BOSTON -- Gov. Stephen Merrill of New Hampshire said last week that $24 million in departmental budget cuts are needed to keep the state's books balanced through the remainder of the fiscal year.

Speaking at the opening hearing on the state's next two-year budget, Merrill said that without the cuts, the state will be in the red at the end of this fiscal year on June 30, 1995.

The hearings are the first step in the state's process for formulating a new two-year budget for fiscal 1996 and 1997.

New Hampshire is one of several states that formulate a two-year budget instead of having to go through the long budget process every year.

Merrill, a Republican fiscal conservative who was reelected last week for a second two-year term, said he will not consider using a state sales or income tax to bridge the gap in the state's finances.

Additionally, Merrill said that local aid to communities, prison costs, and debt service requirements will not be changed as a way to improve the state's financial picture.

Since he took office in 1993, Merrill has criticized what he has described as the free-spending policies by the state in the past.

New Hampshire's general obligation bonds are rated double-A by Standard & Poor's Corp., Fitch Investors, and Moody's Investors Service.

As part of his last budget package, Merrill said 75% of state agencies maintained or reduced their employment rolls in fiscal 1994 and 1995. There were no provisions in his last budget for salary increases for state employees.

As for taxes, Merrill in his last budget initiated a process that lowered the state's telecommunications tax to 5.5% from 6%. He also lowered the state's real estate transfer tax to $5.00 per $1,000 of assessed valuation from $5.25

During this budget process, Merrill said he will ask state agencies to lower spending by 8% in fiscal 1996 and by 6% in fiscal 1997. These cutbacks are designed to plug a hole in the state's coffers that will be created by changes in the state's Medicaid payments.

Next year, the federal government will give the state $100 million less in Medicaid reimbursements.

For fiscal 1995, the current budget authorizes spending at $860 million. Under Merrill's plan, spending for fiscal 1996 would be around $791 million.

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