The Good, The Bad, and The Ugly of the House Budget

Charlie Arlinghaus

April 1, 2015

As originally published in the New Hampshire Union Leader

The House of Representatives proposed budget in New Hampshire is good, bad, and ugly. It is not draconian by any measure but does represent a difficult struggle to patch together New Hampshire’s fiscal house within existing sources. Not everyone will agree with every decision but too often budget information is sacrificed to the woefully misleading caterwauling that passes for political discourse today.

Every two years New Hampshire has a budget crisis of some degree or another.  The programs and expenditures we currently have grow a little faster than the taxes and fees we use to fund them. Of course that’s an average. In some years, revenues grow a lot faster. Unfortunately we usually spend that money not believing it was an above average year that will soon be counterbalanced.

So most budgets require a reevaluation of programs and priorities. In addition, there are three distinct phases to the budget: The governor’s evaluation and proposals, the House phase, and the Senate sifting of those two competing sets of thoughts with additions of their own.

When the governor and House are of different parties as they are now, the contrast between them is the most striking. It also leads to the greatest political posturing.

The House budget has good points and bad points but it is not some sort of radical cut. In fact, it increases spending faster than the rate of inflation.

The budget includes six or seven different ways to measure numbers and many of them don’t quite compare apples to apples which leads to much confusion. But General Fund spending — the basic category of funding paid for with state taxes — would increase from $2.514 billion in the budget ending June 30 to $2.683 billion in the next budget, an increase of 6.7%. For comparison, the most recent biennium over biennium inflation number is just 2.8%.

Some of that increase comes from shifting $23 million per year in Department of Safety spending back into the general fund so the right apples to apples comparison might be a 4.8% increase, still well above inflation.

Politics being what it is, an increase above the rate of inflation is described in political press releases as slashing cuts. It is true that this budget will spend much less than the governor wanted to spend. But it is an increase over actual spending last year and the year before.

Different legislators will perhaps have different priorities. There will be a significant debate — as there always is — about education funding. The state’s education formula is based largely on pupil counts. In the recent past towns were shielded from the effect of declining enrollments. Adhering to the actual formula would mean towns with fewer students would receive fewer dollars. Some legislators would like towns to never lose the aid they once received. That’s obviously not feasible in the long term.

There are also structural problems with the budget as there usually are with the House budget, the middle step of the three step process.

First and foremost are revenues. A budget is fundamentally a plan to spend the revenue available from the state’s taxes and fees and only that revenue. It is quite sensible to limit spending to existing taxes and avoid increasing the tax burden on citizens in a state that has not yet recovered from the most recent recession.

However, lawmakers should spend tax money and not prop up spending with one-time gimmicks that have little hope of being repeated. Recurring expenses should only be supported by recurring revenue. To do otherwise is to put off a decision and create a problem for someone in the future to resolve.

This budget proposal would use a tax amnesty program, something we can’t do more than once a decade or so, and uses the proceeds not for one-time spending (as I’ve suggested) but uses it to prop up the budget. Worse, it would take $50.8 million from the renewable energy fund and just spend it. The annual proceeds from energy supplier paid credits were just $17m in the most recent year.

So a total of $64 million of the budget comes from one-time revenues that won’t be around next time. That’s a mistake.

You should ignore the political language describing the budget as somehow cutting. It spends more money just not quite as much more as the governor would have preferred. But many of its decisions will have to be reconsidered in the Senate. Think of this as a first draft.