July 1, 2009
State budget cuts $50 million in revenue-sharing
Lynch signs 2-year, $11.5 billion state budget


CONCORD - Gov. John Lynch yesterday put his signature on the state's $11.5 billion budget for the next two years. 

The budget took effect at midnight and will run until June 30, 2011.

Lynch said the budget, "reduces general fund spending, protects essential services without an income tax, a sales tax or an increase in the gas tax, but by closing loopholes." 

The two-year plan raises tax rates on tobacco, rooms and meals and closes business tax loopholes in the interest and dividends tax. It adds a 10 percent tax on gambling winnings, and boosts a variety of fees, including car and boat registrations, vanity plates, environmental and subdivision permits.

The budget also closes the Laconia State Prison, the Tobey School in Concord and the New London and Keene district courts. More court closings are being studied.

The $11.5 billion package is balanced with the help of $110 million in surplus at the Joint Underwriting Association, a medical malpractice insurance pool for health care providers. A Belknap County Superior Court judge froze the funds Monday, blocking the state from taking them until she rules on a lawsuit brought by JUA members. They argue rules say the excess funds should go to those who paid the premiums.

Lynch said he is confident the courts will allow the transfer, saying an Attorney General's Office opinion says state government is entitled to the funds. 

Republicans yesterday criticized Lynch for signing a budget that relies so heavily on funding at issue in a court suit.

"Senate Republicans warned this risky scheme would get tied up in court and could jeopardize the budget, but our attempts to stop the raid were blocked by the Democrats. Monday's court ruling has validated our warnings," Senate Minority Leader Peter Bragdon, R-Milford, said.

He urged Lynch to veto the budget and call a special session of the Legislature.

Late yesterday, a Merrimack County Superior Court judge froze $8.8 million in excess Medicaid money meant to help balance the budget. Justice Diane Nicolosi said a group of nursing homes appear likely to succeed in their effort to force the state to use the money to compensate them for the costs of providing care to Medicaid clients.

The budget cuts the state workforce by 5 percent, with 200 layoffs and another 400 vacant positions being eliminated.

Lynch said contract talks continue with the State Employees Association. He said he prefers worker furloughs to layoffs as a way to make $25 million in personnel savings the budget requires. But he said a voluntary furloughs system won't be enough. Up to 950 layoffs will be needed if a deal can't be reached on specific, predictable cutbacks.

"We need an approach with certainty and accountability ... It's difficult to see how we accomplish that on a voluntary basis," Lynch said.

He said the budget keeps the spending of state taxes roughly flat over the two-year period, cutting them by about 1 percent.

Republican critics disagree, saying that when accounting changes are considered, state spending is up about 7 percent. An analysis by the Legislative Budget Assistant's Office found the budget reduces state general fund spending by more than 3 percent.

When federal stimulus and other outside funds are added to the mix, the total budget increases by about 10.5 percent, LBA found. That includes spending of $625 million for highway improvements, much of it in federal stimulus funds.

Controversial measures in the budget include an expansion of the rooms and meals tax to include campsites, a change that will raise an extra $4.5 million a year. The rate of the tax, on all meals, hotel rooms and rentals, goes to 9 percent from 8 percent, raising a total of $31.2 million a year.

Towns and cities are left considering higher property taxes or deep cuts in their municipal budgets. The state cut $50 million in revenue-sharing money that it usually distributes, and has cut its share of pension contributions for local workers, from 35 percent last year to 30 percent in the first year and 25 percent in the second year of the budget.

Lynch said that when all municipal and school district aid are considered together, the state has increased overall local aid by nearly 2 percent.

Lynch also signed the state capital budget, which included $14.5 million for a new performance shell at Hampton Beach, a new ski lift at the Mittersill ski area adjacent to Cannon Mountain, and $35 million for community college and technical education center improvements.



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