Charlie Arlinghaus

July 8, 2015

As originally published in the New Hampshire Union Leader

Fissures over fiscal policy are fed by fanciful fictions that threaten the focus needed to fix the state’s financial budget. Political statements mislead you and indefensible charges are designed to distract you from a simple but philosophical disagreement.

The governor of one party vetoed a budget passed by a legislature controlled by the other political party. Democratic Governor Maggie Hassan wanted to spend more money particularly on social programs and the university system. The Republican legislature would spend less money and phase in a reduction to our high state business taxes.

Instead of focusing on that philosophical fact, too much of the debate has focused on a fiction.  The governor and her allies repeatedly claim — despite proof to the contrary — that the budget is “unbalanced.” The state budget law requires quite specifically that the budget be balanced so any charge of imbalance is quite serious if true. Her charge, however, is silly hogwash.

The governor defined her unbalanced charge in her veto statement: “The legislature double-counted carryforward funds, attempting to take money that has been designated and appropriated to pay for 2015 bills, and instead proposed to use it to balance its 2016 budget.”

A very serious charge indeed. The difficulty with the charge is that it isn’t true. Accompanying each budget and budget proposal is a sheet from the state’s very strictly non-partisan office of Legislative Budget Assistant showing how the state’s budget is balanced. The LBA works for the legislature, is technically tasked by the committee chairmen, and has an unvarnished and unquestioned reputation for neutrality.

The balance document is called a surplus statement and is the chief point of reference for everyone in the executive branch, legislative branch, and general public for deciphering the budget.

To begin with, it shows a balanced budget without any question. The estimates of revenue are accepted by everyone involved in the process and they balance the budget spending authority granted.

The governor hasn’t produced her own surplus statement because she doesn’t allege inaccuracies in that document itself. Instead, she claims something quite specific: she believes money is being double counted — it was spent in the budget that ended June 30 and is being carried forward as if unspent so it can be spent again next year.

If true, this would show up in the surplus statement as the legislature artificially deflating FY2015 spending below what the governor knows will be spent. Actual spending would then come in high, the extra money would be unavailable, and we suddenly have a deficit.

State documents however show no such thing. The surplus statement shows the governor and legislature both planned on general fund appropriations of $1.34 billion.

Sometimes governors or legislatures can play games with what are called lapses — the planned management difference between what is technically authorized and what will actually be spent. Most line items are caps on spending authority and we know the agencies will spend just a bit less. That difference is included in the budget and each department manages its spending — under the watchful of the governor as CEO — to meet its requirement.

But here too the governor and legislature show no difference. They each budget 4% of authorized to spending to lapse, or remain unused — the exact same $51.2 million. You might argue that the legislature basically just accepted the governor’s claims about 2015 spending and adopted them.

So the ridiculous “unbalanced” rhetoric is just a political canard and should be ignored as just so much silliness.

The real disagreement is over cutting business taxes. If we have some of the highest business taxes in the country — and we do — should we start reducing them to gradually improve our competitiveness? Or are we better off having the government spend the money on priorities it determines will be the most helpful?

The proposed cut doesn’t reduce revenue below current levels. Rather it uses the natural growth to reduce rates — business tax revenues will be the same next year as this year. No one presumes one change will suddenly improve our anemic job growth but many things need to change and we need to start changing them gradually so we can afford to improve our position without disruption.

Budget imbalance is a fiction. The philosophical differences between the legislature and the governor are real and should be the focus of debate.

1 reply
  1. Marc says:

    Charlie Arlinghaus wrote an editorial for the Union Leader published July 1, 2015 titled “Fanciful Fiction of Fiscal Fracture” stating that there are “fissures over fiscal policy”. Well, sorry Charlie, your analysis misses the point. The assumption of the piece is that it is the budget that needs fixing which is clearly not what is going on in Concord. Making matters worse you assert the discussion around the budget is a simple but philosophical disagreement.

    You are a really smart guy but perhaps more lacking in perspicacity than we had thought. Don’t misunderstand. Your facts are all correct and verifiable. But it is silly to accept the statements of politicians as meaning what they say. Their utterance must always be analyzed in the context of both their topic and the motivations of their makers.

    The governor did veto a budget passed the legislature. That is as close to agreement as we are likely to com. You asserted that there are two parties. While nominally true, in practice what we have de facto is one party with two fundraising arms.

    The House had a Republican majority but was Democratically controlled by a cabal of Republicrats who worked in concert with a cohesive group of Demacans. Governor Maggie Hassan does not care a whit about the budget or its contents. Rather she is interested in posturing in advance of Senatorial race against another Bi-party member in what promises to be an unprincipled beauty contest only the electorate will lose.

    We agree the budget debate has focused on a fiction. Your article spends too much time proving untrue what is obviously untrue even to the casual observer. The bi-party knows that New Hampshire is in deeper trouble because of its disproportionate reliance on high business taxes than it will admit. The Governors and Legislatures of the past and present have maneuvered the state into a precarious position economically just as they did with respect to the unfunded liabilities attached to the New Hampshire Retirement System.

    The budget imbalance is a fiction. So too are the philosophical differences between the legislature and the governor. The real focus of debate should be on whether or not we actually have a two party system. How is it possible to have a two party system when each party selects the candidate from the other party it most wants to run against? The focus should also include whether or not the participants in the process can be trusted to act in a principled way on behalf of those they serve instead of a self-serving manner intended to advance their personal ambitions.

    Reply

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