The Governor’s Budget Address Starts Everything

Charlie Arlinghaus

February 4, 2014

As originally published in the New Hampshire Union Leader

February is that exciting time of the year when the governor gives us a special valentine in the form of her budget address. Much better than candy or flowers, it is an outline of the two-year state budget – the policy document that guides every little thing the government does and defines an administration. With government currently divided, we should listen carefully to see if this critical address is meaningless theater or the first step toward something constructive happening despite political antagonism.

The areas we should all watch relate to economic development, budget gimmicks, and whether the budget will be really balanced or rely on one-time revenues and settlements.

By now, everyone realizes that the top priority for the state, Republicans and Democrats, liberals and conservatives, is economic development. Jobs have been stagnant for 15 years and people rightfully fear that we will never regain our competitiveness.

While there is disagreement about what needs to be done, everyone agrees that now is not the time for half measures. The governor should step forward and prove she is serious with serious initiatives. One of the things I’ve suggested is to lower the highest marginal tax rate – the billboard price of doing business in New Hampshire. She’s unlikely to agree but that’s all right. I’ve said for years that we have to do more than a few things, not just one.

She needs to make serious proposals and explain how they will make a difference in our competitiveness. The one thing that can’t be at the center of her plan is a train. Whether the train is a sensible idea or not (financially it’s not in my book but perhaps you knew that), it is a marginal proposal that occupies a small niche. It’s not the centerpiece of economic development.

We have a real problem and we need solutions. Propose your silly train but don’t try to pretend that’s a plan. Give us some real ideas. We are uncompetitive on taxes and they can be changed right away. But let me also vote to move energy up the list and focus on price not weather stripping.

In addition, the business of budgets matter. Budgets are harder each year because we did less of the hard work the one before. Each budget for a decade the various parties in control have suspended the state budget law that requires surpluses be placed in the rainy day fund. Consequently we have almost no money in reserve.

What’s worse, we generally achieve pseudo-balance in weird ways. The ridiculous gimmicks (like borrowing money to pay for our borrowing) of 2008 and 2009 have gone for good but there are still gimmicks to be had and avoided. The short version of the rule ought to be that general spending will be balanced by regular general revenues. Dedicated funds need to stay dedicated lest you be accused of lying about the purposes. One-time revenues need to be spent on one-time expenses not used to prop up spending you can’t pay for.

The governor will likely endorse Sen. Sanborn’s idea of a tax amnesty holiday but that’s a one-time remedy not an annual occurrence. Annual spending must only be supported with annual fees and annual taxes. She should also endorse his idea of not spending on recurring operating expenses.

The last budget was only sort of balanced. Its revenues and its spending didn’t match. Instead it used the surplus remaining from the prior budget and spent it down over time. Lawmakers will always have those temptations but they must avoid them.

Honest estimates of regular revenues should be balanced by a spending budget that the executive branch will and can enforce. We have some remaining holes this year because the administration let spending get away from the budget. Those holes should be plugged but then let’s be honest about whether the spending estimates are realistic and will or can be enforced.

A supposedly temporary gimmick one year becomes a hole the next. Worrying about every detail every year keeps problems under control.

Most important, a sensible budget will allow us to focus on the real problems New Hampshire faces: why is our economy stagnant and what can we do about it?