CONCORD - Gov. John Lynch today presented a balanced, honest and fiscally responsible budget that invests in the priorities of the people of New Hampshire - without new taxes.

"This is a budget that uses taxpayer dollars wisely to meet state government's most fundamental responsibilities: caring for our most vulnerable citizens; educating our children; strengthening our economy; protecting our environment and natural resources; and ensuring the safety of our citizens," Gov. Lynch said this morning as he presented his budget to a joint session of the legislature.

In balancing the budget, Gov. Lynch was faced with the immediate challenge of addressing a $300 million increase in non-discretionary costs, including a $95 million increase in the cost of state employees' benefits; a $19 million increase in retirees' health insurance costs; a $38 million increase in the state's contribution for retirement costs for teachers, police officers and firefighters; a $17 million increase in meals and rooms distribution to communities; an $18 million increase in fuel costs; and a $22.5 million increase in catastrophic and building aid.

Outside of non-discretionary costs, the budget limits general fund spending growth to 4.15 percent over the two-year budget cycle. The overall growth in the budget in total funds is 7.73 percent.

"To balance this budget, we made tough choices. We cut agency requests by $291 million. We asked agencies to justify every dollar, to be more efficient, and to direct more of their resources to areas that directly serve our citizens," Gov. Lynch said. In addition, Gov. Lynch eliminated 321 vacant positions, most vacant more than six months.

Gov. Lynch's budget uses sound revenue estimates, based on historic trends and assuming modest economic growth. In delivering his budget, Gov. Lynch also called for a more thorough tracking of expenses on a statewide basis, similar to what the state does with revenues each month.

Gov. Lynch told legislators, "Our work on this budget is one of the most important things we will do together in this two-year session. It is through the budget that we establish our priorities for the next two years. And I look forward to working closely with all of you as we set the course for a stronger, better New Hampshire."

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

Gov. Lynch's budget makes major investments in important priorities for New Hampshire - helping keep higher education affordable; providing health insurance for children; helping young people graduate high school; fully funding building aid, catastrophic aid and tuition and transportation aid for local school districts; increasing the number of state troopers; protecting New Hampshire's natural environment; and replacing federal funding cuts in critical areas.

To fund critical programs, the budget includes a 28-cent increase in the tobacco tax, which will keep New Hampshire's tobacco tax well below neighboring states and help deter young people from smoking

Gov. Lynch called on the legislature to join with him to meet the state's responsibility for public education, beginning with defining an adequate education. On Monday, Gov. Lynch joined with a bipartisan coalition of lawmakers to propose such a definition based on existing school approval standards and curriculum frameworks.

"Once we have completed a definition of an adequate education, we must ensure that every community has the resources it needs to provide that education for its children. To do that, we need the flexibility to target aid - lifting up the communities that are struggling to provide a quality education," Gov. Lynch said.

"That is why I will soon present to you a constitutional amendment that allows us to target aid, affirms the state's responsibility for education, and ensures that the state cannot walk away from that responsibility," he said.

"I do not believe we should put in place a new school funding formula until we have defined an adequate education and passed this constitutional amendment. Nor do I believe we should simply go forward with the current law," Gov. Lynch said, citing the dramatic swing in state aid many communities would see under the current law.

"We should not subject our communities to these major changes when we know we will put a new funding law in place by the end of the biennium," Gov. Lynch said, proposing to guarantee that every community receives the same amount of aid they received this year plus five percent.

"This interim measure will allow our communities to plan and will give the legislature the time necessary to develop a better and more permanent education funding solution," he said.

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Budget Highlights

Among the highlights of the budget Gov. Lynch presented to the Legislature today:

Investing in Education

* Provides a 5 percent increase in education aid to all communities as an interim measure while the Legislature works to meet the Supreme Court's recent deadline to define an adequate education by June 30th.

* In addition to approximately $1 billion in adequacy grants, the state will also spend about $191 million over the biennium on other state aid to schools including building aid, reading recovery, dropout prevention, tuition and transportation, catastrophic aid, local education improvement grants, career and technical education, court-ordered placements and state testing.

* Helps keep higher education affordable and accessible to New Hampshire families by increasing funding for New Hampshire's community technical colleges by $10 million and increasing funding for the University System by $16 million.

* Expands the Affordable College Effort program, created in 2006. The funding will allow New Hampshire students who receive the maximum Pell Grant to attend UNH, Plymouth State or Keene State for no additional tuition costs for their freshman, sophomore and junior years.

* Doubles Project Running Start, which allows high school students to earn college credits - transferable to colleges across the nation - at their own local high school.

* Provides a $4 million increase in dropout prevention to help more young people graduate from high school, including doubling tutoring and one-on-one assistance for at-risk students; expanding adult high schools; expanding access to the career and technical education centers; and investing in apprenticeship programs.

Serving Children and Families

* Allows an additional 10,000 children to enroll in New Hampshire's Healthy Kids Children's Health Insurance Program over the next three years.

* Provides a $5.7 million increase to reduce by half the expected waiting list for people with developmental disabilities over the biennium and completely eliminate it in four years. This budget will also reduce the anticipated waiting list for people with Acquired Brain Disorders by 77 percent over the biennium.

* Expands access to affordable housing for New Hampshire families, by providing $400,000 for a pilot grant program to help communities develop workforce housing and creating a $400,000 revolving loan fund to help homeless families with security deposits and first month's rent.

* Increases funding for home- and community-based care for seniors by $5.4 million.

* Provides funding to implement the recommendations of the Governor's Lead Poisoning Task Force. It will allow the state to increase its inspections for lead poisoning cases; reduce the threshold blood level limit for children with lead poisoning from 20 micrograms per deciliter to 10 micrograms per deciliter, the level recommended by the Centers of Disease Control; and allows the Department of Health and Human Services to do preventative inspections.

Preserving New Hampshire's Environment and Natural Resources

* Protects New Hampshire's natural and historical landmarks by funding the Land and Community Heritage Investment Program at $12 million over the biennium.

* Provides $6 million for capital improvements across the state park system, the first major system-wide capital investment in the state parks since 1963.

* Invests in protecting New Hampshire's state-owned historic sites, by creating a new Bureau of Historic Resources in the Division of State Parks and providing $484,000 in funding over the biennium.

* Provides $535,000 in capital funds toward the purchase of Temple Mountain as a new state park.

Strengthening the Economy

* Maintains state support for the Industrial Research Center at the University of New Hampshire and the Small Business Development Center.

* Increases funding for tourism advertising by $250,000 each year of the biennium to help attract additional visitors to New Hampshire.

* Allows for the creation of a research and development tax credit to encourage innovative companies to create new jobs in New Hampshire.

Improving Public Safety:

* Funds seven state trooper positions, created by the legislature last year, and adds six new trooper positions over the biennium.

* Creates an Internet Crimes Prosecutor position in the Department of Justice to help communities and police departments address 21st century crimes, including online predators.

* Provides funding for a comprehensive study and master plan for all of New Hampshire's correctional facilities and a secure psychiatric unit, and $10 million in capital funding to begin expansion of the Northern Correctional Facility in Berlin.

Serving Our Veterans:

* Provides almost $10 million to pay for direct care staff, medications and serving an additional 50 people at the State Veterans Home.

* Includes $6.2 million for capital improvements at the State's Veteran's Home; and nearly $900,000 for capital improvements at the New Hampshire Veterans' Cemetery.