CONCORD – Gov. John Lynch used his final State of the State address Tuesday to call for raising the cigarette tax, doubling a popular business tax credit and amending the Constitution to direct more money to needy school districts

The retiring four-term Democrat also labeled as “shortsighted” the 45 percent cuts in state aid to higher education and said lawmakers need to heal wounds with acute-care hospitals over deep cuts in aid to them.

Lynch also called for toned-down rhetoric that too often has prompted opponents to act on “demonizing one another.”

“There’s a harshness in the air, in the tone and nature of our communication, and particularly within this building, that’s not healthy for our people or our democracy. We can disagree without demonizing one another,” Lynch said. “Vigorous debate is important, but our citizens expect us to behave with dignity and respect. They expect us to look for common ground and common purpose. We can find inspiration and models to follow in our people, who show us every day how to come together.”

Lynch said lawmakers need to find enough money to widen Interstate 93. He criticized the Legislature’s decision to cut spending in the Highway Fund by $90 million over the next two years.

During a 30-minute speech that hop-scotched between Lynch’s past achievements and his list of things to do before leaving office, Lynch told lawmakers the most good they can do is not to upset the track record of a state with low unemployment, low child poverty, low crime rates and the “Most Livable State” honor three years running.

“As the husband of a physician, I urge us to adopt the cardinal rule of medicine: first do no harm,” Lynch said. “We can build on our success, but overall New Hampshire has a strategy that is working. Let’s not mess it up.”

Over his final year, Lynch vowed to complete government reorganization efforts with a reform bill that would eliminate 100 reports, cut paperwork and combine the administration of 34 licensing boards.

On taxes, Lynch said the 10-cent cut in the tax on cigarettes has cost the treasury $13 million, wiping out gains in recovering taxes from business.

“The cut in the tobacco tax was nonsensical,” Lynch said. “That money would have been better spent on our community college and university systems, for example. We should roll it back, and use the revenue to invest in our economic future.”

Lynch gave a spirited defense of organized labor and vowed to block any threats to collective bargaining and called upon lawmakers to give back to state prosecutors authority to investigate claims of mortgage fraud

The outgoing governor took on House Speaker William O’Brien, R-Mont Vernon, with a spirited push to create a state health care exchange to comply with the federal health care law.

“A well-designed health insurance exchange can make it easier for businesses to compare and obtain affordable health insurance,” Lynch said. “And I certainly don’t think we want the federal government to design an exchange for us. That is why must move forward now with designing our own exchange right here in New Hampshire.”

O’Brien is pushing rival legislation to ban the state from setting a state exchange up or cooperating in any way with the federal government.

Lynch, 59, came to the State House in 2003, promising a spirit of bipartisanship and an administration free of ethical controversy.

The fix-it business consultant became the first in 90 years to topple an incumbent governor seeking a second term.

The ever-cautious, moderate Democrat kept his agenda limited and achieved it, fulfilling the mandate that all five-year-old children have a public kindergarten option and lowering the dropout rate by making students stay in school until age 18.

Lynch signed some of the toughest laws against child sex predators, both in person and via the Internet, and resurrected a job training program that’s helped the unemployed find new skills during this difficult recession.

The eight-year tenure was not without its bumps in the road.

Lynch signed a new tax treatment on profit from owners of limited liability companies that became so unpopular he championed its repeal nine months later.

Lynch spearheaded corrections reform to let inmates out on supervised before their maximum terms ended. After the law came under withering attack during Lynch’s re-election run in 2010, the GOP-dominated Legislature watered down some of its key provisions.

Politically, Lynch has served without peer, twice gaining near or over 70 percent of the popular vote and going down as the top vote getter on the ballot in state history.

While another Lynch victory was by no means assured, he would have entered as the odds-on favorite to take a record fifth consecutive two-year term this November.

His departure throws the race wide open with prominent, Democratic and Republican figures already hunting for votes.

Kevin Landrigan can reached at 321-7040 or klandrigan@nashuatelegraph.com; also check out Kevin Landrigan (@KLandrigan) on Twitter and don’t forget The Telegraph’s new, interactive live feed at www.nashuatelegraph.com/topics/livefeed.

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