PROVIDENCE — General Assembly leaders are planning to hold oversight hearings in the next few weeks to determine how the State of Rhode Island ended the 2007-08 budget year, days after they went home, with a $33.6- million deficit.

In an interview yesterday, House Majority Leader Gordon Fox said lawmakers are concerned about the impact the newly acknowledged deficit may have on the state’s reputation, bond rating and cost of borrowing money in the future. He said he personally is also concerned that the Carcieri administration is proposing what for many years was considered the unthinkable: taking money out of the state’s rainy-day fund to cover deficit-spending on routine operating expenses, a precedent that he likened to “crossing the Rubicon.”

Lawmakers tapped the rainy-day fund for the first time ever at the administration’s request in April after the state was hit with the need to make a $19-million refund to an unnamed financial institution on taxes paid during the 2006-07 budget year.

News that the state ended its last budget year on June 30 with a $33.6-million deficit — attributed primarily to overspending by state departments, including the governor’s office — was disclosed in an Aug. 29 report by the state controller’s office that surfaced this week.

Asked if he feared that tapping the rainy-day fund twice within a matter of months would set a bad precedent, Fox said: “I think that crossing that line is almost like the Rubicon. It’s something that — and I’ve been up here for 16 years now — that we’ve never done and we’ve had some dire times and never done it.

“It’s a great concern,” he said, especially “when there are certainly questions about management. If these are avoidable circumstances that have long-term ramifications that are going to cost the taxpayers of this state — the state’s reputation — harm because of a lack of management, we need to know that.

“So … we are talking with the finance chairmen. We are going to have a series of oversight hearings to look at exactly what’s going on, and why we’re getting here,” he said.

Asked if he believed lawmakers should be held accountable for hiding their heads in the sand as the deficit evolved, he said: “Not so much in the sand, because … when we pass the budget we are relying on the best information we have at the time, but what I am really concerned about is at some point this lands on our lap ... reports are put out there, no attention paid to them, then all of a sudden we arrive in January and it’s instantly we need a new ‘supplemental’ — we’re further in the red than we were and then we have to come up with, a lot of times, draconian choices to deal with that, and it’s not fair and it’s not right and we need to know about that.”

Governor Carcieri’s spokeswoman had this response to Fox’s announcement that lawmakers intended to hold hearings into the “root causes” of the newly disclosed deficit: “The administration will continue the ongoing dialogue with the Legislature, especially the House and Senate Finance Committees, on budget discussions.”

Fox made his remarks in an impromptu interview after a news conference in the bell chamber of the State House commemorating the anniversary of the Sept. 11, 2001, terrorist attacks.

In a brief interview a few minutes earlier, Carcieri said: “We had a tough year. You know that. We were doing everything we could.”

Referring to his failed plan to force state employees to take six unpaid days off to save $14.8 million, he said: “We had six furlough days that were banked, and we tried to make up as much ground as we could … It’s a very difficult time right now. That’s what a rainy-day fund is for, to bridge that. We are going to have to absorb that in the next year, and that’s what we are working on feverishly right now.”

After the interview, the governor’s spokeswoman, Amy Kempe, berated a Journal reporter for asking the governor questions about the deficit after the news conference ended. She has not yet, however, responded to repeated requests to interview the governor about the deficit.

So Carcieri’s statements yesterday marked his first public comment on the first end-of-year deficit in modern history attributable to overspending.

In May, he signed a deficit-avoidance plan, addressing the last budget year’s shortfall of $151 million by cutting health-care and welfare benefits for thousands of children, forcing six unpaid days off on the state’s work force, and ordering an across-the-board 2.7-percent cut of departmental spending.

But things did not go as planned. The forced furlough days died in union negotiations, and several departments that answered directly to the governor missed spending targets.

They include the Department of Human Services (overspent by $18.6 million), the Department of Mental Health Retardation and Hospitals ($7.8 million), the Department of Corrections ($3.2 million) and the governor’s office ($184,152), according to a preliminary closing statement issued by the state controller Marc Leonetti on Aug. 29 that The Journal obtained from the House fiscal office this week.

Kempe gave several reasons for the overspending by the governor’s office, including the legislature’s decision to trim the governor’s contingency fund by $487,113.

Asked more specifically to list the expenses that resulted in the $184,152 deficit in the governor’s office accounts, she cited two. She said the administration planned to sublet to Guam an empty office the state has maintained in Washington for years at a cost of $2,000 a month, but the paperwork took longer than expected to go through. She also cited Carcieri’s hiring of former U.S. Solicitor General Theodore B. Olson — the lawyer who successfully argued the case that put George W. Bush in the White House — to help the state in its fight to keep control of 31 acres owned by the Narragansett Indian tribe.

Carcieri hired Olson as lead lawyer for his office shortly after the U.S. Supreme Court agreed in February to decide whether the Department of Interior can take 31 acres just north of Route 1 in Charlestown into trust on behalf of the Narragansett Indians. Trust status would remove the land from most state and local laws, placing it under tribal and federal control.

Olson was to be paid a flat $200,000 in installments from the governor’s contingency account: $100,000 last year and the rest this year, according to the governor’s former press secretary, Jeff Neal. According to Kempe, that did not play out as anticipated.

She did not mention as a contributing factor the governor’s hiring of a second out-of-state lawyer, James Bopp, at a cost of $15,000 to file a legal brief here in a same-sex marriage case.

—With reports from staff writer Steve Peoples

kgregg@projo.com