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.