Letter to New Hampshire Agency Heads - Submitting Plans to Reduce Budgets

Letter

October 2, 2014

Dear Agency Head:

First, let me thank you for all of your hard work as we complete the unaudited financial statements for Fiscal Year 2014. I know your staff spent hours closing out thousands of accounts and working with the Department of Administrative Services to close out the books for this year.

Overall, on a cash basis, agencies exceeded the budget's lapse estimate by $8.5 million, and your hard work has resulted in a nearly $20 million surplus on a GAAP (Generally Accepted Accounting Principles) basis.

Unfortunately, as we have discussed, it appears from September revenues that we will face financial challenges in Fiscal Year 2015, and we need to take action now to keep our budget balanced, just as we did in Fiscal Year 2014.

Revenues that indicate economic activity, particularly meals and rooms and real estate transfer tax, continue to outperform estimates. However, the last legislature passed changes to tax laws that went into effect in the fourth quarter of Fiscal Year 2014. Since those changes went into effect, we have seen business tax and interest-and-dividends tax revenues regularly fall below plan.

So while revenues are running slightly ahead of plan for the year, the trend in business and interest-and-dividends revenue demands action. In addition, Health and Human Services has seen caseload growth larger than projected and is working with my office to develop its own plan to live within its budget.

As you know, because of our concerns about Fiscal Year 2015 revenue projections, we preemptively instituted a freeze on generally funded hiring, equipment and out-of-state travel. I also asked agencies to delay any large expenditures.

In light of the September revenue numbers, I am asking state agencies to submit plans to reduce their budgets. We are asking agencies -- with the exception of Health and Human Services, which is developing its own plan -- to submit plans that will provide a combined $30 million in budget reduction options. I recognize how significant a reduction that may be for some agencies and the impact that this could have on services. After we have received all proposals, we will work closely with all of you to weigh the options and develop a final plan that ensures a balanced budget for Fiscal Year 2015.

Reduction targets will be distributed based on your agencies share of general fund appropriations. I will also be asking the legislative and judicial branches to participate. Over the next week, you will receive your individual agency targets from your Business Supervisor, as well as your submission deadlines.

Thank you again for your hard work.

With every good wish,

Margaret Wood Hassan
Governor

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