New Hampshire Governor Lynch Presents Budget

Budget Meets State Government’s Core Responsibilities; Keeps Overall Aid to Local Property Taxpayers at Least Level

February 12, 2009 -- CONCORD - Faced with the worst economic crisis since the Great Depression, New Hampshire Governor John Lynch today presented a balanced, honest and fiscally responsible budget that reduces the size and cost of state government, while meeting the needs of the people of New Hampshire.

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“The budget I present today for state fiscal years 2010-2011 is balanced. This budget recognizes the extraordinary economic crisis facing our state and our nation by lowering costs, making state government more efficient and meeting our fundamental responsibilities to people,” Gov. Lynch said this morning as he presented his budget to a joint session of the legislature.

For New Hampshire, like almost every other state across the nation, this recession has translated into an unprecedented fiscal challenge. No one person, no one political party, can meet these extraordinary challenges alone. We must come together to help our citizens as they struggle with the deepening recession and to meet the fiscal challenges that our state faces,” Gov. Lynch said.

To meet this financial challenge, Gov. Lynch presented a budget that spends $40 million, or 1 percent, less than the current two-year budget. The budget proposal funds essential safety, public health services and keeps overall funding to property taxpayers at least level.

For Fiscal Year 2009, there is a projected $275 million revenue shortfall in the general and education trust funds. Given the continuing economic turmoil facing the nation, Gov. Lynch’s budget, on average, projects existing revenues will remain flat for the next two years.

“In developing this budget, we worked to lower the state’s cost structure. That’s absolutely necessary to make sure New Hampshire gets through the next two years of this downturn. Although this recession will not last forever, we must make continuing changes to state government in order to meet our priorities today and into the future,” Gov. Lynch said.

Assuming modest economic growth returns in 2012-2013, the general fund budget is sustainable if reductions to the cost structure are made and longer-term efficiencies recommend by Gov. Lynch in his address are implemented

“This is a difficult budget, but with challenge also comes opportunity. We must all be willing to re-think everything state government does, and how we do it. As we developed this budget, we assessed every state program, and asked whether this is something the state should continue to do. And if the answer was yes, we worked with agencies to consider how it could be done more efficiently,” Gov. Lynch said.

Gov. Lynch’s proposed budget makes hundreds of changes, large and small, across state government. This budget unfunds 391 vacant positions, and continues the state hiring freeze into 2010-2011. As a result of program eliminations and other efficiencies, there will be approximately 275 to 300 layoffs statewide.

“These layoffs are in no way a reflection of the hard work by our employees, who have served the state so well over the years. They are driven by our need to change the way state government does business,” Gov. Lynch said.

One of the largest drivers of state spending is the direct cash assistance provided to cities and towns - whether in the form of revenue sharing, meals and rooms distribution, education aid, or retirement contributions for local employees.

This budget suspends revenue sharing, rooms and meals distribution and reduces the state’s contribution to retirement costs from 35 to 30 percent, level-funding it with this biennium. This will allow the state to provide an additional $123 million in education adequacy aid for communities.

New Hampshire will also receive additional money from the state fiscal stabilization fund included in the federal stimulus legislation. Gov. Lynch recommended sending that money to communities to offset other reductions. In the aggregate, this approach will result in property taxpayers receiving the same or a slight increase in aid.

This budget protects essential services provided through Health and Human Services, while reducing or eliminating other programs within the department. It also makes major changes in the Department of Corrections, the creates efficient business practices in the running of state liquor stores and helps ensure New Hampshire can continue to have quality roads and bridges.

Gov. Lynch also made several longer-term recommendations, which if implemented, will make state government more sustainable and efficient in the future.

“This is a difficult budget filled with hard choices. But it is a budget that meets state government’s core responsibilities. No cut was easy to make. But we strived to make cuts responsibly and strategically, to ensure state government is stronger and better able to fulfill its priorities in the future,” Gov. Lynch said.

“These extraordinary times demand that all of us come to the table together to serve our families,” Gov. Lynch said. “Together, we will guide New Hampshire through these challenging times and make our state stronger for the future.”

Budget Highlights

This balanced budget spends $40 million less in general funds in Fiscal Years 2010-2011 than actual and estimated spending in Fiscal Years 2008-2009, a one percent decrease.

In this budget, for the first time, agencies have included estimates of all federal grants for the next biennium.

This budget assumes that, on average, existing state revenues will stay flat in 2010-2011.

This budget meets the state’s fundamental responsibilities -- protecting public safety; helping our most vulnerable citizens; educating the next generation; and preserving our quality of life.

This budget keeps aggregate funding to communities level by funding the $123 million increase in education adequacy, level funding the state’s contribution to local retirement costs, and sending an estimated increase in federal aid to cities and towns.

This budget helps mitigate tuition increases by providing a slight increase in the state contribution to the University and Community College systems over actual state spending in fiscal years 2008-2009.

This budget provides funding to the state Veterans’ Home to allow for an increase in residents.

This budget continues our commitment to children’s health insurance, maintains eligibility for our existing Medicaid and child care programs, and will provide continuing support to people with developmental disabilities. This budget freezes current provider reimbursements rates, with exceptions for physicians, nurse practitioners and psychologists, who receive a small increase. These steps will help protect the safety net for our most vulnerable citizens.

The capital budget focuses on critical maintenance projects that can begin quickly, in order to help create jobs.

This budget reduces a number of state government expenses across the board, including out-of-state-travel, equipment, subscriptions, training and organizational dues.

This budget saves $8 million on estimated fuel costs by locking in fuel prices for the next 18 months. In addition, the capital budget includes $3 million for energy efficiency upgrades across state government.

This budget unfunds 391 vacant positions, and continues the state hiring freeze into 2010-2011. As a result of program eliminations and other efficiencies, there will be approximately 275 to 300 layoffs statewide.

This budget controls the growth in state retiree health insurance costs by aligning benefits of the state retiree health insurance plan with those for active state employees. In addition, it institutes premiums for retirees younger than age 65 similar to the amount of monthly premiums retirees over the age of 65 currently pay for Medicare. The change saves $9 million over the biennium in all funds.

This budget proposes a new health insurance plan focused on wellness, prevention and disease management for non-classified and unclassified state employees. It also includes sliding scale premiums based on whether an employee chooses single, couple or family coverage. This will save an estimated $3.3 million in all funds. Some of the savings will be shared with employees in a one-time payment. The same proposal will be offered to classified employees.

Through this budget process, agencies identified and eliminated programs that no longer match current priorities. For example, the Department of Education eliminated a program that provided $17,500 for geography education at Keene State.

Through this budget process, state agencies changed operations to reduce costs:

* The Department of Administrative Services is switching to a four-day a week cleaning schedule for state buildings.
* The Department of Resources and Economic Development is moving the International Trade Office from Portsmouth to Concord. The Department of Cultural Resources is reducing its arts and library staff.
* The Department of Safety will reduce field offices by continuing to expand the use of technology. Almost all communities are now linked electronically to the state for car registrations. In addition, Safety is working to develop a system by this fall that will allow citizens to renew their drivers’ licenses online once every five years. As a result, most citizens will only need to visit a state motor vehicle office once every 10 years. These changes allow for the closure of two motor vehicle substations.

Through this budget process, state agencies considered what the state could do without or delay for two years. For example, the Department of Environmental Services will meet its existing grant commitments, but award no new grants over the next biennium. This budget level funded or reduced other grant programs.

The Department of Health and Human Services is funded at $721 million in general and increased federal Medicaid reimbursement funds - a slight decrease over actual 2009 projected spending. To protect core Health and Human Services programs, this budget:

* Closes the Tobey School. Tobey School students will continue to be served in appropriate community settings. Closing the school and providing funding to ensure services for the students will save approximately $1.4 million.
* Eliminates the catastrophic illness program, which provides support a number of specific illnesses selected by the legislature. In addition, it recommends eliminating reimbursement for chiropractic and podiatry services. Those dollars are redirected to the state’s Medicaid program.
* Eliminates funding for Direct Medical Education for hospitals and redirects the funding to the loan repayment program for primary care providers who treat under-served citizens, particularly through the Community Health Centers.
* Redesigns foster care reimbursement rates, increasing the average daily rate by ending special bonus payments. The Department will also change policies to move children more quickly out of expensive placements and into permanent homes.
* Reduces the Department’s personnel costs by $28 million over the biennium.

This budget holds spending for the Department of Corrections level in Fiscal Year 2010 by closing the Lakes Region Facility, through accelerated federal deportations of non-violent illegal immigrants and re-configuring the Berlin prison to serve additional prisoners.

This budget provides the funding necessary to fill judicial vacancies, and ensure that criminal and civil trials can move expeditiously. To reduce judicial costs, this budget recommends closing eight district courts in Hillsborough, New London, Plaistow, Claremont, Milford, Hooksett, Keene, and Colebrook. The savings will be an estimated $2 million a year.

This budget increases liquor revenue to the state by $50 million in 2010-2011:

* Closing about 16 under-performing stores and replacing them with agency stores. In addition, the capital budget includes funding for one to two new stores in under-served markets.
* Allowing the liquor commission to sell additional products
* Giving the Liquor Commission greater authority to set prices and discounts, and to determine inventory

In addition, this budget projects leasing land adjacent to state liquor stores on our turnpikes, and selling the Concord Warehouse, for an estimated $30 million in general fund revenue in 2010-2011.

This budget is balanced by using $60 million of the surplus in the state medical malpractice fund to support health care costs; a 35-cent increase in the tobacco tax; a ¾ percent increase in the meals and rooms tax; and a tax on gambling winnings more than $600.

This budget balances the state Highway Fund and allows New Hampshire to maintain its roads and bridges by:

* Decreasing distributions to other state agencies from the Highway Fund
* Selling a portion of Interstate 95 to the Turnpike System
* Increasing tolls to allow open tolling in Hampton, Hooksett and Bedford and to maintain connecting roads and bridges
* Increases vehicle registration fees an average of $10 to pay for road maintenance
* Implementing a frequent user discount for E-Z Pass that caps a commuter’s monthly costs at $30 a month

Governor Lynch has also outlined a number of proposals for further consideration that could reduce general fund costs in the 2012-2013 biennium, including:

* A new payment system for health care providers that encourages consolidation and more integrated service delivery
* Consolidating regulatory boards to reduce costs and improve administrative oversight
* Explore coordinating with neighboring states to develop a 2,000- to 3,000-bed Northern New England Correctional Facility. Such a move would potentially allow us to close the Concord prison, and provide space for other New England inmates. It could reduce state operating costs, turn the prison into a property taxpayer for the City of Berlin and provide jobs in a struggling part of our state.
* Sunsetting all non-regulatory boards, commissions and committees by the end of Fiscal Year 2011
* Merging the Department of Resources and Economic Development with the Department of Employment Security
* Creating a new Department of Natural and Cultural Resources by merging Fish and Game, Parks, Forest and Lands, Agriculture and Cultural Resources
* Merging law enforcement functions under the Department of Safety

Source: New Hampshire Governor