaker expects the budget proposal to cause vast cost overruns across state government.

Rep. Thomas C. Slater, a House Finance Committee member who helped craft the Medicaid proposal, said state departments would probably overspend the current plan by $100 million.

The budget “is not really unbalanced, it’s just that the departments will not hit the goals they think they’re going to make,” Slater said. “Everything in the budget is estimated anyway.”

BOTH CHAMBERS of the Assembly are scheduled to vote on the state budget by the end of the week.

That gives lawmakers plenty of time to prepare for November’s reelection campaigns (every lawmaker’s term expires at the end of the year) without the distraction of the financial mess that has consumed state politics for the past six months.

The elections have not been far from legislators’ minds.

“It’s an election year and the elections have affected this session since the first day we came here in January,” Moura said. “The most political document in this building is the budget.”

Lawmakers know the coming elections will be challenging. To avert a separate current-year state deficit, they recently took more than $12 million in promised aid to cities and towns in the middle of the fiscal year.

House Finance Committee Chairman Steven M. Costantino, the architect of the Assembly’s budget, acknowledged there will be pressure on municipalities. But he quickly points to the inclusion of “a slight bump” in local education aid.

Indeed, the new spending plan relies on a projected increase in gambling revenues from Twin River to distribute $12.8 million in education financing to cities and towns in the budget year that begins July 1.

Some fear, however, that depending on gambling revenues in an uncertain economy may lead to more problems.

“I was grateful to see that there are some increases [in education aid], but that’s gambling revenue that, guess what, can’t be depended on,” said Rep. Edwin R. Pacheco, D-Glocester. “Let’s say we have another bad year as far as gambling revenues are concerned. So next year, are we going to be in the same position and have to ask the cities and towns for another kickback?”

The bump in education financing, however, gives incumbent lawmakers something to bring to the campaign trail. “It’s a campaign issue,” Slater said.

But as with many increases in the spending plan, the increase is offset by cuts elsewhere. The budget proposal cuts non-education financing, for example, from the current year’s originally approved levels by $12.5 million.

EVEN IF THE budget proposal is based on realistic assumptions, chances are good that Rhode Island will face another midyear shortfall by the end of November.

State government’s fiscal health is tied directly to the regional economy.

“Our sales tax [revenue] is down, our income tax [revenue] is down and there is a tremendous lack of job growth right now in the state of Rhode Island,” Costantino said, adding that inflation and energy prices are exacerbating the situation.

He said lawmakers will probably be forced to pass another round of budget cuts or revenue increases early in the next session simply because of the economy’s drag on the state’s coffers.

“It’s not so much I’m not confident in the budget,” Costantino said, “it’s that I have less confidence in the economy, which has a direct impact on my confidence on the budget.”

The Assembly’s budget proposal avoids increasing the sales or income taxes. It also avoids rolling back or delaying tax breaks aimed at high earners — the capital gains tax and alternative flat tax option that organized labor and its allies lobbied hard for in recent months.

But it would be wrong to assume those issues are dead.

Meanwhile, Moakley, of URI, said it’s not necessarily a bad thing to put off some difficult decisions for the 2009 legislative session.

“I think they made a big step in terms of cutting spending and making some difficult choices in terms of the structural deficit,” she said. “I think it’s the best they can do.”

speoples@projo.com