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State spending freeze locked in

State House Bureau

May 22. 2014 8:21PM

CONCORD — The state will freeze hiring, equipment purchases and out-of-state travel paid for with general funds after the Joint Legislative Fiscal Committee approved Gov. Maggie Hassan’s executive order Thursday.

“Given the fact that revenues remain ahead of plan for the year, this is an unprecedented action that will help protect our budget,” Hassan told the committee. “We are taking the fiscally responsible, preemptive step of putting a freeze into place now so we are prepared in case the revenue trends seen in April continue.”

Hassan noted through March that the state was $25 million ahead of estimates, but April revenues were $22 million below expectations, particularly for business and interest and dividend taxes.

She said despite the drop, state revenues remain above by $3.9 million for the fiscal year to date.

Republicans on the committee noted that revenues are close to estimates for the year, saying instead the problem is spending.

“The state does not have a revenue problem,” said Senate President Chuck Morse, R-Salem. “The problem is expenses.”

He and other Republican senators on the committee claimed the governor has been slow to share financial information with them, and said they would like to see more specific proposals.

Hassan said state financial officials do not have enough information at this time to determine whether “this is a one-time issue or a permanent revenue decrease based on tax code changes, but we cannot wait to find out.”

She noted the 2011 and 2012 Legislature made changes in business tax codes that were felt beginning with the April revenue report, and said businesses are also beginning to write off losses from the recession.

If more adjustments need to be made, Hassan said she would first address them through executive orders, but legislative approval may be needed for some cuts, which may require a special session this summer.

Morse kyboshed talk about the special session, saying he was not calling the Senate back for a revenue problem that does not exist.

He said the Senate would come back to address needed changes to the Medicaid Enhancement Tax.

The state faces the loss of $185 million in Medicaid Enhancement Tax revenues after two superior court judges declared the levy unconstitutional.

Hassan said her office and department heads continue to meet with hospitals and lawmakers to discuss solutions that protects the state budget, preserves the state’s health care system and restores uncompensated care payments to hospitals.

She noted that 48 other states have a Medicaid tax so there are alternatives that can be explored.

Hassan cautioned lawmakers that state departments may not be able to meet their lapses or money that is budgeted but not spent. She said to date lapses total about $30 million without several traditional areas of savings that would increase the total. State budget writers expect state agencies to save about $50 million in order to help balance the budget.

The State Employees Association released a statement blaming lawmakers’ risky legislative behavior for putting the state in financial danger.

“We assert that it is not this governor or the state employees who are holding NH back from being the best it can be,” the statement said.

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