The Rhode Island General Assembly returned to work on Tuesday facing a budget nightmare that was years in the making: $800 million in deficits stretched out over the current fiscal year, ending June 30, and the next one.

It must bridge the gap in a state economy reeling under America’s highest unemployment rate (tied with Michigan), widespread foreclosures and plummeting tax revenues. Meanwhile, the state is trying to implement a radical restructuring of the Medicaid program, which serves the poor, disabled and elderly.

At the same time, its taxes are already among America’s highest, with property taxes being particularly onerous, fueling the flight of middle-class jobs and tax revenues. Hiking taxes — one idea on the table — seems likely only to hasten their departure, accelerating the downward spiral.

Rhode Island is in this predicament because, for years, its political leaders increased state spending at an alarmingly faster rate (about 7 percent) than revenues (about 4 percent). For several years, they hid the problem with gimmicks and one-time infusions of revenue, but the train wreck was inevitable.

Now Rhode Island faces sharp cuts in local aid and public services, which could hurt the poor and harm the quality of life here.

Or . . . political leaders could begin to do the hard work we have long advocated, embracing some radical and politically difficult changes.

They need to:

• Reform the unsustainable public-employee pension system.

• Remove many unfunded mandates on cities and towns, so that local officials can manage their jurisdictions in a much more cost-effective way.

• Rewrite some of the state’s labor laws that are unfair to taxpayers and force unaffordable spending on local communities.

• Consolidate the administration of municipal safety and education to make these public services much more cost-effective. Many states administer services over areas vastly wider than the 39 cities and towns of Rhode Island. Perhaps Rhode Island’s county system can be energized to help achieve this.

• Super-charge the economy by developing ports, and particularly build a container port at Quonset Point.

• Hold the line on broad-based taxes, and align the state’s taxes with those of neighboring states as much as possible to at least ensure that it’s not less competitive than they are.

• Focus more of school spending on serving students.

None of this will be easy. But it should be clear to the state’s political leaders by now that the old way of doing business leads to disastrous deficits. More of the same will not work. Public services and the poor will suffer unless Rhode Island changes.

There are some changes of leadership and new blood in the Assembly. House Speaker William Murphy, who has demonstrated an understanding of the need to boost economic activity and jobs, and new Senate President Teresa Paiva-Weed will have to be brave enough to confront entrenched interests if they really want to get Rhode Island back on track.

The beauty is that, once the state starts spending within its means, and running government much more efficiently, it will be poised to boom when the economy turns around.