I promised the people of New Hampshire an honest and balanced budget that reflects our values and priorities. I promised not bigger government, but better government.

The budget I present today keeps those promises. This budget is balanced. It is honest, fiscally conservative and responsible.

I’ve said you can keep an eye on the bottom line and still look out for people. That is just what this budget does.

As you all know, we faced a large challenge. The loss of $185 million in federal revenues. The loss of $28 million in revenue from changes in the federal estate tax. Millions in regular maintenance costs were deferred during the last biennium -- basic equipment, including snowplows and computers, was not replaced.

We met this challenge by making tough choices and demanding accountability for every tax dollar. We zero-based state agency budgets – requiring agencies to justify every dollar they spend.

We cut more than $70 million from agency budget requests. We eliminated more than 150 vacant positions, but not front-line employees who directly serve our citizens.

I made hard choices so we could invest in our priorities as a state. I made cuts and I made investments to improve efficiency and effectiveness – putting the needs of our citizens first.

This budget does not include a host of new programs. Instead I focused on making sure we are meeting our existing priorities and commitments.

The growth in general fund spending in this budget is largely driven by non-discretionary spending including a 28 percent increase in state employees’ health insurance costs; an increase in meals and rooms distribution to communities; and an increase in catastrophic and building aid to schools, which were not adequately funded in the last biennium.

This budget is helped by a growing economy. The revenue estimates in this budget are prudent and realistic, reflecting that revenues will be higher than first estimated last fall.
Through zero-base budgeting, we identified a number of ways we could make state government work more efficiently. For example:

The Department of Resources and Economic Development had two separate marketing divisions – one for state parks and one for travel and tourism. We directed the department to combine those divisions and invest the savings in marketing our state.

Another agency requested a $500,000 database to track information that could just as easily be tracked on a spreadsheet. We cut that $500,000 from the budget.

At the Department of Revenue Administration, we invested in auditors to investigate fraud and abuse, which will help increase revenues.

As a state we own millions of dollars worth of surplus property, but we do not have a good system for tracking it.

Did you know that the state is the proud owner of a condo complex in Conway? This budget adds a real estate manager position to assess what we own, and sell those properties that we don’t need and shouldn’t own.

The rising cost of energy is one of the biggest cost drivers for state government. This budget funds the position of state energy manager to track all state energy costs, lower energy use, and save our taxpayers money.

Zero-based budgeting is an ongoing exercise because protecting taxpayer dollars is an ongoing responsibility.

We must continue to look for better ways to improve services and operate more efficiently to make the best use of every taxpayer dollar.

We’ve made smart choices with this budget. As a result, we can make some smart investments – in our economy, in our environment, and in our people.

We know that business, not state government, creates jobs. But we also know that when the state partners wisely with the private sector we can grow our economy and attract good-paying jobs for our citizens.

This budget continues support for the Small Business Development Centers and the Industrial Research Center.

It invests in the International Trade Resource Center to help our businesses sell their products and services to countries around the world.

We know that investing in tourism pays off, generating jobs for our people, and revenues for our businesses and government. That is why this budget increases funding for tourism advertising by $100,000.

And later this week, I will be announcing a new public-private partnership to help attract and create new jobs in New Hampshire.

A quality and safe transportation system is essential to our economic development. This budget includes the state match required to obtain all possible federal highway aid.

It will help remove more bridges from the Red List. And it supports critical projects to facilitate the widening of Interstate 93.

Our state’s beautiful natural environment is part of why we all love and live in New Hampshire. It is also one of our state’s most important economic assets.

New Hampshire’s Land and Community Heritage Investment Program helps protect the natural and historic landmarks that make New Hampshire special.

Bringing together state, local and private resources, LCHIP is also a wonderful example of what we can accomplish working together.

This budget provides $4 million for LCHIP in 2006 and fully funds LCHIP at $6 million in 2007.

One of the most important things we can do for our economy and our families is to invest in education. The demands of a changing economy require a highly skilled and educated workforce. Most new jobs require a college education. We must take steps to make college more affordable for our children and families.

With this budget, the University System has committed to keeping tuition increases low, and the community technical college system has committed to no tuition increase for the next two years.

And I am proud to say that with this budget, for the very first time, New Hampshire students who receive the maximum Pell Grant will be able to attend UNH, Plymouth or Keene for no additional tuition cost in their first year.

We value our good schools, and we recognize that as a state we have a responsibility to make sure our children receive a quality education.

To do that, we must keep our promises to our communities and our children, and demand accountability.

Last year, New Hampshire only funded 70 percent of its commitment to communities for special education students. This budget increases that aid by more than 50 percent over the next two years.

This budget also increases building aid by $11 million and funds student assessment tests.

This budget also funds a fair and lasting solution to school funding.

I am proud that I have been joined by a bipartisan group of legislators – Deputy Speaker Ken Weyler, Rep. Liz Hager, Rep. Jim Craig, Rep. Sharon Nordgren, Sen. Bob Odell, Sen. John Gallus, Sen. Lou D’Allesandro, and Sen. Joe Foster – to present to you a new school funding plan.

This bipartisan proposal meets our responsibility to ensure every child the opportunity for a quality education. It gives more aid to communities with the greatest need; provides stability and predictability; and allows us at last to focus on quality and accountability. And this plan eliminates the statewide property tax and donor towns once and for all.

The sponsors of this proposal have put partisanship aside to focus on what is best for our children and our state As this plan moves through the legislature, I recognize there will be other ideas and I welcome an open and honest discussion.

We all agree that it doesn’t matter who gets the credit. What matters is that we get it done. We have a responsibility to put in place a lasting school funding solution – and I ask you to join with us. We can and we must solve school funding this year.

To pay for education and for eliminating the statewide property tax, this budget includes a 28-cent increase in the tobacco tax.

New Hampshire has never dedicated the revenue we need to responsibly grow state aid to education year to year.

That is why this budget dedicates the revenue from the tobacco tax increase to the Education Trust Fund. This will help ensure that we have the revenues in place to meet our responsibility for education now and in the future.

This proposal keeps the rate of our tobacco tax well below those of our neighboring states. It also allows us to accomplish an important public health goal – reducing the number of children who start smoking.

I ask you to join me in supporting this common-sense proposal.

We have a responsibility as a state to protect our most vulnerable citizens: our children, seniors, people with disabilities. That is our moral obligation.

But there is an economic justification too – we all pay when the basic needs of our citizens are unmet.

That is why this budget preserves and strengthens our commitment to those with the greatest needs.

Many of our seniors live on fixed incomes, struggling to make ends meet. We must do what we can to help them live their lives with dignity.

That is why this budget funds Meals on Wheels, wheelchair van transportation, and gives more seniors the option to stay in their own homes and communities.

People with disabilities should be given the opportunity to live their lives to the fullest. This budget cuts in half the waiting list for people with developmental disabilities.

Children with access to quality health care do better in school and better later in life. As a state, we’ve recognized that investing in children’s health insurance is not just the right thing to do; it’s the smart thing to do.

New Hampshire’s Healthy Kids Children’s Health Insurance Program is a unique public-private partnership –hailed as a national model.

This budget invests in Healthy Kids and will allow us to provide health insurance to another 6,000 New Hampshire children.

With a growing and aging population, the demand on our Medicaid system is also growing. We must reform Medicaid to meet those demands, but thoughtfully, with full public involvement.

My office has held three public conversations with our community partners and our citizens about their ideas for improving Medicaid.

We must now take those ideas, along with the work done by the staff of the Department of Health and Human Services, and develop initiatives that make sense for our citizens.

We should reform Medicaid, but we must take the time to do it right and to make sure it’s right for New Hampshire. That is what I am committed to doing.

Our veterans sacrificed for all of us and we owe them a debt of gratitude. New veterans are now returning home from service in Iraq and Afghanistan, and I ask you to join me in thanking them.

This budget allows us to hire the staff necessary to open the new wing of the Veterans Home and to add a new staff member at the Veterans Council to help our new veterans get the services they need.

The most fundamental duty of state government is to protect the safety of our citizens.

In recent years, we’ve seen a reduction in the number of state troopers. At the same time, the number of fatal accidents is increasing.

I’ve heard too many reports of insufficient backup for local police departments and large stretches of our highways with no trooper on duty. That’s not safe for our troopers or for our citizens.

That is why I’ve asked the Department of Safety to re-allocate its resources to strengthen our state police force, restoring 14 trooper positions by the end of the biennium.

As I travel across New Hampshire, I hear from the citizens of our great state a new sense optimism that together we can and we will address the challenges facing our state, from the budget to education funding to reducing health care costs.

I’ve seen that same sense of optimism here in this building.

I thank you for your willingness to work with me, and I look forward to continuing to work with you to make real progress.

Working together, Democrats and Republicans, we will enact an honest and balanced budget – a budget that invests in our future and puts the needs of our people first.

Thank you.