Charlie Arlinghaus

June 24, 2015

As originally published in the New Hampshire Union Leader

The juvenile rhetoric that dominates so much of politics today makes it hard to sort out the looming budget veto and the issues beneath it. The first step to understanding is to ignore everything every politician says. Vetoes are not radical, the budget differences in almost but not quite all areas are tiny, and there is absolutely no chance whatsoever that New Hampshire’s government will shut down.

With a governor of one party and a legislature of the other, disagreements over policy are inevitable. But on the budget they are not particularly stark. For example, the governor hoped to increase the two-year, all-inclusive budget by 6.4% to $11.49 billion. The legislature is proposing a 5.1% increase to $11.35 billion. On each side, the Health and Human Services half of the budget would increase more than twice as fast as everything else. For example, the legislature proposes increasing HHS 8.4% and everything else by 3.2%.

Nonetheless, the governor has announced she will veto the budget after it passes today. Is a veto reckless or radical or extreme in some way? Of course not. Budgets are rarely vetoed – Republican Craig Benson vetoed a budget in 2003 and Democrat Hugh Gallen did so in 1981 — but the state constitution grants the governor that authority and there is no reason not to use it if things are that horrible.

However, to find the disagreements we have to start by ignoring the governor’s very silly rhetoric. The governor insists on saying the budget is not balanced. In reality,  all the official documents show not only balance but that it also adds surplus money to the state’s rainy day fund.

I would prefer the budget balance regular spending with regular revenue but it so very rarely does quite that. This year, the legislature carries forward some of the surplus from the current year to spend next year but then so did the governor. The legislature uses one-time tax amnesty revenue but then so did the governor. So go ahead and dismiss nonsensical claims of imbalance. Both the governor and the legislature do the same things in this area.

The governor would prefer to reauthorize Medicaid Expansion but the House and Senate can’t agree themselves and are postponing the debate until next year. Here the legislature and governor disagree but the outcome has been known for four months and can’t be changed by a veto. This is a real disagreement but not the source of the veto.

There are only two significant disputes. The governor’s team negotiated a pay raise for state workers which the legislature doesn’t fund. This is a more direct action than six years ago when then-Gov. Lynch asked the then-Democratic legislature for and received a directive to cut $25 million out of state paychecks (the current dispute is about $12 million). Because the current legislative decision is more direct than the Lynch end around of six years ago it is more controversial. Interestingly, Gov. Gallen vetoed the 1981 budget over the legislature granting 6% raises instead of the 9% he wanted.

The second issue is cuts to New Hampshire’s very high business taxes. The governor would prefer to spend the money and claims the cuts benefit only a small minority. As I documented four months ago, this is wrong. About 75% of “businesses” are paper businesses with no employees. The firms with more than five employees, the rough number that pay the profits tax, account for 95% of the jobs.

This is a real, philosophical difference. One side would lower the price of doing business in the state, the other believes the money could be better spent by government.

The worst political rhetoric involves each side accusing the other of shutting down government. That simply won’t happen. My organization, the Josiah Bartlett Center, published “Off Budget”, a paper detailing what has happened each time government has approached June 30 without a budget.

The legislature will pass a temporary “continuing resolution” to temporarily fund government at its current level. The last time this happened, in 2003, the legislature adopted a three month budget at 3/12 of the year that ended. The current legislature will pass a six month version.

Given the level of hostility and lack of trust between legislative leaders and the governor, this seems sensible. After the verbal and symbolic fisticuffs dominating the last month, a cooling off period is certainly required. A three month delay is simply not enough time for the heat to dissipate and then honest negotiations to begin. Everyone involved could use a time out.

1 reply
  1. William Fortune
    William Fortune says:

    “The second issue is cuts to New Hampshire’s very high business taxes.” Charlie, when are you going to “get it” ???? What they call a Businesses Profits Tax, is in reality, a tax on consumers and employees. Taxes collected from a business are a expense that must be passed onto the consumer. If those taxes can’t be passed onto the consumer then the business has to try and reduce wages, so in effect the employees pay part of the taxes. Usually both wages are cut and the price of goods and services is increased.
    When the cost to the consumer becomes too high the consumer will go without or go elsewhere and then the company will have to go out of business, so there is no tax revenue from the consumer and the employees lose their income that has to be replaced in part by other consumers.
    “The Business Profit Tax and other taxes, like the 80 % tax on electricity is the biggest government/politician lie of the 19 th, 20 th and 21 Centuries” Bill Fortune

    Reply

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