The Governor’s Budget is Incomplete but Worrisome

Charlie Arlinghaus

February 20, 2013

As originally published in the New Hampshire Union Leader

The governor’s budget address last week, while surprisingly incomplete, did reveal some troubling trends as well as a few pieces of good news. There are a lot of details we can’t figure out until she finishes the budget detail (which was due last Friday) but we do have a sense of the priorities she has set.

The governor is required by law to present a budget no later than February 15 of her first year in office. The components of that budget are spelled out by law but they boil down to one document which is the numbers – a sort of giant spreadsheet – that becomes House Bill 1 and a second document which includes all the explanations and legal language – a narrative document that explains the spreadsheet – that becomes House Bill 2.

It was thought that both were required to be presented to the legislature by February 15. The current governor decided to break new ground and not deliver the narrative portion, House Bill 2. The lack of narrative means we can’t fully evaluate the details of many of her proposals until that part of the budget is complete. However, we can infer things from the numbers and her speech.

Budget analysts are most concerned with the money raised by state taxes and fees, the operating budget called the general fund. The governor appears to moving about $25 million in what’s called board and care revenue offline. It has been for decades counted as general fund and will no longer be listed that way. Relabeling it, whether a good or bad idea, has the effect of making the general fund appear smaller than it was and makes the percentage increase seem smaller

For comparison, if you account for that change, general fund increases over the two years of the budget by 10.2% rather than the 7% or so claimed.

The state’s general fund budget can be divided into two halves: everything that we do at Health and Human Services and everything else. Over the two years of the governor’s budget, general fund spending in the almost-half of the budget that is the department of Health and Human Services rises by just 1.3%. The other, slightly-larger half of the budget increases by 13.9%. Half of the increased spending is a larger grant to the community colleges and university.

Since Republicans cut HHS by dramatically less than they cut the rest of the budget last time, perhaps this is the governor’s way of evening things out. She promised to restore the spending cuts contained in the budget of 2011. Her budget ends up 6% higher than the year before that supposedly draconian budget. So at least in the aggregate she restored the spending and then some.

To pay for all that new spending, there is good news and bad news on the revenue front. The good news is that the base the governor uses for her revenue estimates, while optimistic about avoiding a recession, is reasonable and not wildly optimistic.

The bad revenue news is that the additional revenues the governor banks on getting are wildly speculative. She presumes casino gambling will pass though the bill won’t even have a hearing in the House before they must pass the budget. She counts on a bill passing bids being solicited, a winner selected, and receiving the first $40 million of an $80 million franchise fee being received all within twelve months of the budget passing.

All told, half the new spending in her budget is paid for with the casino revenues. Wherever you stand on gambling (and personally, I’m agnostic about it), we probably all agree that doing or not should be done for policy reasons not just because you don’t know where else to get the money.

The other big concern about the budget is what happens to the current year that ends June 30. As readers of this space know, we face a shortfall of $25 million that must be closed. I’ve advocated spending cuts for months now. We don’t have the language detail for this but a spreadsheet in the governor’s proposal calls for $29.5 million in dedicated funds/other initiatives. It sounds as if she intends to take dedicated money and spend it instead on the general fund. But we won’t know for sure until she details these proposals and completes her budget.

The budget is still, unfortunately incomplete. But the early signs are troubling.