If you haven’t stocked up on toilet paper, hand sanitizer, disinfectant wipes or milk yet, good luck. By the time you read this, your local supermarket might well be out. At noon on Friday, the Bedford Market Basket had some scattered half gallons and a single gallon-jug of milk left. (It was chocolate, indicating poor judgment on someone’s part.)

Supermarket shelves are empty all over New Hampshire as Granite Staters raid stores for milk and various sanitizing products. It’s as if the state’s been sacked by obsessive-compulsive pirates with rickets. 

But it wasn’t pirates (alas). Shelves are empty because basic market price mechanisms did not kick in. 

When demand surges as it did this past week, price increases typically follow. Higher prices discourage hoarding and encourage suppliers to boost production. But supermarket executives know that if they discourage hoarding by raising prices, people will accuse them of “price gouging.” So they don’t raise prices. Predictably, shortages result. 

A Union Leader story that credited the shortage to “panic buying” featured a Hannaford sign taped to a bare shelf. The store “may have frequent out of stocks on many toilet paper products for the foreseeable future,” it warned.

Well, of course. When toilet paper costs exactly the same during a period of peak demand that it did the week before, buying more than you need comes with zero additional cost. You might as well buy a bunch now “just in case” because it’s the same price now as it was last week and it will be next month. 

A price increase would make some people think twice about buying more than they think they’ll need. That would leave more for people who have a greater immediate need. 

Unwilling to raise prices, stores have tried to discourage hoarding by imposing purchase limits. “There is a daily purchase limit on this item of 2 per customer,” read one sign at a local Hannaford on Friday. It sat on an empty shelf. Such limits are a form of rationing. They’re just not as good a form as price adjustments are. 

Shortages, by the way, are also a form of rationing. They’re just a really bad one.  

“Price gouging” can have different meanings. Raising the price when one has a monopoly on a good or service is one. Raising prices in a competitive market when demand surges is another. The second meaning is the misleading one. People equate the two, but they aren’t the same.

Studies done on gas price increases after hurricanes Katrina and Rita found that the prices were regular supply and demand fluctuations, not arbitrary impositions, as in the case of the monopolist. A 2007 price gouging study published in the Journal of Competition Law and Economics analyzed the impact on the economy if price gouging laws had been in effect after those two hurricanes. The authors estimated that “economic damages would have been increased by $1.5–2.9 billion during the two-month period of price increases.”

That’s because laws that ban “price gouging” are really just price caps. And price caps create shortages during periods when the market price otherwise would rise above the cap. 

Economist Milton Friedman made exactly this point when writing about the U.S. gas shortages in 1973. 

This week’s supermarket sell-outs are caused by the failure of prices to find their natural market equilibrium. If government forbade sellers from raising prices, the result would be the same. 

Thankfully, New Hampshire has no anti-price-gouging law to make shortages even worse.

The state’s first vaping tax took effect on January 1, just nine weeks ago. On Thursday, the House approved a bill to more than quadruple it. But the revenue is unlikely to be the bill’s biggest effect.

House Bill 1699 raises the tax on the liquid used for e-cigarette vaping to 40% of the wholesale price. The current rate is 8% for open systems (fill your own) and 30 cents per milliliter for closed systems (cartridges). 

On a 12-8 vote, the House Ways & Means Committee asserted that the increase was justified because of the potential negative health effects of nicotine contained in vaping liquid.

“The nicotine delivered by electronic cigarettes is a toxic addictive chemical derived from the tobacco plant,” Rep. Richard Ames, D-Jaffrey, wrote for the committee. “We know it is addictive. But we don’t yet fully understand the extent of the damage to vital human organs, particularly the lungs and heart, that may be caused by its inhalation through the vaping process. We don’t yet know its effect on the human brain, particularly its effect on the still developing brain of a young person.”

But nicotine researchers have repeatedly pointed out that nicotine should be treated as less harmful than tobacco smoking.

“We need to de-demonize nicotine,” Ann McNeill, professor of tobacco addiction at the Institute of Psychiatry, Psychology and Neuroscience at King’s College London, told Scientific American in 2015.

The reason is that switching from cigarette smoking to vaping produces dramatic reductions in health risks and has been associated with declines in tobacco use.

A study McNeil published in 2018 concluded that the health benefits of switching to e-cigarettes were so profound that e-cigarettes should be prescribed by doctors as smoking-cessation tools. 

“When people smoke tobacco cigarettes, they inhale a lethal mix of 7,000 smoke constituents, 70 of which are known to cause cancer. The constituents in tobacco smoke that cause the harm are either absent or at much lower levels… in e-cigarettes so we are confident that they are substantially less harmful than cigarette smoking,” McNeil told the BBC.

“People smoke for the nicotine — but contrary to what the vast majority believe, nicotine causes little if any of the harm. The toxic smoke is the culprit and is the overwhelming cause of all the tobacco-related disease and death.”

The health argument being used for HB 1669 perpetuates the misconception that there’s little difference in the health risk between tobacco smoking and vaping. 

In fact, there’s a huge difference, and a growing body of research shows that vaping helps smokers quit, leading to improved health outcomes. A study published in the New England Journal of Medicine last year found that e-cigarettes “were more effective for smoking cessation than nicotine-replacement therapy, when both products were accompanied by behavioral support.”

The presence of nicotine in vaping liquid plays a significant role in helping smokers make the switch from tobacco to less-harmful e-cigarettes. A 2016 National Institutes of Health study and a 2015 Society for Research in Nicotine and Tobacco study found that smokers preferred e-cigarettes with higher nicotine content, suggesting that e-cigarettes with higher levels of nicotine helped people quit smoking by offering a satisfying substitute for tobacco. E-cigarettes with lower nicotine levels were less effective. 

Were the state leaving people alone to make their own decisions, the health outcomes would be a matter of individual choice. But in this case legislators are attempting to use the tax code for the express purpose of changing people’s behavior.

That puts the government on the hook for the outcomes. Given the strong link between vaping and smoking cessation, any government effort to discourage vaping would likely lead directly to worse health outcomes for smokers. 

Because the research showing vaping to be an effective smoking cessation method is well publicized, skeptics might conclude that a more powerful motivation for such a tax would be the revenue. (As with nicotine, collecting and spending tax revenue can be habit forming.)

On public policy, New Hampshire should always beat Vermont, as a matter of principle. That goes double for the handling of money. The state that sends a self-proclaimed “socialist” to the U.S. Senate should never get to say it’s more responsible with a dollar.

New Hampshire has bragging rights here. The Granite State is 12th in the Mercatus Center’s ranking of states by fiscal condition. Maine is 34th, Vermont 39th, Massachusetts 47th. 

And yet there’s one area where New Hampshire and Vermont are uncomfortably close: the Pew Center’s national ranking of the best-funded state retirement systems. Both states are down in the 30s, with less than 70 percent of their pension liabilities funded. 

So Vermont officials might have watched approvingly on Wednesday when the House advanced a bill that would worsen the financial position of the New Hampshire Retirement System. 

Instead of edging the State Employee Retirement System closer to the point at which it might some day have enough money to pay what the state owes its retirees, House Bill 1205 would edge us slightly in the opposite direction.

The state’s retirement system ended the 2019 fiscal year 64.8% funded. The system hasn’t been above 70% funded since 2004. Vermont has two state retirement systems, one for state employees, which is just over 70% funded, and a separate system for teachers, which is funded at about 54%. Pew’s latest ranking (using 2017 data), puts Vermont at 64.3% funded.

By contrast, Maine is a Northern New England lighthouse beacon of frugality, with 82% of its obligations funded. 

HB 1205 would nudge New Hampshire downward by eliminating an existing 10% reduction in retiree benefits that kicks in for Group 1 employees (general government employees and teachers) at age 65. The bill would cost the retirement system $37 million, according to its fiscal note. It would cause a slight (less than half a percentage point) increase in government contributions to the system (that is, taxpayer contributions).

When the mandatory cut was passed into law in 1988, 65 was the Social Security retirement age. The age has since inched up to between 66 and 67 years for retirees born in 1938 or later, but state law has kept the pension reduction pegged to age 65.

As a technical update, one can see the logic behind HB 1205. But that logic doesn’t generate its own money. The bill includes no funding to pay for its increased cost.

It’s a $37 million “giveaway,” Rep. Carol McGuire said when speaking against the bill. 

McGuire wasn’t able to convince her colleagues to vote against the bill. But she did succeed in tabling a bigger one, HB 1341. That bill contains a lot of changes, the largest being that it would raise the contribution rate for a large chunk of Group II employees by changing the formula for calculating their pensions. Municipalities would be hit with a large, mandatory increase in their retirement contributions. 

The bill as originally drafted would have added $142 million in unfunded liabilities to the State Retirement System. An amended version on the House floor on Wednesday had no fiscal note, but legislators say it would cost less than the original. 

Supporters tried and failed to remove the bill from the table on Wednesday, so it remains in limbo for now.

Though New Hampshire’s general frugality has kept the state from issuing the sorts of lavish unfunded promises to state employees that have made jokes of the retirement systems in Connecticut, Illinois and New Jersey, most state pension funds are more fully funded than ours. 

Recent returns indicate that loading the system with more unfunded promises would be particularly risky this year. The retirement system’s rate of return on investment was only 5.7% last year, below the assumed 7.25% and well below the previous year’s 8.9%. That translates into a $229 million (32%) drop in investment income from 2018 to 2019.

The retirement system has a plan to move toward full funding over the next two decades, but it relies on hitting investment revenue targets. Consistently lower market returns, like last year’s, and adding large unfunded liabilities would throw off the plan.

The takeaway message from Gov. Chris Sununu’s State of the State address on Thursday was that New Hampshire, like comedian Larry The Cable Guy, gets her done.

The governor even said at the end of his address, “Let’s Get It Done.”

By solving problems through innovative, decentralized, low-cost methods, the state enables high levels of economic opportunity and growth, the governor said.

“Over the last year, New Hampshire families have benefited greatly from record levels of economic growth. Our focus on our workforce, while making high-paying, quality jobs available has paid enormous dividends.

“Business taxes are at their lowest this century, and more people are working than ever before. The model works — and it’s proven.”

We generally agree with that assessment of the New Hampshire model. But out of curiosity, we checked state economic data published in the state’s monthly New Hampshire Economic Outlook for this month, then compared it to the same report from February of 2017, the month after Gov. Sununu took office. These February issues report data from December of the previous year. We found that:

  • From December of 2016 to December of 2019, New Hampshire added 29,520 people to the labor force and 30,720 to the state’s employment rolls.
  • The number of unemployed individuals shrank by 1,210 persons, from 18,940 to 17,730.
  • New Hampshire’s unemployment rate fell from 2.8% to 2.6%.
  • Wage growth was up from an average wage of $890.46 to $939.21. That growth is lower than the rate of inflation as measured by the Consumer Price Index, but above the rate as measured by the Personal Consumption Expenditures method, which better accounts for the added value of improved consumer goods.

New Hampshire has experienced strong economic growth since the end of the last recession, and this growth has continued during Gov. Sununu’s tenure.

The governor can take credit for keeping business tax rates down and preventing numerous growth-harming taxes and regulations from becoming law during the last two legislative sessions. His defend-the-economy mindset has prevented the state government from reversing these positive economic trends.

Generally speaking, high business tax rates reduce, economic growth, opportunity and innovation.

A 2017 study by professors from Columbia, Duke and Harvard, for example, found that higher corporate tax rates led to lower corporate profits, which in turn led to lower domestic investment and, subsequently, lower economic growth.

And a 2018 study by economists from the University of Chicago and Harvard found that “taxation of both corporate and personal income negatively affects the quantity, quality, and location of innovation at the state level and the individual inventor and firm levels.”

Since taking office, the governor has focused a lot of his energy on protecting the economy from legislative proposals that would impeded growth, hiring, innovation and economic opportunity. That approach is working well for the state, which has hit record levels of employment in the past year and is, at long last, attracting young people again.

In other words, that approach is getting her done.

Nine days ago, you thought you woke up in a new year and a new decade. A fresh start! A chance to leave the past behind and venture into a bold new future of limitless possibilities!

Sorry, it’s Groundhog Day and you’re Bill Murray.

Welcome to Week 54 of 2019.

The Legislature opened its session on Wednesday by taking up bills that remain from the previous year, as is its custom. Even with hundreds of leftover bills awaiting disposal, a majority party can set the agenda and tone for a new year on the first days of a session.

The message coming from Concord this week was crystal clear: 2020 is going to be 2019 all over again.

The last legislative session was defined by its clashes between the governor and the Democratic majority in the Legislature over the imposition of new costs on employers and consumers, from business tax increases to energy price hikes to costly employer regulations such as mandatory paid leave and large minimum wage increases.

The House this week signaled that Democrats intend to make the 2020 elections about all of these same issues. They are determined to impose through the legislative process new financial burdens on employers and consumers.

Of course, they don’t view these issues this way. They would say they’re protecting Granite Staters from businesses that refuse to do the morally right thing. That philosophical difference drives these two competing agendas and will shape the 2020 state elections.

Last year, Gov. Chris Sununu famously vetoed 57 bills, including many of the Democrats’ top priorities. This week was a parade of zombie bills killed by the governor but reincarnated and sent staggering back out by legislators.

The House this week passed a mandatory paid family leave plan like the one Gov. Sununu vetoed last year. It was no accident that paid family leave was Senate Bill 1 in 2019 and a top item for the opening of the 2020 session.

Like last year’s plan, this one would create a government-run family leave program and pay for it by imposing a tax of 0.5% on wages. Also like last year, the Department of Employment Security estimated the cost to be $168.6 million a year.

Also returning from the dead was the minimum wage increase. But this time the zombie returned with new weaponry. The bill passed this week would more than double the state minimum wage to $15 an hour. The version that passed last year raised it to $12 an hour.

A representative who argued for letting the market decide wage rates was shouted down and the Speaker of the House had to restore order. The prevailing view was that greedy employers must be made to pay morally correct wages.

But the public sector pays less than $15 an hour too. The bill’s fiscal note states that 224 state employees currently earn less than $12 an hour, the minimum that would kick in this year were the bill to become law. By forcing government wages higher, the bill would put upward pressure on taxes.

The bill goes even further by allowing municipalities to establish minimums higher than the state’s. (Look out, Portsmouth and Hanover restaurants.) Naturally, no city could set a minimum lower than the one passed by the Legislature. So Berlin, Claremont, and Charlestown would have to find the money to pay all of their employees $15 an hour too. Those greedy plutocrats.

Imposing more employer costs that would be passed on to consumers, the House approved a plastic bag ban, also a zombie from last year, though not one vetoed by the governor. The bill’s summary states: “This bill requires businesses to charge customers for single-use bags.”

But it does more. It even regulates the composition of paper bags that might be offered in place of plastic ones. “Paper bags shall be made of recycled paper defined as 100 percent recyclable containing a minimum of 40 percent post-consumer recycled materials,” the bill asserts. “The bag shall be visibly labeled as ‘made from recycled materials’ and ‘recyclable and reusable.’”

Legislators who made a big show of trying to subsidize New Hampshire’s forest products industry last year just passed a bill to reduce demand for paper bags made with fresh-cut trees. Politics is strange.

It’s 2020 (allegedly), and this is how the legislative session began, with zombie bills and rehashed debates from 2019. It’s not likely to change much between now and November. So cue up Old Town Road and put on your House Stark T-shirt. This session is going to feel like a remake no one asked for but studios just couldn’t resist forcing on everyone.

The Legislature opens its 2020 session on Wednesday, and among the bills recommended out of committee for passage that day is a proposal to protect Granite Staters from the cruel predations of… art therapists?

Really.

This urgent action wasn’t mentioned among the Legislature’s 2020 priorities, yet here is House Bill 546. Why?

Well, in every legislative session, a small group of art therapists comes to the Legislature with an urgent request: Please outlaw our competition.

They don’t put it quite that way, of course. The messaging is always about licensing being needed for insurance coverage, or the danger posed by poorly trained art therapists. Yet the bills always define art therapy as broadly as possible and include criminal penalties for its unlicensed practice. Classic rent seeking.

Usually, common sense prevails and the bill dies. Committee revisions to the latest version of this anti-competitive legislation might allow it to pass.

New Hampshire does not license art therapy as a separate therapeutic practice. In fact, only eight states do, according to the American Art Therapy Association. Art therapists who have advanced degrees, and sometimes licenses from another state, have for years argued that artists and therapists who blend art instruction with even a small dose of therapeutic practices are a danger to the public and must be stopped.

Never mind that art has been considered therapeutic since cave men started scratching on rocks, or that the practice known as art therapy was invented by an artist, not a licensed therapist.

Art therapists who hold advanced degrees and out-of-state licenses want the state to require that anyone who offers “art therapy” services… hold an advanced degree and a state license.

See how this works?

Currently, licensed therapists in New Hampshire can incorporate art into therapy sessions without having to spend several more years in school to obtain a separate art therapy degree.

For example, a child therapist might have a child express his or her feelings by drawing pictures. Children don’t have the biggest vocabularies, so this can be a great way to help children communicate complicated emotions.

Therapists are not alone in using art to help people deal with emotional or physical issues. Art instructors routinely help people express previously unarticulated emotions through the creation of art. Museums even offer programs that, while not conducted by licensed therapists, are therapeutic in nature.

For example, the Currier Museum of Art’s “Art of Hope” program “provides support for loved ones whose family members suffer from substance use disorder.”

Under House Bill 546, it would be illegal for anyone to offer “art therapy” services unless the instructor has “a masters or doctoral degree from an accredited college or university in a program in art therapy….”

The bill contains an exemption for art teachers who do not present themselves as therapists. But under the definitions in the bill, any presentation that an art instruction program is therapeutic in nature could be construed to run afoul of the law.

Included in the bill’s definitions of art therapy is:

“Using the process and products of art creation to facilitate clients’ exploration of inner fears, conflicts, and core issues with the goal of improving physical, mental, and emotional functioning and well-being.”

Art instructors have been doing this for centuries. Without a license. Suddenly, in 2020, it’s a danger to the public?

There’s no evidence that unlicensed art therapists are inflicting psychological damage on Granite Staters. In fact, as mentioned earlier, only eight states have a distinct art therapy license and only five cover the practice under another license.

But there’s plenty of anecdotal evidence that the absence of an oppressive licensing regime has allowed many people to find services that have helped them through difficult times.

Though presented as a public health measure, this bill is simply an effort to restrict competition. It serves a small special interest, not the public interest.

Artificially reducing the supply of a valuable service by writing unnecessary restrictions into law would be an odd way to start this new decade.

Last year’s U.S. Supreme Court ruling in Janus v. AFCSME triggered a 5.9% reduction in New Hampshire state employee union membership, state payroll data obtained by the Josiah Bartlett Center for Public Policy show. The sudden drop reversed a years-long trend of rising union enrollment in state government.

Prior to the Janus decision, New Hampshire was one of 22 states plus the District of Columbia that forced non-union employees to pay union fees. Janus forbade states from collecting those fees.

New Hampshire halted this “agency fee” collection immediately after the ruling last June. In the following 12 months, state employee unions collectively lost 420 members, or 5.9% of their enrollment.

The vast majority of those losses (92.4%, or 388 members) came from the State Employees Association, according to state payroll figures.

Because the state withholds union dues from paychecks, union membership is trackable through payroll records. Those records show that in the previous five years, state employee unions had grown steadily, adding an average of 184 members a year.

Twelve months later, payroll records show that the Janus decision wiped out nearly half of those gains in just one year. The Josiah Bartlett Center obtained the data through right-to-know requests.

The inescapable conclusion is that hundreds of New Hampshire state employees had been joining labor unions only because they were being forced to hand over their money whether they joined or not.

Finally free to decide for themselves whether to support a union, they’ve chosen, along with more than 2,000 other state employees, to keep their money.

“Agency fees” and free speech

“Agency fees” were withheld from state employee paychecks and given directly to the unions on the theory that collective bargaining agreements benefitted all employees.

In Janus v. AFCSME, the Supreme Court held that state government “extraction of agency fees from nonconsenting (sic) public-sector employees violates the First Amendment.”

The court concluded that agency fee collection “violates the free speech rights of nonmem­bers by compelling them to subsidize private speech on matters of substantial public concern.”

As of the date of the Janus decision, 2,161 non-union N.H. state employees had been compelled to pay $1,012,055.83 in agency fees during the previous 12 months, payroll data the Josiah Bartlett Center obtained last year showed.

Instead of seeing those employees rush to join, unions lost withholdings from another 420 employees the next year. The figures show that agency-fee payers were not the only ones bankrolling unions reluctantly, in violation of their First Amendment rights. So were hundreds of union members.

The Janus drop

To see whether the decline in membership since the Janus ruling was an outlier, we obtained the union membership figures for the five years leading up to the court’s decision.

Conveniently, the Janus decision was handed down on the final week of New Hampshire’s fiscal year, which gave us the ability to look at union membership at the end of each state budget year.

State payroll data show a steady increase in union dues withholdings from 2013-2018. During those five years, state employee unions gained 922 dues-paying members. In no year did union membership drop.

Then, in the fiscal year following the Janus decision, state employee unions lost 422 dues-paying members, or 45% of the enrollment they had gained during the previous five years.

The financial losses that accompanied this membership decline appear to be small, however. According to state figures, unions lost only $5,388.50 for the year.

A drop, not a disaster

The drop in membership is not the financial catastrophe some advocates on both sides had predicted. Long-term effects won’t be known for years, but the immediate effect, though notable, is less dramatic than many had anticipated.

The largest financial losses came with the abolition of agency fees. New Hampshire state employee unions lost more than $1 million a year in agency fee collections from non-members after the Janus decision. But they managed to hold on to 94 percent of their members, losing only a few thousand dollars in membership dues.

The payroll data suggest that most state employees find value in union membership while a smaller portion either doesn’t want to associate with a union or has concluded that the costs outweigh the benefits.

The state payroll data spreadsheets can be viewed here: Union Dues 2013 Through 2019 Web.

A pdf of this brief can be downloaded here: Janus Effect Union On NH Union Membership.

Throughout 2019’s prolonged budget debate, two competing claims dominated the dispute over business tax rates. This week’s budget deal confirms conclusively which side was correct.

For months, Democratic leaders in the Legislature claimed that their budget — the one Gov. Chris Sununu vetoed — “stabilized” business tax rates. The budget did not raise taxes, they said repeatedly, but maintained existing tax rates and only eliminated tax cuts that were scheduled to take place in the future.

Republican Gov. Chris Sununu countered by accusing legislators of raising both the 2019 business tax rates and the 2021 rates.

The budget compromise Gov. Sununu signed this week reveals the truth. Unlike the vetoed state budget, this one actually keeps business tax rates the same for 2019 and 2020. It confirms that legislative leaders were incorrect when they claimed that their previous budget did not raise taxes.

On Jan. 1, 2019, the Business Profits Tax rate dropped from 7.9 percent to 7.7 percent and the Business Enterprise Tax rate dropped from 0.675 percent to 0.6 percent.

The budget that Gov. Sununu vetoed raised those rates back to their 2018 levels of 7.9 percent and 0.75 percent. It did so immediately, not in the future. It further eliminated the reductions (to 7.5 percent and 0.5 percent) scheduled to take place in 2021.

The governor insisted that the 2019 tax rates remain intact. Legislators insisted that rates return to their 2018 levels. There seemed to be no middle ground. Until this week.

How did this budget bring the two sides to agreement?

It did so by keeping this year’s tax rates intact and using revenue targets to trigger future changes.

The compromise budget keeps this year’s rates at 7.7 percent and 0.6 percent. Legislative leaders do not call this a tax cut. That is an admission that their previous budget did, in fact, raise business tax rates in 2019, not just in the future.

Under the compromise, if total general and education fund revenue for the current state fiscal year neither rises nor falls by 6 percent or more, those tax rates remain in place through the next fiscal year.

That is, the rates remain stable if revenue remains stable. At last, the budget “stabilizes” business tax revenue.

However, if total revenue rises by 6 percent or more, business tax rates will fall to the rates they were already scheduled to hit in 2021: 7.5 percent and 0.5 percent.

If total revenue falls by 6 percent or more, business tax rates will automatically snap back to their 2018 levels of 7.9 percent and 0.675 percent. This is another admission that the vetoed budget raised, rather than stabilized, business tax rates.

In essence, each side is betting that the economy will turn in their political favor in the next year.

In this deal, Democrats seem to be taking the bigger risk. To get what they have spent the better part of this year advocating, they need the economy to tank.

They have insisted that “out-of-state corporations” are unfairly undertaxed and that the state desperately needs more revenue. To achieve both, they have advocated higher business tax rates. Yet they get those higher rates only if state revenue comes in more than $155.8 million below expectations.

(Revenues have fallen slightly so far this fiscal year, but not at a rate that would trigger the tax increase.)

Gov. Sununu, on the other hand, gets two additional years of stable, relatively low tax rates (2019 and 2020). In the third year, he gets either a continuation of those rates or an additional tax cut unless state revenues quickly crater.

Much has been made of Gov. Chris Sununu’s record number of vetoes in 2019.  Less has been made of the content of those bills.  

Media coverage of the governor’s vetoes has tended to skew toward the most contentious issues, such as voter identification and residency requirements or firearm regulations.  But more than half of the vetoes involved bills that can be expected to have a negative effect the state economy.  

A small and almost entirely overlooked subset of vetoes involved bills that would restrict citizens’ constitutionally protected free speech rights. 

As economic growth and free speech are issues for which the Josiah Bartlett Center for Public Policy advocates, we highlight in this brief the vetoed bills that would have a negative impact on both.     

Of the 55 bills that Gov. Sununu has vetoed, 28 (or 51 percent) were bills that would make New Hampshire less economically competitive through the imposition of new taxes, fees or regulations.  Three others would suppress constitutionally protected free speech rights.

Not every regulatory bill is on this list, however. For example, although it is a regulation on employers, it is unclear what economic effect Senate Bill 100, banning employers from inquiring about criminal histories on a job application, would have. Reducing recidivism and increasing the economic independence of people with criminal records would be positive outcomes. But these laudable goals have not been shown to follow from this type of legislation. Some research even suggests that such ban-the-box laws increase negative outcomes for law-abiding minority applicants. In his veto message, Gov. Sununu stated that the bill’s intended outcome is best pursued voluntarily. That is consistent with our general approach to economic regulation. Given the uncertainty clouding the outcomes of such legislation, we exclude SB 100 from this list.     

For readers following along at home, the 31 bills covered in this brief are outlined below. 

Vetoed bills that impose new taxes, fees, or economically costly regulations

House Bills 1 & 2, the state budget.  The Legislature’s budget spent nearly $500 million more than Gov. Sununu’s proposed budget, raised business taxes, imposed costly business regulations, and created a structural deficit that would require large spending cuts or tax increases in the future. 

House Bill 183, establishing microgrids and requiring electric utilities to buy base-load power from biomass facilities. This bill forces utilities to subsidize biomass plants.  The Public Utilities Commission estimated that the bill would impose above-market energy costs of $18 million on utility companies.  Utilities would pass those costs on to consumers. 

House Bill 211, banning employers from asking about salary history.  This ban began in Massachusetts in 2016 and is spreading nationwide.  Its intent was to weaken wage discrimination on the assumption that employers would pay people more if they were ignorant of their past history.  This may be a good practice for employers to adopt, but supporters and opponents both assume that the bill would force compensation cost increases for businesses. 

House Bill 292, expanding the insurance premium tax to include broker fees.  The Department of Insurance stated that the bill would increase tax revenue, but it could not say by how much.  This functions as a tax increase on insurers with no corresponding increase in services provided. 

House Bill 293, banning employers from checking applicants’ credit history.  This bill would ban most employers from using a person’s credit history in employment decisions.  However, it exempts banks, financial holding companies, government agencies, and numerous positions.  The exemptions are an acknowledgement that credit checks are valid for many positions and that disallowing them imposes costly risks on employers. 

House Bill 326, redefining “prime wetland” to include portions less than 50 feet wide.  Contractors and the state Department of Transportation expressed concerns over the bill’s vague language and its impact on development.  The House exempted state highways, but not other development.  The New Hampshire Association of Natural Resource Scientists opposed the bill, calling it too vague.  It is an unworkable, needless impediment to development.  

House Bill 365, expanding the size of solar and hydropower facilities to which electric utilities are forced to pay above-market rates for power.  This bill would make solar and hydro generators of up to 5 megawatts in size eligible for net metering, which was created for small, home-sized solar arrays.  It would compel utilities to pay about twice the current rate to those generators.  The costs, estimated at about $10 million a year, would be borne by ratepayers. 

House Bill 409, allowing municipalities to double the current $5 transportation improvement fee they charge for registered vehicles.  This is a 100 percent fee increase. 

House Bill 582, repealing the consumer rebate for the Regional Greenhouse Gas Initiative.   This bill would halt consumer rebates from the RGGI program, costing electricity ratepayers more than $5 million a year. 

House Bill 664, removing insurers from much of the auto repair coverage process.  This bill would force insurers to pay for any repair “to the extent the claimant’s vehicle is repaired in conformance with applicable manufacturer’s procedures.” That sounds harmless, but in effect it would prevent insurers from negotiating lower prices for many auto repairs, thus raising costs for consumers.  

Senate Bill 1, creating a state-run, tax-funded paid family and medical leave program.  This bill would impose a $168 million tax on businesses to fund a government entitlement program that would cost taxpayers more than $6 million a year to administer.  There is no evidence that employees want this benefit more than any other, and the governor proposed an alternative that would require no new state taxes.

Senate Bill 2, tripling state job training funds deducted from unemployment compensation tax revenues.  The bill would raise this funding from $2 million to $6 million a year and allow $600,000 of that to be spent on administration.  The state already spends millions on various job training initiatives.  By taking this money from the unemployment trust fund, it could trigger additional unemployment insurance tax payments in the future.  Legislative staff pegged the additional payments at $13 million in 2021 if the trust fund falls below its required reserves.

Senate Bill 10, raising the state minimum wage to $12 an hour.  This bill would force employers to pay higher wages to employees without corresponding increases in productivity.  It would function as a tax on hiring the lowest-skilled Granite Staters, reducing their job opportunities. 

Senate Bill 20, amending the youth employment laws and employment records and notification requirements for employers.  This bill would make employing minor teens more difficult, placing the first rung on the economic ladder out of reach for more people.  It would forbid employees from volunteering to work on their designated days off.  It would allow the state to force employers to keep employment record indefinitely, instead of for three years.

Senate Bill 72, repealing a requirement that the Public Utilities Commission grant utilities Renewable Energy Credits for the purchase of small-scale solar power.  The purpose of this bill is to force utilities to buy Renewable Energy Credits.  The PUC testified in committee that it would prefer to modify the formula it uses for granting credits rather than repealing the credit.  “Repealing the credit will cause ratepayers to pay more for RPS compliance” than the PUC’s proposal would. This bill would increase New Hampshire’s already high electricity prices. 

Senate Bill 74, raising the $25 fee on deeds and mortgages for funding the Land and Community Heritage Investment Program.  It would add $10 to the cost of recording a deed or mortgage. 

Senate Bill 99, changing the definition of gainful employment for workers compensation purposes.  This bill would force employers to make disability payments to people who can work, but who wind up taking a job that pays less than they earned in their last job. 

Senate Bill 140, allowing local school districts to deny students academic credit earned through State Board of Education-approved outside courses.  The Legislature last year passed a bill allowing students to earn high school graduation credits for approved courses outside of the public school system.  Businesses supported the program as a means of improving public education and job readiness.  This bill would cripple that alternative education initiative by authorizing school districts to deny credits already earned through the alternative courses. 

Senate Bill 146, eliminating the one-week waiting period before someone can receive unemployment benefits.  Forty-four states use this waiting period.  The Department of Employment Security estimated that this bill would trigger an additional $12 million in unemployment compensation tax payments in the first quarter of 2020 alone.  The department warned that in an economic downturn with high unemployment, this change could lead to a significant reduction of the unemployment trust fund. 

Senate Bill 148, regulating notifications public employees must be given regarding union membership.  This bill was intended to notify public employees of their constitutional right not to join a union and to inform them how much a union charges in dues.  The “constitutional right” language was removed and the bill became an attempt to codify in law rather than through contracts various union accommodations.  It would write into law that unions must have access to information employees might not wish to share, such as employees’ complete personal contact information, including cell phone numbers and personal email addresses.

Senate Bill 151, establishing administrative procedures for employers who fail to make payroll or obtain workers’ compensation coverage.  Current procedures give business owners notice that they might be in violation of the law, and they allow for a swift hearing.  This bill allows the state to force immediate work stoppages before a hearing, but suspends the stoppage pending the outcome of a hearing.  Violations of a work stoppage order would be a criminal offense.  It replaces a procedure that gives businesses the benefit of the doubt with an aggressively adversarial procedure that presumes guilt and imposes potentially fatal penalties. 

Senate Bill 167, creating a clean energy resource procurement commission and directly assessing only gas and electric distribution utilities to cover its expenses.  This bill creates a commission stacked heavily with renewable energy producers and advocates, tasks it with pursuing long-term contracts for renewable energy generation, and passes the costs on to an industry the commission aspires to destroy.  It also would push up energy rates. 

Senate Bill 168, increasing the amount of solar energy utilities are required to purchase by 900 percent.  By raising from 0.6 percent to 5.4 percent the percentage of a utility’s energy mix that has to come from solar power generators built after 2006, the bill intentionally creates a direct transfer of wealth from electricity ratepayers to solar energy companies.  The subsidy could tally more than $120 million by 2025, and $30 million a year after that, according to an analysis by the New England Ratepayers Association. 

Senate Bill 205, removing the requirement that systems benefits charge increases be approved by legislators.  Electricity consumers pay what the state calls a systems benefits charge each month to fund energy efficiency programs and assistance for low-income residents.  This bill allows the energy efficiency portion to be increased without legislative approval, effectively creating a tax that can be increased without being put to a vote of the people’s representatives.

Senate Bill 271, requiring prevailing wages on all state-funded public works projects.  This bill artificially inflates labor costs on public-sector, taxpayer-funded construction projects.

Senate Bill 275, requiring all state vehicles to be zero-emission vehicles by 2041.  The bill’s fiscal note estimates a $28 million price tag to rush the state to reach this artificial goal. 

Senate Bill 307, specifying the “color corrected temperature” of outdoor lightbulbs used by state agencies.  The bill states that “such luminaires have a color correlated temperature of 3,000 degrees Kelvin or less when initially installed or replaced….”  Though there is not likely to be an immediate cost, as the state already uses that standard, the bill needlessly writes this standard into law, making it hard to change in the future as technologies evolve. 

Vetoed bills that limit citizens’ free speech rights

Senate Bill 18, requiring that public employees give 30 days notice if they wish to stop the automatic deduction of union dues from their paychecks.  This bill is intended to weaken public employee free speech rights guaranteed under the First Amendment and upheld by the U.S. Supreme Court’s 2018 Janus ruling.  It would compel employees to continue paying union dues against their will for 30 days.  

Senate Bill 106, changing the definition of a political advocacy organization.  This bill is a deliberate attempt to suppress criticism of elected officials before an election.  It requires any organization that spends at least $2,500 on “communications that refer to a clearly identified candidate or candidates or the success or defeat of a measure or measures” to file as a political advocacy organization and disclose its donors.

Senate Bill 156, changing reporting requirements for political contributions from limited liability companies.  This bill would recategorize contributions from LLCs as contributions from individual LLC members.  The effect would be to discourage constitutionally protected rights to associate and engage in political speech.  It would carve out political activity as the one area of law where LLCs are not treated as a legal entity separate and distinct from its members. 

To download our full brief on these vetoed bills, use the pdf version here: Bartlett Brief — 56% Vetoed Bills

Dazzled by the allure of Hollywood, some New Hampshire legislators have spent years trying to create a state tax incentive program for the film production industry.  These efforts have died like a B-movie villain year after year, but they return from the grave at the start of each new session.  Research from other states shows that these incentives cost more than they bring in.  They are worse investments than Pauly Shore movies.

After expanding in the first decade of the 20th century, state financial incentives for the film industry suffered a nationwide retreat in the second decade as states abandoned them after seeing the terrible returns.  In this briefing paper, we show that New Hampshire legislators should forget these financial flops and focus instead on maintaining the state’s regime of low taxes for all businesses.

The state film production incentive highlight reel is a disaster:

  • A report from Massachusetts found that from 2006-2015 its program produced just 14 cents of new tax revenue per dollar spent on the program, only 34.3 percent of credit-eligible spending was in-state, and net generated in-state spending was less than the value of the tax credits.
  • A review of Rhode Island’s program concluded that, at best, it lost $1.8 million per year in tax revenue, and that it produced just 94 new film industry jobs in 13 years.
  • Georgia’s program, the most generous in the country, has spent more than $4 billion on production incentives over the last 10 years, but “the return on investment appears to be quite small,”  as each new full-time job in the industry has cost taxpayers at least $119,000.

Read the full the briefing paper here to see why New Hampshire should avoid these financial flops: Bartlett Brief – Film Production Incentives.