(CONCORD)  New Hampshire decided not to tap into its piggy bank to balance last year’s budget.  The Legislative Fiscal Committee this morning narrowly defeated transferring nearly $80 million from the state’s Revenue Stabilization Reserve Account, commonly known as the Rainy Day Fund, in order to close the books of Fiscal Year 2009.  The vote was 5-5, with all House members supporting the transfer and all Senators opposing it.

State officials have missed their January 1st statutory deadline for filing the final financial report, but had been waiting for the Supreme Court to decide the state’s appeal on the Joint Underwriting Association Lawsuit.  In asking for the transfer, State Treasurer Cathy Provencher argued that New Hampshire can’t afford to wait on a decision it had expected first in November, and then in December.

“It’s time to close the books,” Provencher said.

Administrative Services Commissioner Linda Hodgdon says bond rating agencies look at whether or not New Hampshire files its financial statements on time, and that leaving last year’s books open this long is a bad idea.

“The longer the statements are open to FY09, the longer we are exposed to something else happening,” Hodgdon explained.

Comptroller Carter, Commissioner Hodgdon, Treasurer Provencher

State budget writers had planned on taking $65 million from the surplus in the JUA to balance the FY09 budget, and another $45 million this year.  In July, Superior Court Judge Kathleen McGuire ruled that JUA surplus belonged to the doctors and hospitals that paid into the fund, and could not be confiscated by the state.  The Supreme Court heard oral arguments in October, but has not said when it will issue a final decision.

Fiscal Committee Chair Marjorie Smith (D-Durham) says that the transfer is necessary in order to finalize FY09 “with what I would call a balanced budget.”

Senator Peter Bragdon (R-Milford) wondered about the consequences of tapping the Rainy Day Fund now, rather than waiting for the final JUA decision.  Hodgdon said the state’s credibility is at stake if it fails to account for its finances in a timely manner.

Smith expects the state to eventually win its appeal, and worries that writing off the JUA funds for FY09 would signal the Legislature backing away from its decision.  But she agrees that since the court has put the money off limits for now, it shouldn’t go into the books.

Rep. Kurk, Rep. Smith, Sen. Larsen

Provencher urged the Legislature to put the $65 million in JUA funds in question back into the Rainy Day Fund if and when the state wins the case.

“When the JUA decision is received, if it it favorable to the state, the Legislature has options,” she argued.  “I would support putting the $65 million that was scheduled for FY09 back into the Rainy Day Fund.”

Senate President Sylvia Larsen (D-Concord) questioned how drawing down the Revenue Stabilization Reserve Account would impact the state’s bond rating and fiscal stability. Hodgdon concurred that if the state gets clearance to use the JUA funds, the Legislature should restock the Account.

Larsen opposed the transfer, arguing that leaving the books open for an extra week would give the Court a chance to decide the JUA issue and allow the $65 million to be credited towards the FY09 budget.

“Rather than closing the books on the 15th, we would reconvene on the 22nd and see where we were,” Larsen added.  “We want to have a little more time to do that.”

Larsen argued that if the Fiscal Committee took action on January 22nd, the state’s books could be closed by January 29th.

Kurk supported the transfer “with trepidation” because he was worried about leaving the state’s past finances open to more challenges.  He is also concerned that if the JUA funds are allowed, fellow lawmakers will be tempted to treat it as new money rather than replenish the Rainy Day Fund.

“No matter what we do with respect to the JUA issue, we’re still going to have a deficit; either $15 million or $80 million,” Bragdon added.

The Fiscal Committee voted 6-4 to meet again on January 22nd to revisit the transfer, giving the Supreme Court two more weeks to finalize the JUA Case.  The Committee had not planned to meet again until February.