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February 29. 2012 11:39PM

State surplus sparks debate

CONCORD — The state's coffers ended up with a $17.7 million surplus in the last fiscal year, according to the 2011 financial report released Wednesday.

“It didn't come from a turnaround in revenues. It came from the cuts in expenditures,” said Dennis Delay, the economist with the New Hampshire Center for Public Policy Studies.

General fund revenues were even lower in 2011 than they were in 2010, down from $1.78 billion to $1.33 billion in 2011, Delay noted. “That's not too surprising given what was going on in the economy, and what is still going on,” he said.

House Republican leaders called for the funds to be shifted to the Rainy Day Fund, which now stands at only $9.3 million.

“While there will undoubtedly be calls to use this surplus to grow government, the right answer is to put these dollars into rebuilding the state's depleted Rainy Day Fund, so that we can both shore up our bond rating, as well as have some funds set aside in case there is a true emergency that the state faces,” House Speaker William O'Brien, R-Mont Vernon, said in a statement.

Democratic Gov. John Lynch said the surplus should be carried over to the current budget year, which began July 1, to ensure that it remains balanced.

“I believe in balanced budgets, and I am proud of the work we've done to maintain a balanced budget in these difficult times,” Lynch said in a statement. “That work must continue. As we look at the current fiscal year, 2012, there are some promising signs, but some significant challenges as well.”

There are recent indications that tax collections are improving this year, particularly business taxes.

Lynch noted, however, that the increase in business taxes has largely been “wiped out” by a 10-cent cut in the tobacco tax, which had been pushed by the House leadership. Tobacco revenues are more than $12 million lower than they were last year.

The greatest budgetary challenge the state may face this year is the ongoing dispute with its major hospitals over the Medicaid Enhancement Tax. Responding to cuts in uncompensated care payments from the state, the hospitals have filed $69 million in tax claims that must be resolved on a case-by-case basis.

House Speaker O'Brien also used the Department of Administrative Services' release of the 2011 financial report to call for more accurate and realistic revenue forecasts. Noting that an earlier estimate predicted a $26 million surplus for the year, instead of $17.7 million, he said, “That's why the House was so committed to using accurate, responsible revenue projections in this budget.”

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