New Hampshire's lawmakers are being called back to Concord for a special session next week in an effort to begin closing a gap of nearly $100 million that has appeared in the state's $708.9 million budget.
The gap stems from slumping corporate tax revenues last month and rising costs of the state's assistance programs, including welfare and Medicaid.
When they convene next Tuesday, lawmakers will consider a bill to authorize the state's human services chief to apply for additional reimbursements from the federal government under the Medicaid program.
House Speaker Harold W. Burns, R-Whitefield, and Senate President Edward C. DuPont Jr., R-Rochester, announced early this week that they had agreed to hold a session next week to consider the legislation.
The bill would amend legislation passed last summer that imposed an 8% levy on hospitals. The state uses the levy to obtain federal matching funds, before returning the tax money to hospitals.
The amending legislation would raise that levy to obtain more federal matching money, but it was unclear yesterday by how much.
Medicaid now allows reimbursement for such taxes and donations from hospitals, but the Bush administration wants to halt the program, which is viewed as an abuse of Medicaid.
Richard Darman, director of the federal Office of Management and Budget, says the assessment reimbursement program is a loophole that needs to be closed, and it is slated to close at the end of the year.
New Hampshire officials estimate they would lose $63 million in Medicaid matching funds if the Health Care Financing Administration is directed by Congress to end the program.
But by passing emergency legislation now, the state may be able to obtain a large disbursement of Medicaid money for 1991 before the donations and tax reimbursement program ends.
"The purpose of this recall session will be to pass legislation authorizing health and human services Commissioner Dr. Harry Bird to apply for additional Medicaid money," Mr. Burns said in a news release. Dr. Bird did not speculate on how much federal money the state would be able to get, "but he indicated it could be substantial," Mr. Burns continued.
Gov. Judd Gregg held a fiscal summit with legislative leaders Tuesday, according to press secretary Brian Grip. The lawmakers released a statement warning that the budget gap could reach $200 million over the fiscal biennium. The legislature will consider how to complete balancing the current fiscal year budget in January, when members convene for the normally scheduled session.
Sources said Dr. Bird and the administration were busy crafting the Medicaid reimbursement legislation yesterday. Dr. Bird could not be reached for comment.
News of the imbalance came as the state was preparing to tap its retail tax-exempt market with a $50 million college saving bond deal. The offering, slated for Nov. 20, will give rating agencies a chance to assess New Hampshire's fiscal outlook in the light of the new budget gap.
State Treasurer Georgie A. Thomas said demand for the deal would remain strong among retail investors in the state, despite the possible credit quality concerns arising from the budget gap projections.
"I don't foresee the market drying up," Ms. Thomas said in an interview yesterday, but said she expected "an impact on what we have to pay for it." Dean Witter Reynolds is serving as book-running manager on the deal, which may contain some current interest bonds, depending on demand, Ms. Thomas said.
She said she would not be surprised by rating downgrades in advance of the sale. "It's incumbent on the rating agencies to take a very close look," Ms. Thomas said. She also said the state's efforts to balance its books had proved futile because of larger economic factors. "This is a larger issue than just the state government," Ms. Thomas said.
Moody's Investors Service said it had not yet decided whether to affirm the Aa1 rating it assigns to the state's outstanding $506 million of general obligation bonds.
"It's a significant problem and it needs to be addressed," said Steven Hochman, a vice president and manager at Moody's. "Clearly they have to rethink their revenue estimate for fiscal year '92 and '93."
