piercing the budget

Fairness was in the eye of the beholder at the State House last Wednesday when the N.H. House and Senate grudgingly approved the 2010-11 budget. House Bills 1 and 2 contain the state’s general fund spending and revenue, respectively. Earning few cheers, the legislation has been called everything from a legitimate compromise doing the “least possible harm” to an illegal “dung heap.”

With demand for services up and revenue down, legislators faced a $500 million projected shortfall in the general fund, which comprises about one third of the state’s $11.6 billion biennial budget. The other two thirds come from federal funding, dedicated funds, and a host of one-time monies like the federal stimulus package. Use of short-term dollars is not new in the budget balancing act, but neither is criticism of the technique. Detractors say it fails to address a “structural deficit” that always leaves budget writers with problems.

In its final debates, the budget’s passage was attributed mostly for what it doesn’t do: No casinos will break ground next year, gasoline won’t come with a 15-cent-per-gallon fee, and a capital gains tax has been dodged, for now. Echoing the sentiments of many colleagues, Sen. Jacalyn Cilley (D-Barrington) said she voted for both bills only because “the most onerous taxes and fees” had been cleared from the table.

patchwork

Instead of implementing any major revenue sources, 33 smaller taxes and fees are expected to bring in $203 million in the next biennium. Among them are a new 10 percent tax on gambling winnings over $600, a 45-cent tax hike on cigarettes, doubling car and boat registration costs, and a new licensing fee for saltwater fishing. The rooms and meals tax, bumped from 8 to 9 percent, has also been expanded to include campgrounds.

“It sounds like we’re trying to raise revenue from the people we’re trying to help,” said Rep. John Hikel (R-Goffstown). He and others, including those who voted for the bills, predicted that these “nickels and dimes” would add up to dire consequences for many New Hampshire residents.

Others took exception to that charge, nonetheless lamenting that programs such as the state’s cancer plan are delayed and funding is weak for the Land and Community Heritage Investment Program. “We’re trying to help the people who are truly needy,” said Rep. Neal Kurk (R-Weare). By and large, he and others maintained, the budget continues to serve the people who need it most, and its burdens do not fall on the bulk of the population.

The Dept. of Revenue Administration expects to collect $15 million annually by closing what it calls a loophole giving LLC owners an exemption from the interest and dividends tax. Assured by the department that the 5 percent tax would be instituted fairly, the N.H. Business and Industry Association reversed its position and came out in support of the budget the day before the vote.

Sen. Jeb Bradley (R-Wolfeboro), however, took little comfort in the association’s change of heart. He argued that, especially considering the current economy, the budget’s burden should not fall on businesses. “When we’re in a recession, it’s small business that leads our nation out,” he said.

downsizing, downshifting

The state-employed workforce already faces a 5 percent downsize, and the new budget directs Gov. John Lynch to negotiate $25 million in additional cuts with the State Employees Union. Most rhetoric on the matter from the governor and Democratic leadership has focused on furloughs, not more layoffs.

More savings come from the state’s reduced contribution to municipal employee retirement accounts from 35 to 25 percent over two years. The estimated $27 million saved by the state will shift to towns. Communities also will receive less money from the state for catastrophic aid, tuition and transportation cost sharing, and dropout prevention.

“Who here would vote to increase the statewide property tax by 16 percent?” asked Sen. Theodore Gatsas (R-Manchester). He predicted that will be the result of “downshifting” these costs to communities.

Sen. Margaret Hassan (D-Exeter) challenged claims that deeper spending cuts could have avoided such repercussions. Any services cut by the state also would have to be picked up by cities and towns, she said.

Hassan also pointed to the state’s full funding of an adequate education and school building aid. She defended the choice to use federal and bonded money to achieve these goals.

lingering threads

Getting the budget balanced and passed is one thing, but keeping it balanced may be quite another, according to Rep. Kris Roberts (D-Keene).

Two years ago, he questioned the budget projections but took reassurances and voted for it anyway. He won’t be wrong again, he said. Roberts doesn’t trust that revenues will reach their estimations, and he speculates that urgent cuts will be left to the commission of the Department of Revenue Administration. In that case, he said, “the people won’t have a say.”
Some people are already speaking up through a lawsuit. The budget relies on $110 million of surplus funds from the N.H. Medical Malpractice Joint Underwriting Association. Policyholders who created that surplus with premium payments, however, say the insurance money is not the state’s to take, and they’ve brought their case to the courts.

“If anyone is pleased, I haven’t heard it,” said Sen. Harold Janeway (D-Webster). “It really wasn’t meant to please. It was the best we could do under the circumstances,” he said.

Sen. Bob Odell (R-Lempster) does not deny the budget’s systemic faults. “The next budget is going to be a tremendous challenge and problem. But we won’t do anything to avoid that if we don’t pass this today,” he said. Voting in favor of HB 1 and 2, Odell broke ranks with his fellow Republicans, passing the budget 13-11 in the Senate. They passed the House with a 19- and 18-vote margin, respectively.

Gov. Lynch is expected to sign House Bills 1 and 2 into law in time for them to take effect July 1.

Front Door Politics is a weekly legislative update for everyone affected by New Hampshire laws. An online learning center, additional reporting, and a blog subscription are available at www.frontdoorpolitics.com.