The House, Senate and governor are divided over the very foundation of the state budget. (No, not liquor outlet ghost drops.) Revenue estimates.
Including adjustments for the remainder of Fiscal Year 2025, the gap between the governor’s and House’s revenue estimates exceeds $800 million (with all revenue adjustments, including the House’s removal of lottery revenue from the Education Trust Fund). Both sides insist their estimates are accurate.
In the middle of this, former House Ways & Means Chairman Norm Major quietly passed away at age 91, on Tax Day of all days. Had he been back in his old saddle, he would’ve offered wise counsel, although his guidance and example are evident in the House’s lean budget.
Norm Major, the Josiah Bartlett Center’s 2023 Libertas Award winner, was the quiet hero of New Hampshire public policy during his years on and then heading the Ways & Means Committee. Budget after budget, Norm carefully analyzed loads of economic data to figure out how much revenue the state could expect to collect in the future. Woe be to those who tried to cajole him into raising his estimates so they could raise spending.
Norm held the line on state spending like Col. Joshua Chamberlain on Little Round Top. Wave after wave of spending requests would charge up the lightly manned hill, only to be repelled. Legislative leaders, lobbyists, activists, governors… none could break through.
Norm was a supremely kind man. He didn’t tell people “no” out of meanness. Norm just lived in the real world, and he insisted that the state budget live there too.
He called unrealistic revenue estimates “wishful thinking.”
In a 2016 Union Leader column, he retold the story of 2007, when legislators made the mistake of overestimating revenues for the express purpose of inflating spending.
“In 2007, we witnessed what happens when legislators disregard data, and choose revenue estimates that fit their spending needs, rather than choose spending limits to fit their expected revenue.
“While the Ways and Means Committee worked diligently to develop appropriate estimates, a Democrat leader on the Finance committee asked us to “look to the sky” to identify a way to raise those estimates so they could spend more. The House majority at the time bowed to the partisan political pressure and adopted over-ambitious revenue estimates that led the state down a path of overspending. Then-Gov. Lynch was forced to call the Legislature back to Concord for a special session where millions of dollars in appropriations had to be cut or reallocated. When Republicans regained the majority in 2011, they were left with an $800 million structural deficit, which required a massive budget overhaul.”
Balancing the next state budget was disruptive because lawmakers had to fill holes created by irresponsible budget gimmicks. Our then-President Charlie Arlinghaus summarized in 2010 how the budget written with inflated revenue estimates had to be patched when the fantasy revenue didn’t arrive:
“Although the total budget increased over the last four years by $2 billion, the increase in general and education funds was about $700 million while state tax revenues declined slightly. That revenue decline put a lot of pressure on the state budget. Ordinarily, without the money to pay for it, spending would need to have remained flat as well.
“To keep increasing spending as if they had the money, legislators and the governor were forced to turn to three temporary sources for $597 million of one-time revenue. The largest chunk of temporary scaffolding came from the federal stimulus. Some stimulus money is meant for dedicated projects like paving. However, the current budget for FY10 and FY11 includes $351 million in state bailout funds to be used for whatever we wish. It goes away next year.
“The budget also includes $90 million in one-time state revenues like the sale of state assets. Obviously you can’t sell things twice so that revenue also goes away next year.
“Finally, the most dangerous thing we did was to borrow $156 million to plug what would have been a deficit including borrowing more money to pay the interest on money we borrowed in the past. As an added bonus, under state accounting, if you pay for a program with borrowed money it doesn’t count as spending so you can claim it as a spending cut.”
Norm, who served 26 years in the House, considered it his solemn duty to avoid putting the state in that situation. His loyalty was to the taxpayers, state employees and citizens who relied on him to lay a stable, reliable foundation for the budget so it wouldn’t collapse in two years, causing chaos and disruption.
The next two months could give budget writers good reason to raise revenue estimates. That would be welcome, in no small part because that would indicate greater economic strength than current events seem to suggest. We’ll see.
The primary cause of large, disruptive budget cuts is the mismatch between revenues and spending, and the primary cause of that mismatch is “wishful thinking” about state revenues. To avoid the next budget ending in more chaos and disruption, budget negotiators should let themselves be guided by a simple acronym: WWND What Would Norm Do?
One thing Norm would do is advise, as always, that caution is prudent because caution today averts catastrophe tomorrow.