NH Sen Jeb Bradley - Making Tough Choices to Ensure A Strong Economic Future

By Jeb Bradley: June 25, 2011

On Wednesday, both the House and Senate passed a comprehensive two year budget that Governor Lynch has said he will not veto. Some have praised the budget’s fiscal responsibility while others have criticized the cuts it makes to services. From my vantage point, it is a budget that makes tough choices, establishes priorities, and makes long overdue reforms so that government services will be delivered in a more cost effective manner – all of which will enable NH’s competitiveness and future job growth.

Six months ago NH confronted a gaping $800 million projected budget gap. Despite a languishing economy, the previous two budgets had increased spending 23% from $9.36 billion to $11.5 billion. Prior budgets had relied on inflated revenue estimates that never materialized, borrowing for operating expenses, and one time federal stimulus dollars. Alarmingly, despite nearly 100 tax and fee increases, an $800 million gap loomed. Voters said enough last November.

The 2011 Legislature established two goals: NH would not raise taxes that would harm economic recovery and NH government would live within its means -- just as working families and small business owners have been forced to do in the current economic climate. Budget writers knew great caution was necessary in predicting future revenue and certainly the last six months have proven the wisdom of that caution as revenue has not met expectations. They also knew continued borrowing for operating expenses was unsustainable. Lastly, budget writers knew that with a $14 trillion dollar federal debt and trillion dollar deficits stretching as far as the eye can see -- federal largess was neither possible nor warranted.

Extraordinary tough choices had to be made and priorities established, which meant programs – many worthy -- were cut. Governor Lynch initially proposed significant reductions to hospitals for uncompensated care, cuts to programs that serve troubled youth, catastrophic aid for schools districts’ special education costs, Healthy Children, and to the Post Secondary Education Commission, as well as cuts to virtually every state agency except prisons. The Governor also proposed complete elimination of the 35% state assistance for cities and towns’ retirement costs which would have the effect of increasing property taxes by $85 million annually.

Governor Lynch also presumed that revenue growth would be a relatively healthy 3.5%. Unfortunately as winter turned into spring, revenue in the current budget was $42 million less than projected. Legislative budget writers had to make further spending reductions than those proposed by the Governor. NH has learned the hard way: spending that depends upon revenue that may never materialize is foolhardy.

When the budget reached the Senate, the chair of the Finance Committee, Chuck Morse, effectively established priorities. Senator Morse added funds back in to the budget for mental health programs, the developmentally disabled, Service Link, troubled youth, adoption initiatives, and catastrophic aid for special education. Morse proposed key reforms including allowing up to 600 inmates to be incarcerated at private prisons to create savings to pay for some of these adjustments. The Governor’s proposed elimination of retirement assistance to cities and towns was mitigated by pension reform legislation – benefitting hard pressed property taxpayers.

Given the significantly under-performing revenue, funding could not be restored for the University System or to hospitals. Some people have asked why then was the tobacco tax lowered and why were net-operating-loss provisions expanded. Supporters of the tobacco tax decrease believe there will be no net revenue loss as an increase in cross border sales will occur that will help small businesses. If there is a revenue loss, then the budget calls for the tax decrease to be removed in two years. The net-operating-loss provisions will only take effect in the next budget. These provisions allow business to better carry forward losses against future profits. This will improve New Hampshire’s business climate and has been an important priority for chambers of commerce across the state.

In total, spending has been reduced to $10.2 billion -- an 11% cut. Taxes have not been raised, borrowing for operating expenses has been eliminated, no federal bailouts have been assumed, and rosy revenue projections have been rejected. This budget does what small businesses, working families, and taxpayers have been doing for some time: making tough choices to live within their means.

While much has been written about the budget’s bottom line and the impact on particular programs, less discussed are the reforms that will enable state government to deliver services far more effectively and efficiently.

Medicaid – the largest cost item in our budget – will be delivered through managed care as a result of legislation I sponsored and Governor Lynch recently signed. Managed care will save millions without sacrificing quality. A new education funding formula maintains funding levels, holds communities harmless, eliminates donor towns, while mitigating large spending hikes in Concord. Bipartisan legislation I sponsored will curtail the practice of revenue auditors assessing what in essence is an income tax on the salaries small business owners pay themselves – a key reform to enhance NH’s competitiveness. I also sponsored bipartisan Shoreland Protection legislation which protects our shoreland while also simplifying the permitting process and helping homebuilders create jobs. Prison and retirement reforms will also clearly benefit taxpayers.

Voters sent a clear message last November – government had to live within its means and stop reaching ever further into taxpayers’ pockets. This budget makes the tough choices to do exactly that. By doing our job in the Legislature ending the climate of spending hikes, unsustainable borrowing, inflated revenue projections, and ever more tax and fee hikes; the stage is set for further job growth –and when job growth is sustained --- revenue will grow.

Tough choices, priorities, necessary reforms that will grow jobs -- or as President Kennedy said a rising tide that will lift all boats.

The 2011 House Republicans Did Exactly What They Promised

By Andrew Hemingway, chairman, Republican Liberty Caucus of New Hampshire

The Democrats want you to believe that last week’s rally at the State House reflects the majority opinion in New Hampshire. But now that the busloads of public union members have returned to our spendthrift neighboring states and the hundreds of in-state protesters have hopefully returned to their public service jobs, it’s time for a dose of reality.

During the last four years, New Hampshire Democrats not only spent all of your tax dollars; they also borrowed from your children and grandchildren to pay for regular operating expenses, and they relied on more than $700 million in federal taxpayer dollars through the so-called “stimulus package” to cushion public sector employees from the effects of the economy. Even with all of their borrowing and use of one-time funding, the Democrats still left a $47 million deficit in the current budget for the next Legislature to clean up.

Contrary to the idea that such spending might have actually “stimulated” some job growth, the private sector in New Hampshire lost thousands of jobs while Democrats were in office. Now, the Democratic faithful have the audacity to complain about some moderate reductions in public sector staffing and pay packages like it’s the end of the world? New Hampshire already employs more public sector employees per capita than the average U.S. state, according to the New Hampshire Center for Public Policy Studies. Would Democrats prefer we employ the most of any state?

In November, voters rejected the Democratic position that the state has a “revenue problem” and agreed with the Republican position that the state has a “spending problem.” They also agreed with a large group of new Republicans who reminded voters that the best way to create jobs is to cut taxes and fees and lift burdensome regulations so New Hampshire businesses can flourish on their own without government getting in the way.

Unlike past campaigns when politicians said one thing to voters then went another direction in office, the Republicans currently serving in the Legislature have historically done exactly what they said they were going to do. These House Republicans have given voters a balanced $10.3 billion budget for the next two years and they have balanced the current budget without raising taxes or fees, without any new borrowing and without passing any new burden down to the cities and towns of the state. I have no doubt that the silent majority of New Hampshire voters are quite pleased.

Most New Hampshire voters know that the House budget is a moderate and reasonable plan that finally asks public sector employees to live within the same reality as the people they serve. If you still have doubt, ask yourselves: How many private-sector employees do you know who have a pension program through their companies? It’s amazing the noise public sector employees are making because the Legislature has asked them to commit another 2 percent of their pay toward this generous system. And if you still have doubt, ask yourselves: How many private sector employees do you know who aren’t workers at-will? It’s amazing the noise public sector employees are making because the Legislature has asked them to negotiate new contracts without the unusual protection of their old contracts carrying on for years after they have expired.

Contrary to the rhetoric of the Democratic misinformation campaign, the House Republicans’ budget simply restores the balance of power to the people of New Hampshire and stands up to all of the self-serving special interest groups that have opposed such positive change in the past. I truly hope Senate Republicans can be as strong.

While House Republicans truly made some tough choices by cutting $742 million in their budget, it’s important to note that they also restored $150 million worth of spending that the governor had cut out from school building aid, catastrophic aid, special education and state contributions to local employees’ retirements. Perhaps local educators and other public employees should consider this generosity before they run out and shout slogans prepared for them by their union bosses?

New Hampshire should not be a state that shelters a few classes of citizens from the burden facing the rest of us. It’s time for the Democrats to stop complaining about the mess they created so Republicans can use the opportunity voters gave them to clean it up. It’s time for taxpayers to get a break so they can take some time to recover and rebuild the New Hampshire Advantage that the Democrats squandered. It’s also time for the silent majority to express a little appreciation to House Republicans for doing what they were sent to do. While they’re at it, I hope they send a little pressure toward Senate Republicans, who had better learn from their responsive counterparts in the House if they want to return to Concord in 2012. Voters are watching, but I, for one, am confidant that they like what is coming out of the House.

An Uneven Playing Field: The Disparate Impacts of Local Aid Cuts to NH Municipalities

By Todd Selig

In presenting his budget message in February, the Governor proposed several changes to the way the state provides financial assistance to New Hampshire’s cities, towns and school districts. That assistance, known collectively as local aid, takes many forms: public employee retirement costs, school construction, special education expenses, among others.

 

Cuts to local aid are often described as “downshifting,” or the pushing of costs to local taxpayers in an attempt to save money in the state budget. Since the only major revenue source available to cities and towns is the property tax, the shifting of state costs to municipalities often results in higher local property taxes, a trend that has been occurring for the past decade.

 

Given the intense financial pressures in drawing up the next state budget, some degree of downshifting in the next biennium is actively being discussed.  In a newly released report attached, An Uneven Playing Field: The Disparate Impacts of Local Aid Cuts to NH Municipalities, the New Hampshire Center for Public Policy Studies measures the various ways that cuts to local aid programs would be felt in communities across New Hampshire.    

 

The report includes a town by town and city by city list of aid to communities which may be very helpful to you in understanding budgetary impacts to the communities you cover.     

 

I am hopeful that you will review the Center's report to gain an understanding regarding the impacts of budgetary decisions at the state level for our towns, cities, and school districts and ultimately for local property tax payers.

Shameless Mismanagement Abounds

First the so-called “austerity” budget failed and then had to be fixed in a one-day Special Session.  What was discussed in that spectacle were increased taxes and fees previously rejected and the breaking of promises made to grow business in New Hampshire.  This so-called emergency fix, was the direct result of a failure to lead and manage by the administration.  Instead of making hard, but necessary decisions, the majority party opted for their tried and failed song of increase a tax on (this term, quite literally) everything.

As the TV commercial goes, but wait, there is more.  In their rush to tax and spend your dollars, the Administration of New Hampshire took an unprecedented step of immediately applying certain taxes.  That is correct, immediately, with no notice to the Department of Revenue, no notice to retailers, no notice to wholesalers - just tomorrow start paying a tax – and by the way, this taxes is hidden in a bill thick enough to keep a home warm all winter if burned.

In Ways and Means a so-called equity tax on non-smoke tobacco was proposed and, over the objections of many, passed.  That tax was to take place on July 1, meaning that those who collect the tax would have had a least a month to re-mark their product, re-program their check-out scanners, in short there would have been notice, which is only right.  A long time ago St. Thomas Aquinas, Patron Saint of Law Makers, stated that a law that is not published cannot be enforced.  That is fair, equitable and the reasonable process that should be expected of your legislators.

This administration, with a seemingly lack of sense of fairness, or of the rule of law, implemented, overnight, a tax in Section 45 of Special Session House Bill 1 (the fix a broken budget bill).  While I do not subscribe to chew or snuff, nor do I even like cigarettes, I do know right from wrong.  It was and is wrong for the Democrat controlled legislature to pass a bill that immediately imposes as tax, upon signature of the governor.  It is wrong for the Governor to sign such a bill.

Not only was it wrong on the basis of the edict from St. Thomas; it is wrong from a sense of decency and fair play.  It is wrong from an administrative point of view as well.  How can a tax collector be fair and even handed when the Governor forces the tax collector to immediately collect a tax businesses do not even know exists and have not been notified that they would be responsible for collecting from an unsuspecting public?

Our Democrat lead legislature and the Governor’s office did a disservice to the people of New Hampshire when they rammed through an incomplete, un-vetted and unreasonable tax law to fix yet another unreasonable and unsustainable budget bill.  The people of New Hampshire deserve better than this type of mismanagement.

                                                                           -30-  

Jordan Ulery

Hillsborough-27

Hudson, NH

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.