N.H. governor seeks hike in cigarette tax to ease budget woes

Spending cuts also part of package

Governor John Lynch faces a projected $225 million revenue shortfall in a two-year budget plan. Governor John Lynch faces a projected $225 million revenue shortfall in a two-year budget plan. (JIM COLE/ASSOCIATED PRESS)
Email|Print|Single Page| Text size + By Norma Love
Associated Press / May 2, 2008

CONCORD, N.H. - Governor John Lynch proposed yesterday to raise the cigarette tax 25 cents a pack and cut a discount retailers get for wine they buy from the state.

Lynch told the House Finance Committee he also supports a 10 percent tax on Texas Hold 'Em poker games, though that was not included in the proposal he presented yesterday.

The measures are part of Lynch's overall plan to deal with a projected $225 million revenue shortfall in the two-year state budget. He would cut spending $125 million, raise revenue $40 million, and borrow $80 million to pay the state's share of school construction costs that is currently paid with cash.

"New Hampshire, like states across the nation, is being impacted by the slowdown in the national economy," Lynch said. "We know our families are feeling the impact, and so is state government."

The cigarette tax increase would raise $22 million. Lynch said Massachusetts and Maine are considering raising their tax rates, which could make New Hampshire's prices attractive even with a hike in its tax. The current tax is $1.08 per pack.

Lynch approved 28-cent cigarette tax increases in each of the past two budgets.

The governor also wants to cut in half a 20 percent discount given to outlets that buy wine from the state. The cut would save the state about $10 million.

Liquor Commission chairman Mark Bodi said small stores originally benefited most from the discount, but now 90 percent of the wine is sold by 21 large retailers.

"We are making significant cuts," Lynch said. "But after a careful review of agency budgets and budget submissions, I have found that we cannot cut much deeper without seriously impacting essential services and direct services to our people."

The spending cuts range from money intended to lower nursing home rates to a freeze on hiring and equipment purchases.

Lynch said he is working with agency heads on additional cuts.

He said the mix of cuts, revenue measures, and borrowing was a balanced way to address the budget problem.

Lynch cautioned against using state savings.

"We cannot be tempted to hastily use those funds to address the shortfall," he said.

Weare Republican Neal Kurk questioned the wisdom of borrowing money for school construction. Kurk noted that the current budget borrows money to pay for highway projects that had been paid with cash.

Lynch defended the practice as common in the private sector. School buildings are capital projects, he said.

Lynch also proposed studying whether the state's school construction aid program should be reformed.

Republicans were quick to criticize the revenue-raising proposals.

"Rather than looking for reasonable places to reduce the bloated budget passed last year and bring it into line with our rising revenues, the governor and Democratic leaders of both the House and Senate want to raise still more taxes and fees," said Representative David Hess, deputy House GOP leader.

Republicans said reducing the wine discount would hurt small businesses. Hess said businesses will have to absorb the higher cost or pass it onto consumers.

"You're going to hit the consumer or the business either way," he said.

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