Associated Press
Economy, immigration debate top RI stories of 2008
By ERIC TUCKER , 12.26.08, 09:45 AM EST

For Rhode Island, 2008 brought a dreadful mix of rising unemployment, gaping budget deficits, mounting foreclosures and tumbling home prices - all combining to create the worst downturn in the Ocean State since the recession of the early 1990s.

There were other big stories, of course - federal corruption cases, a heated debate on illegal immigration and a shake-up on Smith Hill, among others - but it was the economy that informed policy decisions and consumed the Statehouse agenda.

Rhode Island, grappling with a depleted manufacturing sector and job losses in the construction and business services industries, posted a 9.3 percent unemployment rate in the fall that tied Michigan as worst in the nation. The two states were the only ones that lost population from 2007 to 2008.

Falling revenue forced Republican Gov. Don Carcieri to sign a $6.9 billion budget in June that made deep spending cuts to welfare programs and other social services. He then entered a protracted legal fight with union leaders over a plan to impose higher health care costs.

"I think everybody up here understood that our options are few, that we need to dig in, really dig in deeper than we've ever dug in, and make some major, major changes," Carcieri said at a budget signing ceremony.

State officials brainstormed ways to kickstart the battered economy, such as borrowing $25 million to make it less risky for banks to loan money to small businesses. But legislative leaders still expect a $366 million deficit for the year ending in June, and a $486 million shortfall after that.

Carcieri linked the state's fiscal woes, in part, to its population of illegal immigrants, saying they were financially straining school districts, hospitals and the prison system.
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He signed an executive order requiring state agencies and companies that do business with the state to use a federal database called E-Verify to check the legal status of new hires. It also directed state police and prison officials to identify immigration violators in state custody for possible deportation.

"If you're here illegally, you shouldn't be here illegally. You shouldn't be here," Carcieri said in announcing the order, which prompted an outcry from immigrant advocates and a court challenge from the American Civil Liberties Union.

The year ended with Carcieri and the federal government agreeing on a $12 billion, five-year spending cap on the state's Medicaid program for the poor, elderly and disabled. In return for agreeing to spending limits that save the federal government money, the state wins greater flexibility to use its Medicaid money. Lawmakers now must decide whether to accept or reject the proposal.

A shakeup at the Statehouse leaves new faces to deal with the financial mess.

Senate President Joseph Montalbano was upset in November by self-funded independent challenger Edward O'Neill. Senate Finance Committee Chairman Stephen Alves didn't even get that far, losing in September's Democratic primary to West Warwick baker Michael Pinga by a razor-thin margin.

Beyond Smith Hill, some of Rhode Island's biggest stories in 2008 came out of the courts.

Two former CVS vice presidents were acquitted of federal charges they bribed ex-state Sen. John Celona, whose disastrous turn on the stand as the government's star witness aided the defense. Prosecutors retried two former hospital executives on similar corruption charges; one, Robert Urciuoli, was convicted while the other, Frances Driscoll, was acquitted.

Lawsuits over the February 2003 Station nightclub fire, which killed 100 people, resolved with all defendants - including club owners Jeffrey and Michael Derderian and members of the rock band Great White - reaching settlements of more than $176 million with survivors and relatives of those who died. Plaintiffs are expected to start receiving the money next year.

Meanwhile, former Great White tour manager Daniel Biechele, whose pyrotechnics sparked the fire, was released on parole after serving 22 months of his four-year prison sentence.

Another major lawsuit ended when the state Supreme Court overturned a jury verdict that could have forced Sherwin-Williams Co. (nyse: SHW - news - people ) and two other former lead paint companies to spend billions of dollars cleaning the toxic substance from contaminated homes. The court said the companies could not be held liable because they no longer controlled their products, reversing the first-in-the-nation verdict against the former makers of lead pigment and paint.

And three members of the Narragansett Indian Tribe - including Chief Sachem Matthew Thomas - were convicted of misdemeanor charges for their involvement in an acrimonious scuffle with state troopers over a tax-free smoke shop in July 2003. Four others were acquitted.

One person who won't see how the legal system shapes up in 2009 is Rhode Island's colorful Supreme Court chief justice, Frank Williams, who announced his retirement in December after eight years as the outspoken public face of the state judiciary. Though the announcement surprised many in the legal community, Williams said he had simply tired of the job's administrative duties.

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