Gov. Benson orders budgets
with 10- and 8-percent cuts

July 30, 2004

Gov. Craig Benson has ordered New Hampshire's agency heads to submit two budgets by the end of the year -- one that maintains current programs and factors in inflation and growth for the next two years, and another that cuts 10% from this year's budget for 2006 and 8% for 2007.

The maintenance budget, which is required by law, is due Sept. 24. The budgets containing the cuts aren't due until Nov. 1, meaning that voters probably won't know what cuts are being considered until after the election. Hearings on the agencies' requests usually begin in November, in advance of the governor presenting a budget proposal to the legislature in February.

"This is the first step at looking at every possible combination of spending," the Associated Press quoted Benson as saying. "We need entrepreneurial skills to increase efficiency and lower taxes."

NH Center for Public Policy Studies has forecast a $300 million state deficit by July 1, 2007, a problem exacerbated by the fact that Benson and the legislature drained state savings accounts and used one-time revenue in a failed attempt to balance the current budget.

A 10% cut is one many programs will be unable to absorb, but the reality behind the numbers is much worse.

Many services provided by the Dept. of Health and Human Services (DHHS) are required by state or federal law and cannot be cut. Reducing state employees' contracted wages and benefits isn't an option. So consumers of so-called "optional" Medicaid services, which include developmental and mental health programs, are likely to experience much-deeper cuts or even elimination.

Other important points to consider:

-- Even services that are protected under state law can be "unmandated" in the budget's "trailer" bill. The trailer bill is a package containing the law changes necessary to enact the budget.

-- The 10% and 8% cuts refer to the state's general funds. For DHHS, it translates into $60.4 million less in fiscal year '06 and $48.3 less in '07.

-- Because almost every DHHS general fund dollar is matched by a federal dollar, that $60.4 million state cut will result in a loss of $120 million in services.

-- Spending for some children's, elder care and nursing home services are also matched by a county share; these will experience a $4 cut in services for every general fund dollar cut.

-- Many federally funded programs require a "maintenance of effort" of state funds. A 10% funding cut would put them at risk.

-- Some independent observers believe that, with no additional revenue, cuts larger than 10 percent will be needed to balance the budget.