July 2, 2009

Fiscal Years 2011 and 2012 in balance
State budget passes, with ups and downs
By Jeff Mucciarone jmucciarone@hippopress.com

Faced with a mounting $500 million deficit for the biennium that started this week, state budget writers had a stiff challenge before them this year.

Legislators approved an $11.5 billion state budget last week, which Gov. John Lunch signed on Tuesday, June 30 (though a court ruling may hold up $110 million Lynch had hoped to use from the state’s medical malpractice fund).

There are losses — the closure of the Laconia prison, at least 200 layoffs, and retirees under age 65 must now contribute to their health coverage. There are also winners — aid to local schools is fully funded, aid to communities overall increases by 1.7 percent and the Department of Corrections will start a Division of Community Corrections to monitor parolees and probationers to reduce recidivism.

“I think it’s a tough and responsible budget and a balanced budget,” said Senate Majority Leader Maggie Hassan, D-Exeter. “The fact that we were able to come to an agreement on it, given the economic conditions we have, I think is a very good accomplishment.”

Along with 200 layoffs, the budget calls for un-funding 400 state positions and directs Lynch to cut another $25 million in personnel. Lynch is expected to try to negotiate unpaid furloughs in an effort to avoid more layoffs. The budget will also close several district courts and will cut medical education reimbursements for hospitals.

“I think that I am very pleased we will end Fiscal Year 2009 with a balanced budget and we have constructed a balanced budget for 2011 and 2012,” said Rep. Marjorie Smith, D-Durham. Smith helped lead a committee in negotiations on the final budget. “It was a very difficult and painful job to do, as we tried to meet the needs of the citizens who have no place else to turn but to the state. At the same time, we had to try to find revenue to keep the state going in the fairest way that we could given the choices available to us.”

According to a press release from Lynch’s office, the budget decreases state spending by about 1.1 percent. Republicans say the budget actually increases state spending by 6 or 7 percent.

Steve Norton, executive director of the New Hampshire Center for Public Policy Studies, said in a recent report the state made two significant changes in how it accounts for general fund activities — school building aid and liquor commission appropriations are no longer included in the general fund. If they were, as they always have been, the state’s general fund would increase by 5.2 percent under the recently passed budget. With the accounting changes, general fund expenditures decrease by less than 1 percent. Between 1990 and 2009, the biennial rate of growth in general funds has been 13.2 percent, according to the report.

The budget does not include a refinancing tax, an entertainment tax or expanded gambling, though it does include a tax on gambling winnings. It also raises the rooms and meals tax from 8 percent to 9 percent and extends it to include campgrounds. Legislators also approved extending the interests and dividends tax to include limited liability companies.

“These tough economic times require tough budget choices — and that’s exactly what we have done with this budget,” Lynch said in the release.

Other highlights of the budget: it significantly reduces funding for the Department of Cultural Resources; it raises the cigarette tax by 45 cents; it phases out state funding for the Commissions on the Status of Women and Men; and the Department of Health and Human Services must cut another $20 million from its $700 million budget.