PAWTUCKET –– The City Council is scheduled to vote Wednesday on a plan to erase this year’s large budget deficits in the next fiscal year by imposing a 5.6 percent property tax increase and drawing on “rainy day” cash reserves, moves that would avert a looming court case over money for the schools.

The tax increase for the year that begins July 1 would cover some $3 million of a $5.2-million schools deficit in this year’s budget. The reserve fund would be tapped to cover both the balance of that deficit and the entire $2.6-million non-schools deficit, said Finance Director Ronald Wunschel.

State law caps increases in local tax levies in fiscal 2010 at 4.75 percent. But Pawtucket was granted an exemption from the state Division of Municipal Finance because it suffered a substantial drop in state revenue-sharing aid, said Peder Schaefer, the division chief. The state cut the city’s aid by $2.6 million, more than 50 percent, according to Wunschel.

The council is scheduled to give final passage to a budget for fiscal 2010 at Wednesday’s meeting.

mmckinne@projo.com