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The Least Efficient State in the Nation

By Charlie Arlinghaus
December 14, 2011
As originally published in the New Hampshire Union Leader

You would think that the most significant budget cut in modern history would have squeezed any potential waste and inefficiency from state government. You would be wrong. Despite a roughly 11% actual cut to the state budget, New Hampshire’s government remains a model of inefficiency. Personal use of state vehicles is the poster child our homegrown inefficiency.

Three years ago, The Pew Center for the States ranked New Hampshire dead last in the country in their triennial ranking of the states in government management. This wasn’t a complete shock. Just three years earlier, while there were worse states (California, for example), we were in the bottom five.

This wasn’t based on hostility toward frugal government. After all, in both surveys the State of Utah, a state with spending similar to ours, ranked number one.

Certainly the budget pressure has forced some departments of state government to eliminate inefficiency where they can. But the report on the state’s fleet management suggests a culture that could use some work.

My colleague Grant Bosse is in the middle of a detailed “fleet week” of stories on the personal use of state vehicles. The preliminary findings are difficult to believe.

State agencies must report vehicles with more than 15% of their mileage used for personal reasons (“non-business usage”). On those few hundred vehicles alone, state officials drove more than 1.5 million miles for personal use on the taxpayer dime.

There are some theories for the odd case or two of say a a bridge inspector taking a car home at night because his first inspection the next morning would make it inefficient to drive back to Concord and then pass his house again on his way to Bridge Number One.

That’s very sensible and very rare. According to official state records, some cars are driven as much as 70% of the time for personal use and the records suggest it is largely the case of a commissioner using a state vehicle issued to him and driving home every night. Does your boss give you a car to drive back and forth to work or do you have a job like the rest of us where they expect that going home at night is your responsibility?

In one relatively bizarre case, the car is driven 60% of the time for personal use and is garaged at night in Bethel, Maine. Why Bethel? That’s where the guy lives. He manages a ski area for us so maybe someone can explain to me how it makes any kind of sense for him to take a taxpayer-supported state vehicle home every night. I’m sorry he lives in Maine but why am I taxed so he can drive a state-owned Chevy Impala home every night instead of buying a car like the rest of us?

By the way, not every commissioner gets a car as a perk of the job. While the most egregious offenders tend to be commissioners or other managers, quite a few commissioners don’t appear on the list.

Oddly, the outrage over this practice does not seem to extend to the supposedly frugal legislature. Personal usage over 15% has to be reported to the legislative fiscal committee but at a meeting where at least some of these outrages were reported, legislators voted to make it easier to take your car home at night. The reporting threshold was raised to 20%. That seems to me the wrong response.

I don’t understand why any state vehicle is ever used for personal reasons — particularly for some commissioner to drive himself to and from work at our expense. That’s insane.

But I suspect it isn’t the only example of odd practices in state government that lead to our being ranked as having the least efficient state government in the country. Does anyone honestly think we’re less efficient than a state like New York? Of course not. But when a respectable organization ranks us last, we ought to at least take a look at some of the stupidest things we’re doing.

I’ve suggested in the past a new government efficiency commission. Have people from outside state government take a look inside state government. They’re less likely to say things like “but we always do that and it used to be worse.”

Some state lawmakers believe there is little inefficiency to be rooted out – this is New Hampshire after all. But that was before they knew we were paying some guy to drive a state car home to Maine every night.

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On Highways, The One Good Idea in Washington

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By Charlie Arlinghaus

Originally Published in the New Hampshire Union Leader

Odd as it may sound, in the next big budget battle the state government could learn a lesson from Washington in how to balance our books. In transportation spending, the state government regularly plans on spending much more than it has available. The state should reverse this practice and turn the highway plan from a wish list back into a plan.

The federal government may make significant cutbacks to the gas taxes it sends back to New Hampshire but who can blame them? Last year, like most years, the Highway Trust Fund took in $35 billion of revenue but authorized spending of $50 billion. That tells you just about all you need to know about how Washington works.

Transportation Committee Chairman John Mica has broken with tradition by planning on spending only what the fund collects in user fees (largely gas taxes) to balance this one corner of the federal budget. It’s a novel idea in Washington but one that we ought to import into New Hampshire.

New Hampshire currently plans its transportation spending under the old Washington model. Every two years, we authorize a new “Ten-Year Transportation Plan.” In this process, we have a long term plan for the infrastructure projects we can fund.

The difficulty with the so-called plan is that it is and has generally been a fiction. Over the years, the Ten Year Plan has morphed from an actual plan into a public relations document that bears little or no relation to reality. We know going into the plan that under current scenarios we have only so-much capacity. Yet project after project is added to the list to make people feel better even without any hope of paying for it.

It’s a game politicians play. They run around the state holding meetings and making people feel good. They pat selectmen and chambers of commerce on the back and say “we’ve added this important project to the Ten Year Plan.” Everybody feels good. We’re in the plan. He’s looking out for us. But back in Concord they snicker because it’s all a game.

There’s no money. The plan isn’t a real plan. Just a few years ago, the projects had swelled so much that it would have taken 30 years to fund the ten year plan. A former commissioner, Charles O’Leary, was brought in as interim commissioner to dish out the pain. He ruthlessly pared down the list so there were “only” 17 years of projects in the Ten Year Plan.

The Orwellian doublespeak part of the whole process is when people who want to raise user fees talk of a deficit in the plan as if simply planning on spending money you don’t have is a deficit. Because of the way the plan is developed, all we really know is that the wish list costs more than we have.

The problem is the process itself. The starting point should be available revenue under current budget scenarios (which includes the federal government sending $50 million less if they actually stop spending money they don’t have in this one tiny area of federal spending).

Highway spending in New Hampshire is not funded by general taxation. Our highway spending is supported entirely by user fees like the gas tax and turnpike tolls. So, if we’re developing a real plan, let’s start by figuring out how much money those fees will raise over the next ten years.

The second step is to figure out what those specific revenues will support and what they won’t support. The advantage is that we can figure out what gets left out and whether or not we can live with that. It helps put any proposal for new projects or new revenues in context.

As part of that process, we’ll have to make distinctions between new features and maintaining the current features we have. Our current roads require regular repaving so they don’t disintegrate. We have a red list of bridges in need of repair. Setting aside the money for prevention and maintenance should probably take priority over some of the more glamorous projects.

I love open road tolling where I can fly through with an EZ Pass and not be bothered to stop. However, the very large expense of such a new feature comes at the expense of fixing a lot of decrepit bridges. Is my convenience more important than maintaining our current infrastructure?

When the plan matches the revenue, we can evaluate proposals to raise or cut revenues more clearly. This is what we can fund with current revenue. He wants a toll increase to do these four things. That is a much more strategic evaluation than saying we just need some extra so I can tell everyone yes and put them on the wish list.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free market think tank based in Concord, New Hampshire.

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It is Time to Discipline The Politicians in Washington

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By Charlie Arlinghaus

July 2011

Originally Published in the New Hampshire Union Leader

Politicians are incapable of doing the right thing on their own. Without some sort of artificially imposed rules, they will continue along in their hapless way on the road to destroying the country. The federal budget is a problem that can only be solved by going back to the 1980s.

The broad outlines of the country’s fiscal policy are well known. Federal politicians almost never balance the budget. Instead they borrow money from our children (and, at this point, grandchildren) to pay for the things they want to spend money on today. There is not a realistic hope of ever paying off all the debt they are accumulating.

The federal budget has been balanced in only four of the last 50 years and then only nominally (actually they used the excess of social security contributions over payments to improve cashflow). The last four Clinton budgets achieved a nominal balance but none of the budgets since then have.

Under the president’s proposed budget, debt held by the public would double to 87% of the gross domestic product. Total debt is already about 100% of the size of the economy.

Since World War I, the country has had a statutory limit on the amount of debt allowed. In a debate over raising that limit for the eleventh time in the last ten years, politicians have been able to posture about the need for so-called spending cuts.

Like almost every other debate in Washington, the debate and cuts are fake. No one in Washington on either side of the aisle has actually proposed a spending cut. What they propose is spending a lot more money but not quite as much more as they were planning.

In New Hampshire, we use normal math. The state just cut spending by more than 10%. We passed a budget that is 10% lower than the prior two-years.

The federal government develops a “baseline” for official spending. They plan on increasing spending by 4.6% in each of the next ten years and spending a total of $46 trillion over those ten years. If they reduce the rate of increase to 4.1%, they will have, by their definition, cut spending by $2 trillion. By New Hampshire’s definition, what they call draconian cuts are an increase of 50% over ten years.

The problem is cultural. They don’t actually have to balance the budget so they don’t. The four years of quasi-balance in the 1990s came as a result of divided government (I hate your spending and you hate mine) and mild restraint during an economic boom.

The solution championed by our Sen. Kelly Ayotte is a balanced budget amendment to the constitution. I am generally reluctant to amend the constitution but this may be a case where the structure of government has failed us and has to be corrected. Regardless, an amendment will take years to go through the process and be ratified by the states.

More immediate action can and should be taken. The model for this action comes from the 1980s and former Sen. Warren Rudman. In the 1980s the annual budget deficit had grown to what was seen then as an obscene level. The annual budget deficit in 1983 was 6% of gross domestic product (in 2010, it was 9%).

Sen. Rudman along with Phil Gramm and Ernest Hollings recognized that the Congress needed to be prodded. They set up a path of lower deficit targets each year until the budget would be balanced in ten years. If Congress didn’t meet the target, an automatic sequester would cut every area of government by an equal amount to meet the target. The threat forced politicians of the 1980s to act and cut spending themselves.

From 1983-1989, the Gramm-Rudman bill lowered the annual deficit from 6% of GDP to 2.8%. Spending went up each year but grew slower than the economy as a whole. But Congress repealed the restraint in 1990.

A new Gramm-Rudman could be enacted by people who both support a constitutional amendment and those who don’t as part of a debt ceiling compromise. The advantage is it would go into effect immediately and force Congress to act. In addition, enforced deficit targets are policy neutral. The target must be met and the deficit gradually erased. The policy decisions to get there are still a matter for debate. Those who want to raise taxes can make that argument. Those who want to cut spending can make that argument.

An agreement over the debt ceiling issue will only be serious if it includes an enforcement mechanism not just feel good rhetoric. The model for action comes from right here in the Granite State. It worked when Sen. Rudman proposed it and will work again.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free market think tank based in Concord, New Hampshire

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Accounting Gimmicks Can’t Hide State’s Fiscal Disaster

Charles M. Arlinghaus

 October 6, 2010

Originally published in the New Hampshire Union Leader

After months of discussion about the exact size of the historic deficit we face next year, the news is filled suddenly with reports of a surplus. Did something change or are we just in the middle of election season? The short answer is things haven’t changed but the easiest distraction from bad news is to ignore it completely. The deficit is still huge. It will dominate the state’s financial future. And, paradoxically, we have a mid-budget surplus for the same reason we face a huge deficit.

New Hampshire has a two-year budget but sensibly mid-budget progress reports are announced. After weeks of discussion of the state’s dismal outlook, the governor eagerly announced this week that the state ended FY2010 in June with a $70M surplus. The public can be forgiven for being confused about how it is possible to have a surplus and also to be facing a huge deficit.

The current legislative leadership and administration will tell you they made the tough decisions and balanced everything through sound financial planning. Let’s look at what happened and decide for ourselves if it was sound decision making or if those decisions were bad for the long term stability of the state.

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.

All of that $597 million has to be replaced or the spending it paid for has to be cut. In addition, the state undertook $300 million of one-time spending reductions that will come back. For example, we suspended municipal aid but promised towns it was temporary and will come back next year. That’s how we can claim balance this year and have a deficit of historic proportions next year. Back in the day, this was referred to as robbing Peter to pay Paul and generally frowned upon.

Even among all the excess money, further games were played. The feds gave us $80 million each of FY10 and FY11 to prop up education spending. As the first fiscal year drew to a close in June, politicians fretted that the mid-budget number might be embarrassing so they fast-forwarded and spent $160 million in the first year and none in the second.

Spending it all in one year doesn’t have any impact on the state’s two-year budget but the quick infusion of $80 million turns the mid-year shortfall into a mid-year surplus just like magic.

A good sign that the nominal surplus is illusory is that no one has proposed using it to restock the rainy day fund. That’s simply because the surplus is a shell game not real.

For the future of our state, the real question is where we stand going forward. While people disagree about the exact number, no budget observer would disagree that the starting budget problem for next year is somewhere between $600 and $900 million.

When a politician starts talking to you about the supposed surplus, simply nod your head and humor them. Then politely turn the conversation to the current state of affairs. How big do they think the hole is for the next budget?

The current budget problems were covered up with borrowing and bailouts. Do they intend to borrow another $156 million for spending? Are they counting on another bailout from Washington or will they join the 37 other states that reduced their spending while New Hampshire increased its spending?

We have a huge problem in the future. Pretending it doesn’t exist won’t make it go away.

 

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