The House approved New Hampshire's first 11-figure budget yesterday, voting along party lines to pass a two-year, $10.4 billion spending plan for the state. The budget, which now heads to the Senate, builds on the governor's proposal and includes significant increases for higher education, cancer screening for low-income residents, and land conservation and historic preservation.

To balance the budget, lawmakers approved two new tax increases: a 45-cent increase in the cigarette tax, to $1.25 a pack, and a 4 percent increase in the real estate transfer tax, raising the rate for home buyers and sellers from $7.50 to $7.80 each per $1,000 of home value. The House also voted to raise the state portion of the vehicle registration fee by $6.

Democrats, who hold the majority in the House for the first time in over 80 years, called the budget a careful, conservative spending plan that addressed several longtime goals, such as an increase in rate payments to people who provide Medicaid services and the creation of a dedicated funding source for LCHIP, the Land and Community Heritage Investment Program.

Republicans called the budget a reckless proposal built on overestimated revenue. They tried to pass multiple unsuccessful amendments to reduce revenue estimates and avoid tax increases, though they did not propose amendments to cut the budget.

"This budget is excessive in spending, and the revenues are unrealistic. We've lost sight that government does not earn money but takes what it spends out of the pockets of those it governs," said Rep. Fran Wendelboe, a New Hampton Republican, calling the budget "a recipe for disaster."

The budget passed on a 208-158 vote, with two Republicans voting in the majority. The trailer bill - which includes the tax increases and other changes to state law necessary to make the budget work - passed 202-151.

House Finance Committee Chairwoman Marjorie Smith, a Durham Democrat, said she was proud of the committee's work. "The budget that we're passing through to the Senate is a careful, cautious, responsible budget that tries to do some decent things," Smith said after the vote.

On the floor, Republicans said they would help their Democratic colleagues cut spending later if the House reduced its revenue estimates for the next two-year budget cycle, which begins July 1. The House Ways and Means Committee estimated that the tax and fee increases and overall growth would cover the $10.4 billion budget with a modest surplus.

But Republicans, led by former ways and means chairman Norm Major, challenged those figures, which they said were off by more than $100 million.

"A perfect storm is brewing, and we will be at the center," said Major, a Plaistow Republican. "The economy is leveling off, but our revenue projections are climbing at a rate that could be called irrational exuberance."

Major offered an amendment to trim the revenue estimates. House Republican Leader Mike Whalley vouched for Major, a former Boy Scout and longtime legislative number-cruncher.

"His DNA does not allow him to be pessimistic or optimistic, only realistic," said Whalley, an Alton Republican, warning of a looming overspending crisis. "The pain that will be inflicted on the people of New Hampshire in the second year (of the budget) is far more than it would be worth today to overstate those revenues."

Democrats, on the other hand, said House Republicans had consistently underestimated state revenue in the past to bolster their arguments for limited budgets. They defended their forecast for the 2008-09 biennium, which they developed with input from state and federal officials, private economists and others.

"The members of the Ways and Means Committee carefully considered this testimony and tempered it with their own research, personal and professional experience, careful analysis and days and weeks of discussion and deliberation," said Rep. Chris Hamm, a Hopkinton Democrat who serves as vice chairwoman of the committee.

Major's revenue amendment failed, 213-152.

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