THERE ARE MANY states in financial trouble. But while other states are open about their financial woes, elected officials in Rhode Island violate their fiduciary duty, and declare the budget balanced when in fact there is a massive deficit, committing fraud upon the taxpayers.

To quote Prof. William Black of the University of Missouri: “Fraud is deceit. And the essence of fraud is, ‘I create trust in you, and then I betray that trust, and get you to give me something of value.’ And as a result, there’s no more effective acid against trust than fraud, especially fraud by top elites, and that’s what we have.”

Yes, that’s what we have. Laughing and joking last year, our leaders signed off on the 2008-09 “balanced” state budget. That “balanced” budget was really a $600 million deficit. It was fraud because they knew it then. And they know it now.

With 11 months of data in for fiscal 2008-09, revenues are running more than $400 million behind the final revised $3.1 billion estimate for total general revenues. And the last few months are showing even more ominous trends. So an aggressive total revenue budget for fiscal 2009-10 would have been $2.7 billion. Instead, our leaders agreed to forecast $3.1 billion in revenue again, putting us all at least another $400 million in the hole.

Reading the 2009-10 state budget, you see the use of $226.5 million of Obama “stimulus” funny money to repeatedly plug budget holes. This funny money is like putting Scotch Tape on ever bigger cracks in a crumbling dam. Add in the illegal raiding of the state’s rainy-day fund this year and the non-funding of the state pension plan for the last five months and you have enough cash flow to take Rhode Island a little farther down the road. A little farther than . . . North Providence.

Oh yes, the state pension system. After three “fixes” in four years, do its assets now match its liabilities? Not even close. Oh, sure, our leaders left the impression that they “fixed” it, but they didn’t. Do we believe that the same people who didn’t fund the pension the last five months of 2009 just “fixed” it?

House Speaker William Murphy’s pension committee took two years to get information that should have taken two weeks. The old “delay, delay, and hope the public goes away” trick. After General Treasurer Frank Caprio’s disastrous investment decisions cost taxpayers billions, the pension plan is still insolvent and has only one option. But here again, elected officials declare victory and hope they will be out of office before you figure it out.

One of the worst things about public fraud is that it’s contagious. When Governor Carcieri raids the rainy day fund and gets away with it, what is to stop cities like Cranston and Warwick from doing the same thing? Nothing, since they did it, too — and got away with it.

Let’s be frank. This fraudulent budget now puts Rhode Island on the road to collapse. Only, unlike California, whose comptroller has put out a loud warning, the Rhode Island populace will have to wait to be “surprised” when Rhode Island is about to miss payroll. The similarities between Rhode Island today and Cranston in 2002 before I became mayor are eerie. The lies were plentiful then and near bankruptcy ensued.

So while fraud is being perpetrated against the Rhode Island public, let me tell you the truth: The deficit could be north of $800 million and is leading to insolvency. The pension system is still broke and can only be saved by turning all accounts into 401(k)s. (See my March 5 Commentary piece, “Time grows short for our poor state.”)

The elected officials who signed off on the budget have all committed fraud.

After our leaders have sent signals for years that they do not want any real tax base in Rhode Island, guess what? There isn’t any. Governor Carcieri’s signing of the budget, despite any cockamamie reason he may give, transmits another signal to everyone outside the state that this nonsense is what Rhode Island deems true, and sends another death blow to both economic development and to the state Republican Party.

You can only sign budgets that you believe result in balanced budgets or surpluses. All else is fraud.

Not only is fraud committed, but the level of shenanigans is shocking. Among the many:

• Raising the cigarette tax 40 percent to the highest in the nation and expecting much more revenue.

• Jacking up the capital-gains tax to the level of ordinary income and budgeting $23.6 million more revenue, as if there was a Berlin Wall along the Rhode Island border to hold people in. They will just move to other states before cashing in their investments.

• State representatives’ still taking free health insurance for a part-time gig, while the public at large suffers with higher and higher health-insurance costs.

• The round-the-clock attempt to tax Rhode Island citizens for buying stuff on the Internet.

All astoundingly dimwitted.

There was a time in the private sector when a division head handed me his budget for the following year. After a short perusal, I noticed that he had the total number of employees going up, and the cost of health insurance for that department going down 75 percent. That employee was let go that day.

If only we could do that here.

Stephen P. Laffey is the former mayor of Cranston.