CONCORD — Democratic leaders in Concord said budget-cutting moves were under way as state revenues in February came in $9 million below estimates and brought the revenue deficit for the first eight months of the year to almost $50 million.
Led by shortfalls in business tax ($6.4 million) and room and meals tax ($2.2 million) collections, February revenues came in at $85.2 million, or 9 percent below the estimate of $94.2 million for one the state's lowest revenue collection months.
The bright spots in the February revenue report included $2.8 million above estimates for tobacco tax collections and $500,000 above estimates for real estate transfer taxes.
A spokesman for Gov. John Lynch said lawmakers cut general fund spending in the 2010-2011 budget and that the "impacts of the national recession" continue to take a toll on state revenues. "These continue to be difficult economic times, and we will need to continue to make adjustments to address that," said Colin Manning.
Republican State Committee Chairman John H. Sununu said the February revenue shortfall reflected was "more bad news" for the state budget.
"Despite the continued shortfalls and mounting deficit, Gov. (John) Lynch still doesn't have the honesty and integrity to admit that his revenue estimates were completely unsustainable," Sununu said.
Even before the latest revenue numbers, Lynch and lawmakers had been preparing to close a growing deficit hole. Last month, Lynch directed agencies to develop plans to reduce general fund spending by 2 percent for the remainder of this fiscal year, which ends June 30, and by 8 percent for fiscal year 2011. The goal is to cut about $140 million. Manning said Lynch will then work with agencies on those plans and to finalize a comprehensive strategy that minimizes the impact on essential services.
"I am discouraged as I review the February revenues," said House Speaker Terie Norelli, D-Portsmouth. "Unfortunately, while there are promising signs for the national economy, the recovery has been slower than anticipated."
Norelli also expressed concern about the drop in business taxes because it reflects on the overall health of economic growth. She said the House is already beginning to work on budget adjustments. "While looking forward to March and April, which traditionally have stronger showings than February, there is currently a bill before the House Finance Committee and we are considering what budget adjustments will be necessary," she said.
In addition to revenue shortfalls, the state budget has been hurt by last month's Supreme Court's decision regarding the Joint Underwriting Association and a dramatic increase in demand for health and human services caseloads — which have grown by more than 20,000 in the past year, driven primarily by an increase in unemployment, according to the Lynch administration.
Senate Majority Leader Maggie Hassan, D-Exeter, said the revenue numbers will be discussed in the coming days. Hassan said the Senate Finance Committee, of which she is a member, will hear testimony on a gambling bill today and will soon consider a bill designed to deal with budget cuts.
Sen. Martha Fuller Clark, D-Portsmouth, said she was disappointed by the February revenue numbers but rejected Republican claims of budget irresponsibility. She said lawmakers were not only going to make tough budget choices but were looking ahead to deal with major cost drivers such as health care and corrections reform.
"These are false accusations," Fuller Clark said. "Obviously, we've taken some hard knocks (economically), but we passed a responsible budget and were already making cuts in the general fund budget and reducing the cost of a number of programs. Every revenue projection we made was lower than the previous year's projections."
Fuller Clark said the cuts to come are going to have a much deeper impact on state services. "Frankly this is not the most optimum time, but we have no choice," she said. "We've reached a Rubicon because the budget cuts are to impact the most vulnerable and their communities."
March and April reports will be crucial in determining the extent of the state budget hole as they are two of three largest months for state revenue estimates.
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