New Hampshire state budget (2008-2009)

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New Hampshire faced a $550 million budget gap for the two-year budget that began July 1, 2009. In an effort to close the large budget gap, Gov. John Lynch proposed laying off up to 300 state workers, closing a state prison and eight district courts. Additionally, the governor suggested dipping into the medical malpractice insurance fund, $50 million, and the state's rainy day fund, $38 million, to help close the budget gap.[1] Despite being poised to receive approximately $750 million in federal stimulus dollars, Gov. Lynch emphasized that any funds received should be viewed as one-time expenditures.[2]

“I don’t believe this is a forever type of problem,” said Lynch. “I really believe this is a two, two-and-a-half year problem and if we work together and don’t do something stupid over the next two years, we’ll emerge as even a stronger state.”[3]

Impact of budget woes

See also: State budget crisis, 2009-2010
  • In March 2009, New Hampshire's unemployment rate was at 6.2 percent, compared to 5.7 percent in February 2009 and 3.7 percent in March 2008. According to state officials 45,750 residents were unemployed in March, 18,340 more than were unemployed at that time in 2008 and 3,500 more than in February.[4]
  • The House voted in favor of a suspension of the insurance tax reduction of a quarter percent in order to raise $5 million.[5]
  • In 2009 the House voted in favor of an 8 percent tax on estates worth more than $2 million, to raise about $10 million.[5]
  • In order to raise state revenue some lawmakers voted in favor of a $0.35 increase in the cigarette tax, to raise $57 million.[5]
  • In reaction to declining revenue lawmakers voted for a 10 percent tax on gambling winnings, to raise $16 million. Additionally, lawmakers voted in favor of a $0.15 per gallon gas tax increase over the next three years, to raise $76 million for the Highway Fund in the next biennium.[5]
  • The University of New Hampshire announced in April 2009 that in light of the current economic climate a salary freeze would be imposed. Additionally, officials mentioned that yearly tuition rates could rise. Salaries would be frozen for non-union employees making more than $40,000 in an attempt to help close a projected $9 million budget gap in fiscal year 2010 and a $17 million gap in fiscal year 2011.[6]
  • In early April 2009 the Manchester School Board voted to lay off 10 assistant principals and proposed cutting 107 teachers and staff, eliminating elementary beginning band and orchestra and the gifted and talented program, reducing kindergarten to a half day, cutting more than $200,000 from athletic programs, and cutting $17,000 from music and arts.[7]

Budget background

See also: New Hampshire state budget

New Hampshire operates on a biennium, covering two fiscal years at a time. A fiscal year begins on July 1 and ends on June 30 of the following year; however, the biennium begins July 1 of odd-numbered years. According to the state Constitution, the governor must pass a balanced budget and cannot carryover deficits.[8] Initially, individual state agencies submit their budget requests in the fall, prior to the governor's completion of the recommended budget. At the beginning of the legislative session the governor presents a recommended budget to both the House and the Senate. But before the bill can be enacted into law, the bill must pass both houses in the legislature.[9]

Budget figures

The following table provides a history of New Hampshire's expenditures and gross domestic product (GDP).

Fiscal year Expenditures (billions) GDP (billions)
2000 $6.2[10] $43.5[10]
2001 $6.6[10] $44.3[10]
2002 $7.1[10] $46.2[10]
2003 $7.7[10] $48.2[10]
2004 $8.3[10] $51.4[10]
2005 $8.7[10] $53.5[10]
2006 $9.0[10] $56.1[10]
2007 $9.4[10] $57.3[10]
2008 $9.8[10] $58.6[10]
2009 $10.2*[10] $60.0*[10]
  • NOTE: The figures for FY 2009 had not been finalized at the time this data was compiled.

Ideas about why the crisis occurred

  • According to a report by the Nelson A. Rockefeller Institute of Government in January 2009, New Hampshire saw a decline in corporate tax revenue of $8 million from 2007 to 2008. However, the state did see a $4 million increase in personal income tax revenue. In total, between 2007 and 2008 the state experienced a loss of $7 million.[11]
  • New Hampshire was one of nine states that does not had a broad-based personal income tax.[11]

Proposed actions

Governor John Lynch

In spite of a looming $550 million budget gap, Gov. Lynch proposed laying off up to 300 state workers, closing a state prison and eight district courts. Additionally, the governor suggested dipping into the medical malpractice insurance fund, $50 million, and the state's rainy day fund, $38 million.[1] However, despite necessary budget cuts, Lynch said that he would veto any attempts to implement a sales or income tax. The governor also noted that any stimulus funds used should be used wisely and communities should remember that they were a one-time source of funds. Some lawmakers had proposed expanding gambling locations throughout the state and although the governor did not reject the notion of expanding gambling, he said, “It should be at a time when we can have a thoughtful discussion on it, not when we have a gun to our head.” Gov. Lynch emphasized that the state needs to trim down on unnecessary expenses; for example, he proposed closing an "inadequate" prison facility in Laconia. The closure, he said, should provide $35,000 per prisoner annually. However, with the necessary cuts and wise use of stimulus funds, the governor estimated that the state would be back on track financially by 2012. “When I looked at the budget I not only looked at the next biennium, I looked four years out to see what we're able to do. And I think it’s a good budget given the financial constraints we’re under,” said Lynch.[3]

Republicans

Contrary to some New Hampshire lawmakers, Republicans said that their proposed budget included spending $11 billion over two years, but did not include new or increased taxes. "Republicans as a matter of policy believe that you don't raise taxes in a recession ... You live within your means," said Rep. Neal Kurk.[12] However, the Republican plan did include an average 13.5 percent across-the-board spending cut; approximately $324 million over two years. “It is clear that House Democrats are leading us down the road toward a sales or income tax with their tax and spend approach to state government," said House GOP Leader Sherman Packard. Additionally, lawmakers noted that their proposal restored $83 million in school construction aid that had been eliminated in alternative proposals.[13]

Democrats

In response to the state's looming budget gap Democrats had proposed a $11.5 billion biennial budget that included several budget cuts and new taxes to raise the necessary revenue. The increase in taxes was estimated to generate approximately $113 million in new revenue. Additionally, in order to reduce the number of necessary budget cuts, lawmakers recommended using $117 million in federal economic stimulus money.[13] "We're trying to share the pain with everyone, to keep the pain as low as possible for everyone," Rep. Marjorie Smith said. "If you think any of us on the committee enjoyed what we were doing, you are wrong." The Democratic plan raised the cigarette tax by $0.35 a pack, the gas tax by $0.15 over three years, and the tax on rooms and meals to 8.75 percent, an increase of nearly 10 percent.[12]

Economic stimulus package

New Hampshire was expected to receive $750 million from the $787 billion dollar economic stimulus.[14] All told, the federal stimulus plan would create or save 16,000 jobs in New Hampshire, based on White House estimates.[15]

According to preliminary reports, New Hampshire was expected to receive:

  • $258.3 million for education[16]
  • $250 million in Medicaid funding[16]
  • $129.4 million for transportation[16]
  • $47 million for special education[2]
  • $200 million for state stabilization funding[2]

Budget transparency

As of 2009, New Hampshire had no statewide, official spending database online.

Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases
State database Searchability Grants Contracts Line item expenditures Dept./agency budgets Public employee salary Exemption level
None n/a n/a n/a n/a n/a n/a n/a

Economic stimulus transparency

  • The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[17]
  • New Hampshire was expected to receive an estimated $592,154,447.[18]

Public employee salary information

See also: New Hampshire state government salary

See also

External links

Additional reading

References

  1. 1.0 1.1 NHPR, "Lynch Outlines Plan Aimed At Closing Budget Gap," February 12,2009
  2. 2.0 2.1 2.2 Fosters Daily Democrat, "Gov. Lynch urges judicious spending of stimulus funds," April 8,2009
  3. 3.0 3.1 Seacoastonline.com, "Lynch defends budget; asks for patience," April 8,2009
  4. WMUR, "NH Unemployment Continues To Rise," April 13,2009
  5. 5.0 5.1 5.2 5.3 New Hampshire Business Review, "N.H. House OKs capital gains, other taxes," April 10,2009
  6. WMUR, "UNH Announces Salary Freeze, Possible Tuition Hikes," April 3,2009
  7. WMUR, "Proposed Manchester School Budget Full Of Cuts," April 14,2009
  8. INPUT, "State Budget Process Tutorial," accessed April 15,2009
  9. State of New Hampshire, "Annual Financial Reports," accessed April 15,2009
  10. 10.00 10.01 10.02 10.03 10.04 10.05 10.06 10.07 10.08 10.09 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 US Government Spending, "New Hampshire State and Local spending," accessed April 15,2009
  11. 11.0 11.1 Nelson A. Rockefeller Institute of Government, "State Revenue Report," January 2009
  12. 12.0 12.1 Union Leader, "Dems 'share pain,' GOP picks budget battle," April 7,2009
  13. 13.0 13.1 Examiner, "NH's 'share the pain' budget: Dems vs. GOP," April 7,2009
  14. Associated Press, "Lynch: Use NH stimulus funds carefully," April 8,2009
  15. American Recovery and Reinvestment Act, "Impact," accessed April 15,2009
  16. 16.0 16.1 16.2 New Hampshire Union Leader, "Stimulus: How NH stacks up," April 7,2009
  17. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  18. Wall Street Journal, "Stimulus Spending by State," April 9,2009