The minimum wage is virtue signaling

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As of July, the average hourly wage for private employment in New Hampshire was $26.22, according to Bureau of Labor Statistics data compiled by the Federal Reserve Bank of St. Louis.

In February, New Hampshire recorded its highest average hourly wage on record, $26.89. (The Federal Reserve data show New Hampshire wages regularly peaking in winter, dropping a bit in summer.)

Even counting for inflation, New Hampshire’s real per capita personal income is up more than $4,000 since the recession.

Hillsborough County was in the top ten counties in the country for wage growth last year, and New Hampshire was among the top five states, according to Federal Bureau of Labor Statistics data released in August.

Amid all of this good news, activists and some politicians are telling everyone that things are bad for the simple reason that state law doesn’t mandate a higher entry-level wage.

This fixation on government mandates rather than the actual economy is a really telling difference in the way some people view the world. On one side, people look around and say, “things are good!” On the other, people bury their heads in statute books and say, “things are terrible!”

The “things are terrible” crowd is pushing again to raise the state minimum wage to $15 an hour. As always, the central assertion is that $7.25 an hour (New Hampshire’s minimum wage is the federal minimum) is not a ‘living wage.”

This is where the gap between the actual economy and economic notions expressed in law grows very wide.

The state Labor Market Information Bureau has compiled U.S. Census estimates for the number of people working at or below the minimum wage in New Hampshire. (Tipped jobs can pay below the minimum.) The data (based on surveys) show only 8,004 Granite Staters working at the minimum-wage or less in 2017.

That’s really low. In fact, it’s a 48 percent decline from the 15,284 Granite Staters estimated to have worked a minimum wage job in 2016. (The number for 2015 was 15,845.)

Why the drop? We don’t know yet. And because of the small sample sizes, it’s possible that a sizable chunk of the decline is a measurement error. Next year’s data will help fill out the picture. But even if 50 percent of the drop is a reporting error, New Hampshire would still have only about 11,600 people working at or below the minimum wage. That’s out of a working-age population of around 913,000, according to Census figures.

At the current estimate of 8,004 people, less than 1 percent of New Hampshire’s working-age population makes the minimum wage or less.

The data further show that 73.5 percent of Granite Staters making the minimum wage or less work in “food preparation and serving-related occupations.”

Tips, commissions and overtime pay are not included in the minimum wage figures, so the actual take-home pay of about three-fourths of New Hampshire employees who are classified as minimum-wage workers will be considerably higher than the minimum wage.

The Census estimates also show that 3,951 people, or 49.4 percent, of Granite Staters who make the minimum wage or less are between the ages of 16-24. These are high school and college-age employees with fewer skills and limited experience.

And experience, as in axe throwing or being Jose Canseco, is a key factor. Looking at the lowest-paying sector, food preparation and serving-related occupations, we see an entry-level wage of $8.36 an hour, a mean wage of $10.55 an hour, and an experienced wage of $13.76 an hour —just $1.24 an hour less than the $15 an hour wage some activists and politicians are demanding.

This tells us that wages are not a measure of a person’s moral worth or dignity, but of economic value. Employers pay inexperienced teens less than experienced adults for reasons that ought to be obvious to anyone who’s ever had a job or waited in line at a McDonald’s. And they pay higher wages to attract better employees.

Even in the fast food industry, competition for good employees is driving up wages so that the minimums in many paces are $10 an hour or higher.

More than doubling the minimum wage to $15 an hour would have a relatively small effect on the pay of experienced employees even in the lowest-paid industries. But it would have a big effect on entry-level positions, effectively pricing younger, less-experienced people out of those jobs.

In an economy in which employers are voluntarily raising wages, we are being told that the government must mandate a very high wage floor, which gets us back to the point about markets vs. laws.

Laws are expressions of moral values. Markets are expressions of economic values (mostly). Even when markets are pushing pay rates higher, people who view the world a certain way find this unacceptable precisely because it does not come from a moral directive.

For the conspicuously virtuous, everything all the time has to be an expression of moral values. Markets don’t operate that way. They consider tradeoffs, which the conspicuously virtuous rarely do. Everything is black and white, good or bad.

So even if markets are driving wages higher, society must act collectively to mandate that wages never fall below whatever the virtuous wage floor of the moment is. Refusal to pass such a mandate is considered a society-wide moral failure.

Or to put it in the contemporary vernacular, minimum wages are virtue signaling.

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Burning money

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Every time you pay your electricity or heating bill, you’re lighting your money on fire. That is, you’re trading money for the energy released by burning some combustible material — natural gas, home heating oil, wood pellets, etc. So in effect, you’re burning your money.

That’s OK, it’s how a market economy works. You don’t make your own clothes or slaughter your own food or build your own home by hand, you pay other people to do those things. (Excepting some of you in the North Country.) When you trade money for energy, you’re basically burning money. The priority, then, is to burn as little of it as possible.

In New Hampshire, politicians keep preventing you from doing that. In fact, they continue to force you to burn more money for electricity than you would otherwise choose to burn.

On Thursday, legislators overrode Gov. Chris Sununu’s veto of Senate Bill 365. The bill forces electric utility companies to buy power at above-market rates from the state’s six biomass power plants and municipal solid waste incinerators.

The bill’s own fiscal note projected that it would cause electricity rates to rise by between $15 million and $20 million a year. So legislators knew exactly what they were doing. They knowingly voted to make you burn more of your money than necessary when buying electricity.

They’re very practiced at this. Over the years, legislators have passed one law after another to prohibit electric utilities from buying power at the lowest available price.

All of these costs add up. Here are just two examples.

A 2015 study by the Beacon Hill Institute found that New Hampshire’s Renewable Portfolio Standards would raise electricity prices by 3.7 percent by 2025, for a total impact of $70 million.

A previous biomass subsidy bill passed just last year, SB 129, also forced utilities to buy additional power from biomass plants. Its costs were estimated at around $75 million to $100 million.

To understand how these mandates make electricity more expensive, imagine you’re a cave man who needs to build a fire. Og is willing to offer you a bundle of wood he chopped himself for one rabbit pelt. Unk is offering you a bundle of organic, cured, and deodorized buffalo chips for one rabbit pelt and a handful of arrow heads.

You just need a fire. You’ve got a fresh squirrel in your deer-skin sack, you’re hungry, and you’ve got to make a new spear to replace the one you lost when that mammoth ran off with it dangling from its side. (WHY WON”T THOSE THINGS JUST DIE??) So you turn to Og.

At that moment, the clan’s code enforcement officer strides up to remind you of the clan leader’s decree that everyone has to use organic buffalo chips as a fuel source once a week. (Unk is the clan leader’s cousin.) You used wood every day this week. You’ve got to buy the dung.

You give Unk your worst arrow heads, naturally, but now you’re out all those arrow heads and will have to make more. You’re no warmer than you were before. The fire didn’t cook your meat any better. It just cost more because someone with power ordered you to support the organic dung industry.

There are other ways politicians and regulators force prices higher. They can even be politicians and regulators in neighboring states.

Across the country, electricity prices have fallen thanks to the natural gas boom. But the prices fall faster and farther in places where politicians don’t block pipeline construction. In New England (and New York), politicians and regulators have made it extremely difficult to build new pipelines.

As ISO New England has pointed out, though natural gas power generation has grown tremendously in in the last 20 years, “the natural gas pipelines that deliver low-cost shale gas into the region have not been expanded at a commensurate pace.”

Public policy is a major reason why New Hampshire has the fifth-highest electric rates in the country.

Politicians could immediately lower those rates by repealing laws and withdrawing regulations that prohibit utilities from buying power at the lowest available market price.

Instead, legislators continue to add new laws that push prices ever higher.

Utilities want to sell us power for less money. They would if they could. But the state forbids it. This needs to stop. We shouldn’t allow our politicians to force us to light our own money on fire.

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A turning point for public sector unions

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Labor Day weekend is a time for last trips to the beach, first trips to apple orchards, and getting into heated political arguments over the role organized labor in the 21st century.

Ah, autumn.

This is the first Labor Day after the U.S. Supreme Court’s famous June 27 Janus decisionin which the court held that “(t)he First Amendment is violated when money is taken from nonconsenting employees for a public-sector union; employees must choose to support the union before anything is taken from them.”

The media’s instant reaction was to predict huge financial losses for unions. That’s a reasonable short-term take. A Josiah Bartlett Center right-to-know request found this summer that unions representing New Hampshire state employees stand to lose $1 million a year in agency fees they had been confiscating from non-union employees.

But the Janus ruling also presents a growth opportunity for public-sector unions.

By devoting themselves so wholeheartedly to political activism, public-sector unions have alienated members of the public as well as many government employees who might otherwise be inclined to join.

In a state like New Hampshire, where state and local government employees are often registered Republicans (including the current and immediate past chairmen of the state Republican Party), partisan political activity can serve to suppress union membership.

Yet, as Josiah Bartlett Center President Andrew Cline writes in a column published in USA Today this weekend:

“Public sector unions can serve either their members or the Democratic Party, not both. On a Labor Day weekend more than two months after a stinging Supreme Court defeat, it isn’t clear that their leaders realize this yet.”

Union leaders don’t seem to realize something critical about the Janus ruling: It created a competitive marketplace for public-sector union representation.

Now that public-sector unions can no longer rely on forced financial support from unwilling government employees, they must behave as other organizations in competitive marketplaces do.

“To win new members,” Cline writes, “they have to prove that they offer public employees a valuable service at a great price. If they do that, the can not only survive, they can also grow.”

Please read the whole column online here as you’re taking that last stroll on some sandy shore or stuffing your mouth with delicious grilled meat. It’s the perfect way to show your friends and family that you’re dedicated to maintaining the true spirit of Labor Day as they try to get you to pay attention to them.

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Diversifying New Hampshire

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New Hampshire, Vermont, and Maine are so white that if a map of the United States were colored according to the skin pigmentation of its residents, Northern New England would look like a snow-covered peak. We could go as a ghost for Halloween without even dressing up. And that’s a potential problem.

Some New Hampshire business and civic leaders recently held a conference to discuss ways to make the state more diverse. This drew nationwide media coverage, including a story in The New York Times. And a lot of shouting. When it comes to anything that touches on race, people really like to shout.

Some of the hostile reactions were knee-jerk racism. Others were labeled racist unfairly. (NHPR summarizes many of the responses here.)

We suspect that had the forum been purely a community or business effort, it would have been little noticed. But once the state gets involved in a cultural initiative, residents have a sense of ownership over it. Government involvement instantly politicizes anything.

People hear that the state is pursuing a diversity initiative, and they read into that all kinds of things. First, they hear the word “race” instead of “diversity.” That’s because the left has conditioned people to think of the latter as a code word for the former.

And because “diversity” has become a political buzzword of the left, it would be easy to assume that the end result, if not the goal, of a diversity initiative would be to make New Hampshire more politically liberal by recruiting people who have a tendency to vote for liberal politicians.

Diversity also implies cultural changes, and that always generates concern that community values will be shifted.

But the message from the forum that generated all the yelling and name calling was decidedly uncontroversial. It’s a message New Hampshire has to take seriously because the state’s future depends on dealing with diversity, broadly defined.

New Hampshire’s economic growth is probably at a turning point. Our tax policy has given us the foundation for having a great economy, but our workforce shortage is threatening our economic future. Simply put, we don’t have enough people.

(People bring not just bodies, but ideas.)

As this newsletter has pointed out before, New Hampshire’s economic growth has for decades been driven not just by low taxes, but by in-migration fueled by those low taxes. That in-migration has slowed, and that’s a huge problem.

Our population is older, our young people prefer to spend early adulthood in more urban areas with higher concentrations of young adults. This is a universal human tendency.

To grow, we need new immigrants. As the nation’s population becomes less white, New Hampshire’s whiteness becomes a potential economic problem. If the state is seen as unwelcoming to non-white Americans, a shrinking percentage of the U.S. population will be interested in moving here.

New Hampshire is not “too white” in any abstract sense. There is no perfect racial or ethnic ratio by which government can judge a state’s population. But the fact that our state is remote, rural, and largely ethnically homogeneous does pose economic challenges.

The term “diversity” has been used for so long as a political weapon that many of us lose sight of its broader meaning. The historical truth is that places that are more open to people from different cultural backgrounds are places that enjoy greater prosperity and create more complex and vibrant cultures of their own.

Great civilizations grow from trade. But it’s not just the economic aspect of trade that benefits a city, state or nation. The exchange of ideas and cultures that comes from a mixing of diverse peoples stimulates new ideas and enterprises. It essentially incubates entrepreneurship and innovation.

This is why remote, mountainous regions of the world are generally less economically prosperous than port cities and communities built at the intersections of trade routes. It’s not just that it’s harder for wagons or ships or trucks to reach those places. It’s that they don’t get to drink from the cultural stew created in the melting pot coastal cities and crossroad communities.

It turns out that diversity itself is a driver of prosperity and growth.

Granite Staters can and should discuss (or shout about) the proper role of the state in pursuing “diversity,” however we choose to define that word. There’s a case to be made that the state shouldn’t try to manage the racial or ethnic makeup of its people in any way because even taking a few small steps down that path is dangerous.

But that doesn’t mean that Granite Staters shouldn’t be concerned about the perception other people have of our great state, and their willingness to move here. Just as New Hampshire’s economy depends on tourism, its economic future depends on the intellectual, cultural and economic exchanges that will or will not take place here in the years to come. Generally speaking, our economic future will be stronger if the people who participate in those exchanges come from a broadly diverse set of backgrounds.

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State employees to save $1 million a year after Janus ruling

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The top two contributors to the re-election campaign of U.S. Rep. Annie Kuster, D-N.H., in this quarter are public-sector labor unions: the Service Employees International Union (SEIU) and the American Federation of State, County, and Municipal Employees (AFSCME). Each union has given Rep. Kuster $5,000 this quarter (not 5,000 quarters).

And until June 27, each of those unions used agency fee provisions in their collective bargaining contracts to take money without consent from public employees who did not wish to give it.

The State Employees Association of New Hampshire is otherwise known as SEIU Local 1984. As of June 27, when the U.S. Supreme Court ruled in Janus vs. American Federation of State, County, and Municipal Employees, the SEA was collecting agency fees from 2,104 state employees, according to data obtained by the Josiah Bartlett Center for Public Policy through a state right-to-know request.

An agency fee is money a public-sector union could take out of a non-member’s pay, ostensibly to cover the cost of collective bargaining. Officially, unions could not use agency fees for political activities. But the extra revenue made these organizations larger and more politically powerful, even if they never spent it directly on lobbying, campaign donations or political ads.

Mark Janus, the Illinois state employee who sued AFSME and won his Supreme Court case last month, successfully argued that being forced to contribute to the union violated his First Amendment rights not just because the union endorsed candidates and policies with which he disagreed. He disagreed with the union’s collective bargaining activities too, and its goal of pushing government spending ever higher.

The Supreme Court agreed with him that the “extraction of agency fees from nonconsenting public-sector employees violates the First Amendment.”

On the date of the ruling, 2,161 New Hampshire state employees were unconstitutionally being compelled to pay $37,913.60 per pay period to unions they chose not to join, according to state data.

From July 6, 2017 to July 6, 2018, state employees were forced against their will to contribute a total of $1,012,055.83 from their paychecks to just two unions, the State Employees Association and the Teamsters.

The payroll records show that through unconstitutional contracts that allowed the state to collect union fees from non-members, public-sector unions in New Hampshire were able to inflate their budgets by nearly 1/5 and their number of financial contributors by nearly 1/3.

This was a forced transfer of money and power from individual state employees to labor unions. That transfer compelled employees to support political positions they did not consent to support.

The Janus ruling made those agency fee clauses immediately null. As a result, individual state employees will have greater leverage when deciding whether to join a union. From now on, the choice of whether any of their pay goes to support a labor union is theirs and theirs alone.

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Why the ARMI subsidy is so important

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Making exceptions to general rules can seem harmless or even essential in the moment. When exceptions are made to achieve a short-term goal, the argument is that this one little violation of our collective standards or norms will quickly fade into history and everything will soon return to normal. 

Life doesn’t always work that way. The first exception becomes a precedent, the basis for further exceptions, and before you can say “Jesse Ventura” it can become a norm. Casual Friday spread throughout the United States in the 1990s as an experimental employee perk. U.S. necktie sales peaked in 1995, and 21 years later the New York Post declared the necktie dead. It’s now impossible to tell a tech CEO from a high school slacker unless they’re both standing beside their cars. 

Setting precedents matters. As a major directional shift in state tax policy, Senate Bill 564 sets a bad precedent for New Hampshire. 

The bill exempts regenerative manufacturing businesses (those that manufacture organic human body parts) from state business taxation. That not being considered enough aid, it also creates a state “regenerative manufacturing workforce development program.” 

The development program involves the state business finance authority taking over the student debt of regenerative manufacturing industry employees. 

As President Obama would say were he a writer for this newsletter, let’s be clear. The target of the bill is Dean Kamen’s Advanced Regenerative Manufacturing Institute. We admire Kamen, and the ARMI project is an exciting, potentially pivotal development for Manchester’s Millyard. This biotech business could — could — be the celebrity anchor tenant Manchester officials have long sought: a magnet tech firm that finally turns Manchester into a center of tech innovation. 

But no one can predict the future. Earlier this century, Kamen’s Segway was supposed to have been a transformative tech business, while Southern New Hampshire University was all but ignored as a small college in Hooksett. Today, SNHU is transforming the Millyard while Segway has moved to a small campus in Bedford. 

In seeking to help this one company, SB 564 creates, for the first time, an economic development incentive for a specific type of business. New Hampshire has for decades firmly and wisely rejected this wasteful and costly tax policy that has wasted so much taxpayer money in other states. 

Until now, New Hampshire has always been able to reject corporate requests for special tax breaks by noting that we just don’t do that in this state. Instead, we encourage economic development by keeping tax rates low for everyone. 

This approach limits rent-seeking and keeps politicians from being able to distribute favors via the tax code to friends or politically favored industries. Allowing no exceptions to the rules is the only way to ensure equal opportunity for all, from the obscure and unconnected to the rich and famous. 

SB 564 breaks with that tradition and grants favored status to a specific type of business. It seeks to justify this by predicting regenerative manufacturing’s benefits to New Hampshire.

“Regenerative manufacturing, the creation of new tissue for medical purposes, is an example of an emerging technology that will change current medical practice, advance the health of the citizens of New Hampshire and the United States, and create a new industry,” the bill states.

Any emerging medical technology could be described the same way. 

The bill asserts that subsidizing this industry will lead to numerous benefits, including “providing new, high paying jobs…attracting highly skilled professionals… fostering the development of a new industry… contributing to the sciences… increasing tax revenues….”

Almost any emerging industry would bring similar benefits.

SB 564 not only grants favors that others will cite when seeking special treatment in the future, but it attempts to justify those favors with language that other industries can easily copy and paste into their own lobbying efforts.  

With this bill, New Hampshire has waded blindly into the economic development incentive swamp. The economic research is quite clear that incentives are harmful at worst, useless at best. They don’t improve state economies. They do create two groups of businesses — insiders and outsiders. Insiders get state aid while outsiders are disadvantaged by having to subsidize their competitors. 

This is not the New Hampshire way. By getting New Hampshire into the incentive game, the precedent set by SB 564 threatens to undermine the foundation of the New Hampshire Advantage.

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Gangster Tactics

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If you live in New Hampshire and enjoy wine, there’s something you should know (besides how approach a tasting). Your own state government, which sells wine, wants to be your primary supplier. Really, it wants to be your only supplier, but the Legislature won’t allow that. So to satisfy its impulse to smash all enemies, it’s rigging the wine market to kneecap upstart competitors.

The New Hampshire Liquor Commission both sells — and regulates the sale of — alcohol. This blatant conflict of interest gives it the power and incentive to limit its competition. Naturally, it uses that power.

After Prohibition, the Liquor Commission was the state’s only alcohol retailer. In the decades that followed, it aggressively fought the private-sector sale of beer and wine, changes that were proposed and ultimately ordered by legislators, who have grocers and drinkers as constituents.

Today, the commission is fighting a new competitor — direct wine retailers. The Liquor Commission is this week acknowledged that it has been systematically banning the direct-to-consumer sale of wines that are also sold in state liquor outlets.

The National Association of Wine Retailers this week called the commission’s actions “gangster tactics.”

During Prohibition, gangsters controlled the production and distribution of alcohol and snuffed out competitors. Ironically, the Liquor Commission, which was created to control alcohol distribution after Prohibition ended, wound up operating like a more lawful version of La Cosa Nostra. It pursues competitors relentlessly and does what it can to eliminate, or at least handicap, them.

Using the word “gangster” to describe the behavior of New Hampshire officials might call to mind images from a Weird Al parody. But where the power to whack competitors exists, it’s used.

Occupational licensing laws often grant specific industries the power to restrict competition. Licensing boards, made up of practitioners of a particular trade, are empowered to both practice and regulate that trade. Not surprisingly, they tirelessly suppress competition and seek legislative authority to further restrict entry into their field.

Public schools succeeded sank an Education Savings Account bill that would have expanded the definition of what constitutes a public education. It would have allowed families to spend the state portion of their public education dollars at non-public schools (local dollars would remain with the local public school district).

Perceiving this as a competitive threat, public school administrators, some local school boards, the teachers’ unions, and their political allies fought hard to maintain their advantage. They successfully turned enough Republicans against the bill to kill it in the House.

Even preppy suburbanites do it. Municipal officials and voters regularly approve ordinances to limit new business and home construction, reducing competition and raising prices.

It’s not that institutions granted such power attract people with a lust for blood and conquest. It’s that the combination of incentives and opportunity leads inevitably to anticompetitive behaviors.

So if you wondered why you could no longer order your favorite wine online, wonder no more. The Liquor Commission’s been taking a lead pipe to the knees of your favorite winery.

This was originally published in our weekly email newsletter, for which you can sign up here.

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Why Education Savings Accounts should not trigger property tax hikes

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A report by the Josiah Bartlett Center for Public Policy and EdChoice shows that New Hampshire public school spending and staffing increased much more rapidly from 1992-2014 than student enrollment did, and the staffing increase came overwhelmingly in non-teaching positions.

The study also calculates that of the $16,205 in per-pupil revenue New Hampshire public schools received in 2015, $11,716 (or 72.2 percent of total per pupil expenditures) can be classified as variable rather than fixed costs.

Together, these data show that there is no reason to believe Education Savings Accounts (ESAs) will trigger local property tax increases should families choose ESAs to provide educational alternatives for their children. On the contrary, ESAs can be expected to save school districts money.

School choice opponents always claim that losing a student won’t save a school money because the remaining students must continue to be taught, so the school can’t fire the teacher. These data show that the spending increases of recent decades have been concentrated in non-teaching positions and have far outpaced student enrollment growth. As such, schools have options for finding savings that need not include cutting teachers.

Study highlights:

•     Between the 1992 and 2014 fiscal years, real spending per student in New Hampshire public schools increased by 56 percent, even though student enrollment grew by only 4 percent.  In that same time, teacher salaries rose by only 2 percent.

•     From 1992-20015, the number of full-time-equivalent personnel increased by 56 percent.  These were mostly non-teaching positions. The number of teachers increased by 29 percent, while the number of non-teaching staff positions increased by an eye-opening 89 percent — 22 times the rate needed to accommodate student growth.

•     The student-to-staff ratio in New Hampshire fell from 8.6 students per full-time staff member in 1992 to 5.8 in 2015.  The national average in 2015 was 8 students per full-time staff member.

•    New Hampshire has a lower student-to-staff ratio, student-to-teacher ratio and student-to-non-teaching staff ratio than the national average. Nationwide in 2015, there were 16.1 students for every non-teaching public school staff member. In New Hampshire in 2015, there were 10.8 students per non-teaching public school staff member.

“The claim that Education Savings Accounts will cause property tax increases is just not borne out by the data,” Josiah Bartlett Center for Public Policy President Andrew Cline said. “With an 89 percent increase in non-teaching staff from 1992-2015 and a 56 percent overall increase in spending, there are opportunities to find savings on the non-teaching side of the ledger should schools lose some revenue from families choosing Education Savings Accounts.”

“Furthermore, as a previous Bartlett Center and EdChoice study showed, school districts can expect to keep more than 98 percent of their budgets should ESAs become an option for New Hampshire families. Looking at the numbers, there is no basis for the claim that ESAs will somehow decimate school districts. In fact, studies show that school choice programs tend to improve educational outcomes for students who remain in traditional public schools.”

Find the full policy brief here: Public School Staffing in New Hampshire

 

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How Medicaid expansion immediately raids the general fund

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The bill reauthorizing Medicaid expansion passed the state Senate on Thursday when half of the 14 Republicans joined all 10 Democrats in voting to extend the Obamacare entitlement program for five years. This is why the #Headdesk Twitter hashtag was invented.

One of the Republican selling points was that the bill pays for for Medicaid expansion while protecting state taxpayers.

It doesn’t, though.

Some readers (the old, boring ones, you know who you are) might remember the ongoing fight to fund the state Alcohol Abuse Prevention and Treatment Fund (Alcohol Fund) established in 2000. State law long required that 5 percent of the state Liquor Commission’s gross profits go into the Alcohol Fund. Only once — in 2003 — have the people’s elected officials followed that law. Typically they write a suspension of the law into the state budget.

New Futures created this handy chart to show the difference between the law’s required deposits and what was actually put into the account.

The Senate’s Medicaid expansion bill follows this grand 18-year bipartisan tradition and raids the Alcohol Fund.

The raid starts by first requiring that the Alcohol Fund at last be fully funded at 5 percent of gross Liquor Commission profits. (No sense in raiding an empty fund, right?)

This Liquor Commission money is then transferred to a new account created to pay for Medicaid expansion. It’s called the New Hampshire Granite Advantage Health Care Trust Fund. (One dedicated fund is being raided to finance another dedicated fund.)

The bill assures us that this transfer will happen only “provided” the programs financed through the Alcohol Fund “shall be paid for with federal or other funds available from within the department of health and human services.”

To provide a portion of those “other funds,” the bill lets the Alcohol Fund accept “gifts, grants, donations, or other funding from any source.” This magic money is directed to the substance abuse programs the Alcohol Fund can no longer finance because Medicaid expansion just swiped all of its Liquor Commission money.

Yeah, it’s Indiana Jones’ bag of sand trick. But with dollars.

What are the odds that those “other funds” will be made up of gifts and donations vs. state general funds?

Wait, don’t answer that question.

Sorry, Harrison.

The important point is that the Senate bill takes Liquor Commission funds and replaces them with whatever the Department of Health and Human Services has lying around. Like, say, lottery tickets, Funspot tokens or, we don’t know, maybe state general funds.

Even if the department finds bags of federal money in an old vault somewhere, the Senate bill still shrinks the general fund. Think back to what we wrote nine paragraphs and two stupid gifs ago (we know, but try).

The Senate bill first addresses the Alcohol Fund by ensuring that it finally receives its full 5 percent of Liquor Commission gross profits. For 15 years, legislators have been taking for the general fund the difference between that full 5 percent and whatever they decided to put into the Alcohol Fund.

Under the Senate bill, those general fund appropriations will no longer happen. They will go instead to fund Medicaid expansion.

Those are some pretty neat tricks to take general fund money via the Alcohol Fund. They could make for an interesting reception when the bill lands in the House.

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Why a constitutional amendment is needed to restore taxpayer standing to challenge illegal spending

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Why a constitutional amendment is needed to restore taxpayer standing
to challenge illegal spending

By Andrew Cline

On Sept. 1, 2015, Manchester’s Board of Mayor and Aldermen approved a contract with the city’s teachers union that included a pay raise. Three aldermen with immediate family members employed as city teachers voted for the contract, in direct violation of the city charter’s conflict of interest provision. (1)

Just five years earlier, taxpayers would have been able to challenge such an illegal vote at the state Supreme Court. For 147 years, New Hampshire taxpayers had the right to petition the court for opinions on the legality of alleged unlawful government expenditures.

As the court put it in Clapp v. Jaffrey (1953), “it is plain that every taxpayer of a town has a vital interest in and a right to the preservation of an orderly and lawful government regardless of whether his purse is immediately touched.” (2)

In Green v. Shaw (1974), nine members of the Portsmouth City Council had sought a judgement against the mayor and 291 municipal officials for numerous alleged violations of law that included the illegal expenditure of taxpayer funds. After making the initial complaint, six of the nine petitioners went off the council, so they brought the case to the court as taxpayers. (3)

“It is well settled in this State that plaintiffs, as taxpayers, have standing to seek redress for the unlawful acts of their public officials,” the court ruled in allowing the petition.

But in a 2010 case called Baer vs. New Hampshire Department of Education, the state Supreme Court summarily threw out a century and a half of established practice and its own legal precedents. It declared that ”taxpayer status, without an injury or an impairment of rights, is not sufficient to confer standing to bring a declaratory judgment action” under the state statute that had long authorized exactly what the court suddenly decided it no longer authorized. (4)

After Baer, legislators amended the statute to clarify that it allows taxpayer standing, but in 2014 the court ruled in Duncan v. State of New Hampshire, struck down that amendment, arguing that it violated Part II, Article 74 of the New Hampshire Constitution, which states that the court can issue advisory opinions to other branches of government. Though that provision doesn’t forbid the court from issuing those opinions to individuals, the court interpreted it as allowing opinions to be given only to the Legislature, governor and Executive Council. (5)

That interpretation, however, ignores the plain language of Part II, Article 4, which grants the Legislature the “full power and authority to erect and constitute judicatories and courts of record, or other courts, to beholden, in the name of the state, for the hearing, trying, and determining, all manner of crimes, offenses, pleas, processes, plaints, action, causes, matters and things whatsoever arising or happening within this state.…” (6)

The Legislature clearly has the “full power and authority” to “beholden” the courts for hearing “all manner of…things whatsoever….” That is not ambiguous. The Legislature can task the court with hearing any case, plea, action, etc.

Consistent with the Legislature’s constitutional authority, RSA 491:22 tasks the court with hearing taxpayer petitions for relief from illegal government acts. It states that “any taxpayer in the jurisdiction of the taxing district shall have standing to petition for relief under this section when it is alleged that the taxing district or any agency or authority thereof has engaged, or proposes to engage, in conduct that is unlawful or unauthorized, and in such a case the taxpayer shall not have to demonstrate that his or her personal rights were impaired or prejudiced.” (7)

RSA 491:22 is a remarkable statute. In it, legislators voluntarily checked their own power. They granted taxpayers a means of holding state and local government officials accountable should they break the law.

With the Baer and Duncan decisions, the New Hampshire Supreme Court eliminated a vital check on government power that had been used numerous times over the course of nearly1.5 centuries.

Just a few weeks ago, Hillsborough County Superior Court Judge Charles Temple cited the Duncan case in ruling that Nashua taxpayers didn’t have standing to challenge a city action that violated the tax cap. (8)

Legislators have proposed restoring the original understanding of taxpayer standing by passing a constitutional amendment, CACR 15. (9)

It would amend Part 1, Article 8 of the New Hampshire Constitution by adding the following language:

“The public also has a right to an orderly, lawful, and accountable government  Therefore, any individual taxpayer eligible to vote in the State shall have standing to petition the Superior Court to declare whether the State or political subdivision in which the taxpayer resides has spent, or has approved spending, public funds in violation of a law, ordinance, or constitutional provision.  In such a case, the taxpayer shall not have to demonstrate that his or her personal rights were impaired or prejudiced beyond his or her status as a taxpayer.  However, this right shall not apply when the challenged governmental action is the subject of a judicial or administrative decision from which there is a right of appeal by statute or otherwise by the parties to that proceeding.”

This clarifying language is not radical. It would restore the constitutional status quo that existed from 1863-2010 and gave taxpayers the ability to challenge illegal government expenditures.

Without a constitutional amendment to restore taxpayer standing, the public will have no recourse when the state or a local government spends money illegally. A vital check on government abuses of power will remain lost, and illegal spending will become more common as government officials learn that they can break the law with impunity.

Andrew Cline is president of the Josiah Bartlett Center for Public Policy.

 

Endnotes

  1. Manchester City Charter, Section 9:03 (e): “Conflict of interest.  No city official shall participate in the decision-making process of any matter in which the official or a member of the official’s immediate family has a direct personal or financial interest. Any official who believes such an interest exists shall disclose such interest and shall not participate in the matter further.”
  2. Clapp v. Jaffrey, N.H. Supreme Court, Oct. 9, 1952.
  3. Green v. Shaw, N.H. Supreme Court, April 30, 1974
  4. Baer v. New Hampshire Department of Education, Sept., 24, 2010.
  5. Duncan v. The State of New Hampshire, Aug. 24, 2014.
  6. “How the Supreme Court got the Duncan case wrong and eliminated taxpayer suits — part 2,” New Hampshire Trial Bar News, Fall 2017.
  7. RSA 491:22
  8. “Judge declares plaintiffs in Nashua spending cap suit have no standing,” New Hampshire Union Leader, Feb. 13, 2018.
  9. CACR 15, 2018 Session, New Hampshire General Court.
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