ROCK A BYE BUDGET: A LULLABY

By Jeb Bradley

The Democratic authors of New Hampshire’s budget and its current $300 million deficit have accelerated into full spin campaign mode. They are chanting across New Hampshire that tough decisions were made, the budget is balanced, taxes are low, and the economy will recover.

Democrats are hoping to lull voters to sleep until November so nobody realizes the budget cradle is about to fall.

What did the budget package do and what are its authors not telling you?

First and foremost, overall state spending increased dramatically from $10.4 to $11.5 billion, or 10.5% on top of a similar 11.2% increase in the previous budget.

Second, 38 taxes or fees were raised in this budget on top of 29 in the previous budget. Some of the most notable hikes were the LLC Income Tax on small business owners, the Camping Tax, higher Rooms and Meals Taxes, more cigarette taxes, a tax on gambling winnings, higher boat and car registration fees, and higher highway tolls. Many Democrats also tried to implement a capital gains tax, an estate tax, remove a key business tax credit, and raise the gasoline tax. They also shortchanged cities and towns by nearly $100 million which has the perverse impact of raising homeowner’s property taxes. The LLC and Camping Tax proved so toxic to the NH economy even those who proposed them without a public hearing, capitulated and joined Republicans in repealing them.

Third, this budget relies on unprecedented one-time money which according to the non-partisan Legislative Budget Assistant approaches $800 million. These one-time dollars include unspecified sale of state assets, unsustainable amounts of abnormal borrowing, and federal stimulus funds exceedingly unlikely to ever be replicated. In fact, $48 million federal dollars that New Hampshire budget authors relied upon to fill the current $300 million hole has been tabled by Congress.

Fourth, due to one-time money the next budget confronts a much more daunting deficit. Having already voted for and implemented 67 separate tax and fee hikes in the current and previous budgets and having tried to pass several more notable tax hikes, it’s no wonder why Democrats are trying to lull voters to sleep.

If Democrats control the Legislature in 2011, voters can expect they will have the Tax-Man on speed dial. Facing unprecedented budget deficits, they are likely to call for income and sales taxes – perhaps both.

With 50,000 of our neighbors recently unemployed in New Hampshire the stakes for economic recovery in November could not be higher. The key question for voters: does New Hampshire succumb to Democrat’s yearning for income and sales taxes? Or do we restructure and shrink state government to make it less costly?

Voters deserve choices. So what might less costly government involve.

According to the Kaiser Family Foundation, New Hampshire has the 10th most costly Medicaid system in the nation, 38% above the national average. Implementing managed care as many other states have – Blue and Red – and reducing costs to the national average, could save nearly $300 million. Our current fee for service Medicaid structure encourages over-utilization. States that have implemented managed care have saved money and maintained quality. It can be done here too.

Legislatively mandated changes to education funding will cost state taxpayers $140 million in the next budget. But 123 communities will lose funds and the statewide property tax will return with vengeance for 42 communities. Maintaining the existing formula saves $140 million until a Constitutional Amendment that allows targeted state aid to communities most in need can finally be presented to voters.

Budget reform is long overdue. Currently department heads must submit budget proposals which maintain existing services – a built-in prescription for ever-more costly government. The law should be changed to require department heads to also propose a 5% budget reduction so that the Legislature can set priorities and achieve savings.

With a $7 billion unfunded liability in our public employee retirement system, reform is also overdue. Taxpayers can no longer shoulder the overwhelming burden of paying for retirement benefits most taxpayers can only dream about for themselves. Further we should look to states like Indiana to achieve significant savings in health care costs for public employees.

Other ideas for savings include consolidating human resource functions across departments, consolidating contracting for human service providers, and increased home confinement for non-violent offenders.

 Structural reforms are necessary to protect taxpayers including a line-item veto for governors and protection from frivolous legal challenges for voter approved local tax caps.

So let’s have this debate about the looming budget train wreck. It’s healthy to debate big ideas – higher taxes vs. shrinking government. Please remember, those humming the Rock A Bye Budget Lullaby also know the bough is breaking and when the cradle falls --- it will be right into taxpayer’s pockets.