Two Aquidneck Island communities have imposed strict spending limits and controls in the face of declining local revenues and the prospect of state aid being slashed.

Municipal leaders in Newport and Middletown both announced in recent days that they would not start any new capital projects with money from the general fund and that even the smallest of purchases must be approved by supervisors. Both communities are curtailing hiring, except with the permission of top administrators, and ordering that overtime be authorized only when necessary.“I don’t recall this kind of caution being expressed this early in the fiscal year,” said Newport City Manager Edward F. Lavallee. “Because the downturn of the economy has prevailed so long, we have to be cautious about it getting any worse. … We can either do it now and prepare for it, or wait and say, ‘Whoops!’ ”

Lavallee sent a memorandum to City Hall department heads last week informing them of the new austerity measures. He emphasized yesterday that the budget the city adopted for the fiscal year that began July 1 anticipated difficult times, including a drop in revenues and investment income and an increase in such expenses as health insurance. In fact, fee revenue from building permits and property transactions are down, along with meals and beverage taxes, he said.

As a result of that conservative budgeting, the city, now five months into the fiscal year, is not projecting a shortfall, Lavallee said.

“We were extremely aggressive in cutting costs,” he said. “Our balance sheet is in pretty good shape.”

But since the budget is so lean and dominated by fixed costs, he said, there is little room to make up a sudden and unanticipated loss or reduction in state aid, as some are speculating might be necessary to address enormous state deficits forecast for this year and next.

So now any purchase over $100 must be approved by the Finance Department and any capital project that has not begun or is not financed with grants will not go forward. While some overtime is “absolutely necessary,” Lavallee said, department heads “have to be very selective” in authorizing it. He won’t be sending two staffers to conferences for computer training anytime soon.

Middletown announced its austerity measures at a Town Council meeting on Monday after Town Administrator Shawn J. Brown met with Lavallee, had discussions with his staff and sent a letter about the new spending policies to his department heads.

He said that Middletown, like Newport, isn’t projecting a shortfall. And the town has a diverse economic base, thanks to defense-industry businesses. Still, revenues have slipped and it’s wise to “be proactive,” Brown said.

“It certainly doesn’t make sense to get in a hole you can’t manage from,” he said. “Now, with a number of state leaders saying, ‘Prepare for the worst,’ it makes sense to put the brakes on and get ready to start making adjustments.”

All “nonessential” spending has been frozen. “Essential” purchases from $50 to $500 must be approved by the finance director and anything beyond that must be authorized by Brown. Travel for conferences will be permitted only if required.

All hiring proposals must be “reviewed,” he said, but he added that with seven vacancies in the Police Department, “I can’t not hire police officers.”

He said that spending controls will not jeopardize public safety or violate labor contracts.

rsalit@projo.com