01:00 AM EST on Thursday, February 26, 2004

BY SCOTT MAYEROWITZ
Journal State House Bureau

PROVIDENCE -- Governor Carcieri is proposing an ambitious spending plan that would ask voters in November to approve $234.5 million in new bonds and ask the General Assembly to sign off on more than $300 million in additional loans.

The new money would pay for capital projects, such as highway improvements and a new biotechnology center at the University of Rhode Island.

Carcieri takes credit in his budget for having a pay-as-you-go financing process for capital items, and while he is paying for other such expenses straight out of the operating budget, he is spreading out the cost of many new projects over decades.

The borrowing doesn't stop there.

When voters go to the polls two years from now, Carcieri plans to have at least another $111.4 million worth of projects on the ballot.

If all of this new borrowing is approved, the amount of money the state spends each year to repay these loans will jump from the current $136.5 million to $184.1 million by 2009.

For years, the state has tried to chip away at its overall debt. It now stands at $1.4 billion, down from nearly $1.9 billion in 1994. The spending plan Carcieri unveiled yesterday would send that number back up to $1.6 billion by 2009.

State budget analysts paint a bleak picture for future years. Without major cuts in the state's expenses or increases in revenue, deficits will continue to grow.

Senate Finance Committee Chairman Stephen D. Alves, D-West Warwick, yesterday said the new borrowing is "a major concern."

"Right now we're in tight financial times," he said. "I'm not sure we should be putting all types of bond issues out there."

But Carcieri spokesman Jeff Neal said the state can't ignore its assets.

"Governor Carcieri believes that as we deal with today's fiscal problems, we must also make targeted investments in Rhode Island's future," Neal said. "The governor has proposed a number of bond initiatives that are designed to generate economic growth and protect Rhode Island's environment. We cannot ignore the pressing infrastructure needs that face Rhode Island today and will only cost more in the future."

Last year, the state's deficit was filled in the final days of budget negotiations by a roughly $100-million federal windfall. Two years ago, the budget gap was filled by dipping into a huge share of the state's future proceeds from a national tobacco settlement. Nearly $250 million of the tobacco money was used to pay off some of the state's long-term debt.

A report last year by Moody's Investors Service lists Rhode Island as having the eighth-highest debt load in the country when compared to personal income. But the data used for the report was more than a year old, and the impact of one-time fixes, such as the tobacco money, has since reduced the debt load.

The governor's budget analysts say the state is still well within guidelines for appropriate debt. The state's Public Finance Management Board says that the debt as a percentage to the state's personal income should be less than 5 to percent 6 percent.

It is now 4.15 percent and by 2009, Carcieri's budget projections show it dropping to 3.76 percent.

The proposed bonds on the November ballot are: $50 million for the biotechnology center at URI; $48 million for development of the Quonset Point-Davisville Industrial Park; $60 million for environmental protection, including open space acquisition, farmland preservation, recreation facilities and watershed restoration; $10 million for emergency water system connections; and $66.5 million for highway improvements and bus purchases.

The governor is also proposing to issue "certificates of participation," a bonding mechanism that requires General Assembly but not voter approval. Those include: $58 million to refurbish buildings at the Pastore center in Cranston; $69.3 million for a new Training School; $169.5 million for a new train station in Warwick and a "people mover" to connect it with T.F. Green Airport; $2.25 million for construction at Travelers' Aid; $11 million to lease vehicles; and a $15-million Economic Development Corporation loan for Browne & Sharpe.

The plan to get the borrowing on the ballot this November will require approval by the General Assembly as part of the state budget package.

-- With staff reports from Liz Anderson