Rhode Island Gov proposes new and smaller budget

NEW YORK (Reuters) - Rhode Island Republican Governor Donald Carcieri on Tuesday proposed a new $2.85 billion budget, about a 5 percent or $151 million reduction from the current accord.

Like most states, Rhode Island must close a deficit and Carcieri's statement said his plan shuts the $427 million shortfall without raising broad-based taxes.

Though local aid that was abolished in previous budgets would not be restored, elementary, high-school and college and university spending would be level.

Carcieri again recommended several cost-saving measures for municipal governments, though the legislature has previously rejected them, and added new proposals, including a pay cut for public employees.

State employees already have endured a pay cut.

Rhode Island has been hurt particularly badly by the national recession. Its 12.9 percent unemployment rate in December was only topped by Michigan's 14.6 percent rate, and Carcieri urged enticing employers to hire workers with small business tax credits from the state and federal government that would be worth $7,500 per hire.

This would add 3,625 jobs -- that would have to pay at least 250 percent of the state minimum wage and meet other requirements -- during the period from July 1, 2010 to December 31, 2011 that the credits would be offered, he said.

His plan would halve the minimum corporate tax to $250, aiding 46,000 small businesses, and the Industrial Recreational Building Authority's credit enhancement program for banks and other bond investors would be quadrupled to $80 million.

"While the State must restrain spending, we must also initiate policies that will get our economy running again," the governor said. "The only responsible way to increase revenues is to get more people back to work, spending money," he added.

(Reporting by Joan Gralla; Editing by Diane Craft)