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Wednesday, December 31, 2008

These plans for tax hikes are just hot air


With a budget crisis of extraordinary proportions, there's a strong whiff of taxes in the air. If we're not careful, we'll find ourselves downwind of the latest taxing rage: flatulence. For some reason, the ill wind of gaseous emissions is very popular among tax-hungry lawmakers and a good symbol of all that's wrong with tax policy.

It's the kind of story you expect to see on April 1: "Farmers protest tax on bovine emissions." The government of New Zealand, caught in a frenzy of something or the other, proposed a tax on the gas emitted by grazing livestock. The government found that livestock were the source of 90 percent of the country's methane emissions. Methane is considered to have 23 times the atmospheric warming potential of carbon dioxide, which New Hampshire has begun regulating. New Zealand's methane solution was the flatulence tax.

In New Zealand, the tax proposal created a huge stink and then died. Estonia, home of the flat tax, added a flatulence tax earlier this year. It, too, was quickly repealed. Then earlier this month, the Environmental Protection Agency turned out to be exploring the tax as one important way to reduce cow flatulence. I swear I'm not making this up.

This is all very silly, but there is a serious point to be made about the abuse of tax policy. Apparently there are some clean air concerns about methane. According to the Department of Energy, livestock accounts for about 30 percent of the 690 million tons of methane emissions, largely through flatulence.

There is a great deal of research into improving cow digestion. Argentine researchers have cows wandering around wearing giant balloons the size of their body to capture gas. They have their hopes pinned on alfalfa to quell the bovine intestine. Welsh researchers are equally optimistic about garlic. Not that the tax would have been any lower for cows with good digestion.

Increasingly, advocates with unmet policy goals look to achieve those goals through tax policy. The more sophisticated have come up with fancy names to support their cause. What you and I might call "nanny-state taxation," they call Pigouvian after an economist who believed taxes could be used to recover the social costs of whatever the observer determines is bad.

Pigouvian is the currently popular term for those economists who see all sorts of virtue in raising the gas taxes I have to pay. But it's just the latest term for the long-standing trend toward a tax nanny.

New York's newly proposed soft drink tax is called an obesity tax to make it seem more health conscious. They don't really tax people on the basis of their body-mass index, but this way it doesn't just seem like they're going after money to fix their deficit. Voters in Maine wanted to enjoy their root beer so they repealed their soft drink tax last year by a 2-1 margin.

Politicians out West want to encourage us not to use bags at the grocery store, so they have a grocery bag fee. It doesn't apply to the same bag if you use it at the hardware store, though. New Hampshire proposed a disposable diaper tax 20 years ago, a candy bar tax two years back, and who can forget the dreaded balloon tax?

Politicians wish more people chose to use recycled shopping bags or cloth diapers, stop eating junk food or stop letting go of their balloons. They finally figured out that taxation is a way to allow them to control your behavior and raise money at the same time.

The other problem with nanny taxation is that it's regressive. The rich shopper can afford dozens of grocery bags, lots of diapers, another few dollars when he fills up at the tank and high-priced root beer. The people struggling in the current economy (or any economy) aren't cutting coupons so they can send the savings on to the government.

In New Hampshire, we raised cigarette taxes three times in the last four years. Everyone claims to feel bad that it hurts poor people a lot worse than rich people, but we "need" the money. And after all, they shouldn't smoke anyway.

In the current economic recession, we can all agree that raising taxes on struggling businesses will hurt. Raising any tax on consumers trying to scrape by is equally bad. Let's not make it worse by pretending we're doing it to help them or it's for a noble cause. Instead, let them keep their own money and behave as they wish.

As for the struggling farmer and his poor cow, don't tax his livelihood and don't make poor Bessie wear a giant collection balloon. Please. Just buy him some alfalfa.

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

Tuesday, December 30, 2008

UL Blasts Rail Project

The Union Leader editorializes against using the latest federal stimulus package as a way for rail enthusiasts to pay for their pet project:
It is typical of the most passionate rail enthusiasts to be blind to the arguments against massive taxpayer support for their pet project. Here are a few excellent reasons why dumping that kind of money into commuter rail isn't a great idea.

One, the project's estimated cost is $300 million. That means it will almost certainly cost $450 million or more and take years to complete. How will a project of that size and scope get done in time to "stimulate" the economy?

Two, it won't stimulate New Hampshire's economy nearly as much as a wider Interstate 93 will. Wider, safer, speedier highways bring more tourists. Who is going to ride the train from Boston to Nashua, then rent a car to go the rest of the way to the lakes or to ski slopes?

Three, who is going to pay to operate the thing, and how? Even if Obama the Benevolent handed us half a billion for the infrastructure, trains don't run themselves for free, and ticket prices cannot go high enough to cover the cost. We'll have a pretty new train sitting in the station unless we raise taxes to pay for it to choo-choo along the track.

Spending the Obama Money

Transportation Commissioner George Campbell didn't get everything he wanted for Christmas, but he making a list for someone with deeper pockets than Santa; the Federal Government:
"It's certainly the best opportunity that's come around in decades, and frankly, it's the best opportunity for infrastructure funding that's come around since the 1950s," said Commissioner George Campbell, who has been compiling a list of projects that could benefit from federal funding as part of Obama's stimulus package. The biggest item by far is more than $300 million to upgrade and double-track rail lines linking Manchester to Lowell, Mass.

Campbell is looking to spend hundreds of millions of dollars that may be coming in a new stimulus package being put together by the incoming Obama Administration. Trains have long been the pet project of "infrastructure" advocates, since most rail lines need far higher per-passenger subsidies than either roads or air travel. Campbell is also looking at ways to pour the anticipated stimulus money into New Hampshire roads:
Campbell's list also includes more than $220 million in "shovel-ready" highway projects that could be set to go within six months, which may be the standard for the stimulus package. On that list, the top priorities are $30 million for the Interstate 93 widening project south of Manchester, $4.5 million to replace a bridge on Route 4 in Lebanon and $12.5 million for the Manchester Boston Regional Airport access road.

The Union Leader article includes nearly $700 million in "Wish Lists" at a time when the state is running historic deficits in its General Fund, Education Fund, Highway Fund, and Pension Plan. Nor does anyone in the article explain how they would like this massive stimulus to be paid for. Presumably, it would just get tacked onto the national debt.

It seems that our state government, facing tight budgets after years of free spending, are having a hard time breaking its big-spending habit. Now, it's looking to Washington for its latest fix.

Wednesday, December 24, 2008

NH needs to set budget priorities


Traditional approaches to solving the state budget deficit won't work. The governor and Legislature should adopt a priority-based governing approach that will create a path to fiscal balance based on a strategic set of priorities.

The traditional approach to a state budget is codified in our state law, but it makes budgeting in lean times much harder. Our law doesn't require state department heads to prepare the budget the governor asks them to. On the contrary, they start the process just before an election when, theoretically, we aren't sure who might win and therefore which set of priorities should guide them.

The department heads are required by law to prepare what's called a maintenance budget, which is essentially what we did last year and what it would cost if we didn't do anything differently. These first budgets are usually called the agency requests or "agency wish lists" because they often include things deleted from previous budgets and are always pared down by governors as a public sign of their frugality.

So by this traditional process we merely start with the status quo and adjust. Any program funded one time starts with the default presumption of future funding. Any new initiative must find some specific older function to displace.

But that isn't how anyone functions outside of government. Most people, businesses and organizations decide what to do according to a priority list. Mortgage, utilities, groceries are of the highest priority and are funded first. We fund projects in a priority order. If we have to pare back, we fund the lowest priority items last.

In the last recession, Gary Locke, the Democratic governor of Washington state, faced a budget shortfall in the billions of dollars. Rather than nibble and tweak at the existing budget, he established a priorities-based budgeting model to find a better way to balance the budget.

The priorities model doesn't presume an ideology. It was established by a liberal governor and has been championed by a free-market think tank, the Evergreen Freedom Foundation.

Essentially what Gov. Locke did (and what Gov. Lynch could do) was to establish a set of core priorities for government action. Funding those core priorities becomes the first claim on available tax revenue. Programs of a lesser priority are cut first or receive funding last. The highest priorities receive funding first.

On some level, we all do this in our heads. Obviously aid to people with developmental disabilities is a substantially higher priority than running a ski area. It would be foolish to balance the budget by cutting each of those programs 10 percent as if they were of equal weight.

Priority-based budgeting formalizes that internal process. If we have the money, we fund the first eight items on our list. If the economy picks up and revenues come in, we fund nine and 10. An increased slowdown and we drop item eight.

Setting priorities won't eliminate the power of the Legislature and governor to make decisions. Different people will set different priorities, rank some things much higher than others might.

A priority model can also solve Walter Peterson's problem. In an interview in March, former Gov. Peterson said that some department heads made helpful suggestions when he asked them for areas to cut. But others would simply ax the most popular programs in their departments, confident the Legislature would immediately restore such high-priority programs.

New Hampshire's system of semi-independent department heads makes it possible to play that kind of game with the nominal head of government. Requiring each department to develop a list of priorities among all of its programs gives the governor an added management tool.

A priorities of government model is a more transparent outgrowth of the zero-based budgeting Gov. Lynch talks about. The governor wants all department heads to build their budget from zero. If they really do start at zero, they are naturally making assumptions about which programs are more and less important as they build their budget.

This kind of change doesn't require a constitutional amendment. It doesn't even require a law change. It just requires the governor to tell the commissioners and then to share the information with the Legislature and the rest of us.

The traditional approach to nibbling and tweaking whatever we happened to do in the previous budget may be enshrined in law, but it is archaic. Governing is about setting priorities. The people we elect establish the current set of priorities and then fund programs according to those priorities. A priority-based budget model will make the debate more constructive and the budget decisions more transparent.

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

Tuesday, December 23, 2008

Congressional Vets Group Wastes Taxpayer Money

The Washington Post reports on a recent Senate investigation showing that a group created by Congress to help veterans start small businesses has wasted 91% of its money on unreleated expenses:

A nonprofit veterans group has "squandered" hundreds of thousands of dollars of the $17 million in federal funds it has received since 2001 and essentially abandoned its mission of helping veterans start small businesses, according to the results of a Senate investigation to be released today.

The National Veterans Business Development Corp., also known as the Veterans Corp. (TVC), grossly mismanaged taxpayer dollars -- including lavish spending on costly dinners and luxury hotels, first-class travel, and compensation for its top two executives that amounted to nearly a quarter of the charity's federal funds, according to a report obtained by The Washington Post.

The reports says that Veterans Corp has spent just 9% of its funding on the small business centers that it was founded to create. Veterans Corps is a not a grassroots veterans organization, but a Congressionally-created non-profit group. The VFW has called for cutting all federal funding for Veterans Corp, and redirecting that money directly to the Small Business Administration's veterans programs.

Monday, December 22, 2008

New Hampshire Courts in the L.A. Times

Bob Drogin of the Los Angeles Times leads off his report on courts across the country facing tight budgets with a look at New Hampshire's decision to suspend jury trials in Feburary:
Financially strapped New Hampshire has become a poster child for the problem. Among other cost-cutting measures, state courts will halt for a month all civil and criminal jury trials early next year to save $73,000 in jurors' per diems. Officials warn they may add another four-week suspension.

"It brings our system almost to a screeching halt," said county prosecutor James M. Reams. His aides are scrambling to reschedule 77 criminal trials that were on the February docket.

"All the effort to subpoena witnesses and prepare for those trials is right out the window," Reams said, frustration in his voice. "Internally, it's a monumental waste of time. We'll have to redo everything."
Drogan also quotes Chief Justice John Broderick, repeating his concerns about the judicial system:
John T. Broderick, chief justice of the state Supreme Court, has carved $2.7 million from the judicial budget. In addition to the one-month halt in jury trials and trimming back courtroom security, seven of the state's 59 judgeships will be left vacant through June, when the fiscal year ends. Three of the empty slots are in trial courts.

Worse, Broderick said, he may need to suspend jury trials for another month, and leave open a Supreme Court slot after one of the five justices retires in February. It is the state's only appellate court.

"In my 36 years here as a lawyer and judge, I've never felt as insecure about the state courts in terms of operations and resources as I do now," Broderick said.

Friday, December 19, 2008

Heeere's Reggie!

New Hampshire Enters the Carbon Cap and Trade Era
By Grant Bosse

An online auction has netted New Hampshire more than $4 million. On Wednesday, New Hampshire participated in its first ever auction of carbon dioxide allowances, which sold for $3.38 each, according to RGGI, Inc. Granite State regulators put 1.2 million allowances up for bid in an auction featuring 31.5 million allowances from ten states. 69 potential buyers placed their bids through a website administered by World Energy, a private company contracted by the ten-state Regional Greenhouse Gas Initiative (RGGI) to auction off the right to emit carbon dioxide.

The $4 million will be deposited in the Regional Greenhouse Gas Reduction Fund, which must go towards energy efficiency and conservation programs. The Legislature has already dedicated $1.2 million from the Fund towards the state's weatherization program. The Public Utilities Commission is responsible for distributing auction revenues.

Beginning on January 1, 2009, any fossil-fueled power plant producing over 25 megawatts of power must obtain allowances for every ton of carbon dioxide (CO2) it produces. In New Hampshire, five power plants are so regulated, accounting for an average of 8.62 million tons of CO2 per year. This is the second precompliance auction under RGGI, but the first in which New Hampshire has put its allowances on the auction block.

Potomac Economics, an independent private firm hired to monitor the quarterly carbon auctions, released its preliminary report on Wednesday’s auction today. Potomac will release a more detailed report next month. States will confirm and transfer allowances by January 5, 2009, which can then be bought and sold on the secondary market.

On September 25, 2008, six states offered a total of 12.5 million allowances, which sold at a clearing price of $3.07. RGGI allowances closed Thursday at $3.27 on the Chicago Climate Futures Exchange (CCFE) and $3.30 on the New York Mercantile Exchange (NYMEX).

Under the Regional Greenhouse Gas Initiative, New Hampshire and nine other northeastern states have capped the amount of carbon dioxide that local power plants can release into the environment, and required them to bid for the right to do so. Joe Fontaine, Emissions Reductions Trading Program Manager with the New Hampshire Department of Environmental Services, says that between the ten states, CO2 production will be capped at 188 million tons per year for the next three years, and gradually reduced by a total of 10%. Each state will receive a predetermined slice of revenues produced from those auctions based on its historic carbon emissions prior to the agreement. This ratio will not change, regardless of any change in carbon output from each state throughout the life of RGGI.

Getting to know Reggie

Frequently Asked Questions about New Hampshire's New Carbon Cap:

What’s RGGI?
The Regional Greenhouse Gas Initiative is an agreement among ten Northeastern and Mid-Atlantic states to limit carbon dioxide emissions through a mandatory cap-and-trade scheme applying to fossil-fueled power plants. It is administered through a non-profit corporation, RGGI Inc., which contracts with private companies to administer and monitor quarterly auctions.

Which states are participating?
Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont.

Who is covered in New Hampshire?
RGGI applies to electric power plants generating more than 25 megawatts that are fueled by coal, oil, or natural gas. In New Hampshire, five power plants meet these requirements:

PSNH Plants
Newington Station in Newington, Oil
Merrimack Station in Bow,Coal
Schiller Station in Portsmouth, Coal*
*One of the three units at Schiller Station has been converted to run on biomass, and is not regulated under RGGI.

AES Plants
Granite Ridge in Londonderry, Natural Gas
Newington Energy in Newington, Natural Gas

How does cap-and-trade work?
For the next three years, RGGI will cap total CO2 from covered sources at 188 million tons per year. That total will drop by 2.5% in each proceeding three-year period until it is 10% lower than current levels. In March 2012, each of the five power producers in New Hampshire will have to produce carbon allowances for every ton of CO2 they’ve released from 2009 to 2011. These allowances may be purchased at quarterly auctions, or on the secondary market. Each allowance permits a ton of CO2 in any of the ten states, and at any time during the three-year compliance period. Power producers will be covered under RGGI beginning January 1, 2009, but will not have to show compliance with the restrictions until March 2012.

Why only coal, oil, and natural gas?
RGGI is designed to reduce carbon dioxide emissions. Nuclear power does not produce CO2. Biofuels such as wood do produce CO2 but as considered carbon-neutral under the law, since trees being grown the replace the biomass fuel theoretically absorb as much CO2 as the burning fuel produces.

What about other greenhouse gasses?
No other greenhouse gasses are covered under RGGI.

How would a federal cap-and-trade law affect RGGI?
Congress has considered several alternative cap-and-trade proposals for years. Most include provisions for state and regional greenhouse gas regulations. Any federal law would likely protect RGGI and other regional agreements from federal pre-emption, and count the established baseline of carbon emissions as the relevant federal baseline, rather than asking states to cut emissions from an already reduced baseline.

How do we know how much CO2 each plant produces?
Each of these power plants is already regulated under the federal acid rain program, which requires constant measurements of smokestack emissions. Since CO2 output is already being measured, electric power generation is considered the low-hanging fruit for CO2 reduction. Other sources such as transportation and agriculture would require extensive measuring and monitoring systems to be developed before a cap-and-trade program could be implemented.

What percentage of New Hampshire emissions come from these power plants?
It’s difficult to determine, since other CO2 sources such as cars, livestock, and even people are much more difficult to measure. Policy-makers estimate that electric power generation accounts for one-third of CO2 emissions nationally.

How are New Hampshire’s annual CO2 emissions calculated?
For most states, RGGI calculates the three-year average emissions from 2000 to 2002. Since two natural gas power plants went on line in New Hampshire in 2002, this figure would be artificially low. New Hampshire uses the two-year average of 2003 to 2004, which comes out to 8.62 million tons of CO2 annually. New Hampshire has 8.62 million carbon allowances to distribute, of which 5.95 million will be auctioned off each year.

Why isn’t New Hampshire selling off all of its CO2 allowances?
PSNH is New Hampshire’s largest electricity provider, and its largest CO2 source under RGGI. Prior to RGGI, PSNH was subject to regulation under the state Clean Power Act. As part of the transition from the Clean Power Act to RGGI, PSNH will be allocated 2.5 million allowances each year at no cost for three years, and 1.5 million allowances annually for the following three years.

New Hampshire lawmakers set aside two percent of the state’s allowances for other purposes. One percent has been reserved for residential homeowners who install renewable electricity to request state allowances to be retired. If unclaimed, these allowances will be added back to a future auction.

Additionally, if power companies are forced to exceed the allowances they’ve purchased in order to meet peak demand during a power emergency, they may receive additional allowances at no cost. One percent of the state’s total has been reserved for this purpose, and would go back into a future auction if not needed.

How much revenue will New Hampshire receive, and where does it go?
Based on current market prices, New Hampshire would receive approximately $18 million each year, those this could vary widely. All auction proceeds will be deposited into the state’s Greenhouse Gas Emissions Reduction Fund, which is administered by the Public Utilities Commission. State law requires that the fund support energy efficiency, conservation, and demand response programs, and that at least 10 percent be used to assist low income residential customers to reduce total energy use. The Legislature has already set aside $1.2 million in anticipated auction revenues towards the state’s weatherization program. The PUC has sole authority to determine how the rest of the Fund will be spent, barring further Legislative directives.

Can auction revenues be used to balance the state budget or for other spending priorities?
Under current law, the Greenhouse Gas Emissions Reduction Fund can not be used for other programs, or to balance the General Fund. However, like all dedicated revenue streams in New Hampshire, these revenues may be redirected at any time through legislation.

What is carbon capture and sequestration?
Rather than emitting CO2 through their smokestacks, power plants could capture the escaping gas, preventing it from increasing atmospheric CO2 levels. While technically possible, this technology is not yet commercially viable, and long-term storage of tons of lighter than air gas is challenging. One possibility is to use the underground space in depleted oil and natural gas deposits to sequester CO2 permanently. Carbon capture and sequestration would be allowed under RGGI, since the cap-and-trade regulations would not apply to CO2 that is never released into the atmosphere. Such an approach is unlikely to take off until the cost of capturing and storing a ton of CO2 is less than the cost of a carbon allowance.

What are carbon offsets?
Carbon offsets are an alternative way to comply with carbon caps. Rather than reduce their own carbon emissions, the source may choose to support programs that offset them. The most common is afforestation, planting trees that absorb CO2 as they grow. Under RGGI, power producers may offsets for up to 3.3% of their CO2 emissions. There are currently five project categories approved for offsets: Landfill methane capture and destructionReduction in emissions of sulfur hexafluoride (SF6) in the electric power sectorSequestration of carbon due to afforestation;Reduction or avoidance of CO2 emissions from natural gas, oil, or propane end-use combustion due to end-use energy efficiency in the building sectorAvoided methane emissions from agricultural manure management operations

How will this affect electric rates?
The cost of carbon allowances will become part of the cost of producing electricity in the Northeast, and will ultimately be borne by ratepayers. How much is will cost depends not only on the price that producers pay for these allowances, but also on the fuels used. Coal is the most carbon-intensive fuel source, producing 2,000 pounds of CO2 per megawatt of power. Natural gas produces 800 pounds of CO2 per megawatt, and oil is somewhere in between depending on the type of oil used. At $3.00 per allowance, this would add $3.00 per megawatt of electricity made by burning coal, and about $1.20 per megawatt from natural gas, or $.003 per kilowatt hour for coal and $.0012 per kilowatt hour for natural gas.

Power producers may avoid the cost of carbon allowances by reducing their carbon emissions, either through upgrading their fossil-fuel facilities, switching to more expensive but carbon-neutral fuel sources, or purchasing offsets as a means of alternative compliance. These costs would also be passed on to ratepayers, but would not produce revenue for the ten RGGI states.

What happens if a power plant exceeds its carbon allowances? Power producers who do not provide sufficient allowances to meet their emissions would face a three to one deduction penalty at the beginning of the next compliance period. For instance, if PSNH released 1,000 tons more CO2 than it purchased for 2009-2011, it would be forced to purchase 3,000 additional credits for 2012-2014. Since this would be an expensive penalty, New Hampshire Emissions Reductions Trading Program Manager Joe Fontaine expects nearly 100% compliance. It will almost certainly be cheaper for utilities to purchase additional allowances on the open market than to pay the penalties.

Who is buying carbon allowances?
The identities of auction winners are not being made public. RGGI has contracts with Potomac Economics to monitor its quarterly auctions. On October 16, 2008, Potomac issued its report on the September 28, 2008 auction, which included 59 entities submitting bids ranging from $1.86 to $12.00. 80% of the bidders were “compliance entities”, which are power producers covered under RGGI. 20% were “non-compliance entities” not covered under RGGI, but who may now sell their allowances in the secondary market.

Where are carbon allowances traded?
Once purchased through the quarterly auctions, RGGI allowances are traded on the Chicago Carbon Futures Exchange (CCFE), and futures contracts for RGGI allowances are available on the New York Mercantile Exchange (NYMEX). At the close of trading on December 18, 2008, RGGI was trading at $3.27 on the CCFE, and $3.30 on NYMEX.

Thursday, December 18, 2008

Telegraph Backs Gas Tax Increase

The Nashua Telegraph this morning comes out in favor of raising New Hampshire's gas tax in order to boost revenues into the Highway Fund:
There's no single answer to the problem, which, if roads must be plowed and salted less often and maintenance delayed, threatens public safety.

But the seriousness of the shortfall means that for the first time since 1992, the governor and Legislature should increase the gas tax.

Wednesday, December 17, 2008

State HHS releases private data

UPDATE- The Union Leader has updated this morning's story by reporting that 9,300 Medicare Part D recipients have had their private information sent out:
The state Department of Health and Human Services mistakenly released personal information about 9,300 Medicare Part D recipients to its service providers two weeks ago and is now notifying those affected.

In letters to clients and providers obtained Wednesday by The Associated Press, the department said it is taking steps to make sure no information is used illegally. But it urged the people affected to initiate credit fraud alerts or freezes on their accounts.

The Union Leader is reporting that New Hampshire's Department of Health and Human Services has mistakenly released private data of Medicare recipients to private service providers:
New Hampshire's Department of Health and Human Services mistakenly released personal information about Medicare Part D recipients to its service providers two weeks ago and is now notifying those affected.

In letters to clients and providers obtained by The Associated Press, the department says it is taking steps to make sure no information was used illegally. But the department is urging clients to initiate credit fraud alerts or freezes on their accounts.

The information was mistakenly attached to an e-mail to providers on Dec. 1.

The state budget deficit is unlikely to be closed this year


With only six months left in the state's fiscal year, the current budget deficit is so large that it probably cannot be fixed. Instead, it will be rolled over until next year, making a difficult budget task even worse.

Even as all public eyes are focused on finishing out the current budget year with as small as a deficit as possible, both the governor and the Legislature are trying to figure out what to do about the budget nightmare approaching after the new year.

A brief status report is in order. New Hampshire is three-quarters of the way through its two-year budget. The first of the two years was bad, but not that bad. The state treasurer provides a concise summary for investors every time the state goes into the bond market to borrow money. According to that report, "The combined general and education fund activity for fiscal year 2008 resulted in an aggregate operating deficit of $37.7 million (including a $15.3 million deficit in the Education Trust Fund). After a $6.8 million budgeted transfer from the general fund to the highway fund, a $17.2 million surplus remained because of the $61.7 million surplus carry forward from fiscal year 2007."

So we spent about $40 million more than we raised in 2008, but we had a cushion built up because of $30 million of the old Craig Benson surplus we had kept out of the rainy day fund and another $30 million of surplus from the first Lynch budget. By law, that $60 million should have gone into the rainy day fund. But by suspending the law, legislators avoided its restrictions.

Whether that was good policy or not (and it wasn't), there won't be any left after this year.

Even after revenue changes the governor made, his administrative services commissioner projects a $250 million revenue shortfall for fiscal year 2009. To address that, the governor has already ordered $40.2 million of cuts and spending freezes. He also has $40 million in bonding authority (to pay for school construction aid). That left a $170 million shortfall.

Last month, the governor proposed another $56.6 million in cuts and an additional $20 million of one-time revenue the Legislature must approve when it reconvenes.

The additional $20 million includes transfers from the highway fund (repaying the end of 2008 transfer) and other surplus money to be transferred from dedicated accounts outside the state's operating account. The $20 million and the $56.6 million should reduce the deficit to about $93 million. If you add to that the $17 million carried forward from last year, the current shortfall is nominally about $75 million. Because some of the reductions will include money that would otherwise "lapse" in budget terms, the real shortfall is probably a little more than $80 million.

To end the year in balance, the governor needs to identify another $80 million in a budget that has only six months remaining. At this point, it seems likely that the governor will roll over the deficit into the next two-year budget when he presents his 2010-2011 budget in February. Without any additional cuts, next year's problem will be Herculean. Because budgets are about making choices about spending and revenue, the so-called starting deficit depends on your assumptions about those choices and how the economy will further affect revenues.

But to show how difficult things are likely to be, assume as a starting point a budget that increases spending by the 20-year average of 5 percent each year. If revenues don't decline any further and stabilize for two years, the gap between spending and available revenues would be almost $700 million over two years plus the $80 million deficit we carry forward.

If spending were held to a zero increase for two straight years, something accomplished only once since World War II, the gap would still be more than $400 million. Maybe the economy will recover a lot faster than anyone thinks. But we probably shouldn't make that assumption in the budget. Budget writers will need to identify hundreds of millions of dollars of spending cuts or increased revenue to close the gap.

Borrowed money will have to be repaid and replaced. One-time revenue sources, such as transfers from the Pease Development Authority or other funds, can't be used to support spending year after year. A federal bailout would only be a stopgap to manage a transition to a real balanced budget. Getting back to fiscal sanity will take time. But we can't keep running deficits.

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

Tuesday, December 16, 2008

Grok doesn't like the van

Our friends at Granite Grok make history today, by agreeing with the Concord Monitor editorial page:

Another case made for a more limited government - so, cops need satellite TV on a stake-out?

Over at NH Watchdog, our friend Grant Bosse alerts us that even as the NH State budget is in $250 million in the whole (our state budget is about $1 Billion / year so it is a hefty percentage - thanks Democrats for boosting spending 17% during the cycle!), the Liquor Commission decided to use $442,000 to buy a van! This as Gov. Do-nothin' is pressuring all departments to cut spending big time.

Guess Commissioner Mark Bodi "doesn't get it" - or worse, believes it doesn't apply to him. Now, this is not just ANY kind of van - it is SPECIAL!

Bodi defends DUI Van

Liquor Commissioner Mark Bodi writes in to the Concord Monitor this morning to defend his department's recent use of $422,000 in federal funds to buy a van, complete with satellite television:
The paper's comment that the command center television would "allow agents to watch the news while waiting to process drunken drivers," is inaccurate. The television screen and satellite capabilities will be used only in cases of actual emergencies when law enforcement personnel must be aware of rapidly changing events, such as severe weather or critical regional or national news. This same type of equipment (and satellite TV programming) is routinely used by other states and widely used within many federal agencies. New Hampshire's recent flood and tornado tragedies are good examples of how this vehicle could be thoughtfully and economically repurposed and deployed for emergency service needs.
Bodi goes on to detail how many people have died in drunk driving accidents, nationally and in New Hampshire. Whether a big screen TV and satellite programming is an efficient way to reduce those deaths is up to those who oversee the Liquor Commission's budget.

Monday, December 15, 2008

Air on the Auction Block

The New Hampshire Department of Environmental Services has announced its first carbon dioxide auction. Under the ten-state Regional Greenhouse Gas Initiative (RGGI), New Hampshire will cap the amount of CO2 that can be emitted from fossil-fuel burning power plants. These plants must bid for the right to emit CO2, which will be capped at current levels on New Year's Day:
On Wednesday, December 17, between 9:00 a.m. and noon, bidders will vie for more than 31.5 million CO2 emission allowances through an online electronic platform administered for RGGI by World Energy Solutions, Inc.
At the first RGGI auction in September, 12.5 million allowances sold at a price of $3.07. New Hampshire did not participate in that auction, but will be providing 1.2 million allowances out of the 31.5 million up for sale on Wednesday.

Each allowance represents a ton of CO2 that can be released into the atmosphere. Between now and 2012, every fossil-fuel burning power plant will have to buy enough allowances to cover its emissions.

Under the September price, New Hampshire would receive about $3.6 million, which will be deposited into a Greenhouse Gas Emissions Reduction Fund, administered by the Public Utilities Commission. The Fund must pay for energy efficiency and conservation programs, with at least ten percent going to low-income residential customers to reduce their total energy use. To that end, the Legislature has already directed $1.2 million from the Fund towards the state's weatherization program, once the Fund actually has any money in it.

Wednesday's price could be higher or lower than September's. With a large drop in global energy demand since September, the price may drop sharply, meaning less money going into that Fund. But the price will be decided by the online bidders later this week, based on their insight into the global and regional energy market in 2012.

Results from Wednesday's auction will be posted by Friday at the RGGI website.

Gambling-Business Coalition Forming

Tom Fahey reports in his weekly Under the State House Dome column that New Hampshire businesses are teaming up with the racetracks to push for expanded gambling in the state:

When Millennium Gaming and Rockingham Park unveiled their new "Fix It Now" coalition last week, they brought along a big group of labor and business owners.

The company continues to hold out the promise of $450 million in new construction at the park in exchange for a bill that in its words would allow "limited gaming." Leading the alliance is Chuck Rolecek, president and CEO of The Premier Companies. The company is the operator of C.R. Sparks Event Center and restaurant in Bedford and the upscale Chop House in Manchester.

He's teamed with about 20 others as well as owners of Millennium and Rockingham to push for a change in state gambling laws.

The group includes the Building and Construction Trades Council, with 7,000 workers in member organizations, trades like construction, electric, plumbing, plastering and sheet metal.

Also in the group are: engineering firms T.F. Moran and Inc. and Waterline Industries; executives of Kelly Construction Co. and Harvey Construction Corp.; food service providers Rolecek, Ron Doucet, owner of the Executive Court Inn and Banquet Center in Londonderry, and Hopi Stradling of the One Hundred Club in Portsmouth. There are also car dealers Paul Holloway of Dreher-Holloway in Exeter and Toyota of Portsmouth. Add to them former state Sen. Chuck Morse, the Tracey Edwards Company ad firm, and Centrix Bank.

Priorities at Parks and Recreation

Should New Hampshire upgrade the facilities at Hampton Beach next year, or spread the project over three years? The Union Leader weighs in this morning on its Editorial Page:

Local business owners want the state to do the entire $18 million project next year. The state Division of Parks and Recreation, which says the plan is its top capital project, wants to spread the costs and the project over three years.

Parks and Recreation cites the state budget as the reason to draw the project out. With an expected $250 million deficit this year and possibly twice that in the next budget, the state cannot justify an $18 million project right now, Parks and Recreation says.

That's the right thinking.

Friday, December 12, 2008

Mercury reductions drive up electric rates

As I, and 300,000 of my closest friends wait for PSNH to restore power following the ice storm , Tom Fahey reports in the Union Leader that a ratepayers' group is going back to court to get out from under recent environmental regulations that are driving rates higher than anticipated:
A group of commercial ratepayers filed a state Supreme Court appeal yesterday aimed at requiring the Public Utilities Commission to review the cost of mercury reduction equipment at the state's largest coal-fired power plant.

The work at Public Service of New Hampshire's plant in Bow was supposed to cost $250 million when a law mandating it passed in 2007. Since then the price has nearly doubled, to $457 million. When finished, the work will cut mercury emissions by 80 percent.

Thursday, December 11, 2008

Is the Gas Tax Outdated?

Mark Sanborn is counselor at the U.S. Department of Transportation, and a New Hampshire native. He writes in this morning's Union Leader that the gas tax is no longer a viable way to pay for highways, and proposes a new approach:

There is another way. We must create a transportation network that applies the concepts of supply and demand, including the use of pricing or tolling. While tolling is not a new concept in the Granite State, pricing is. Dynamic pricing means charging a fee, based on demand, on high-use roads. "Double taxation" can be avoided by making it unnecessary to use gas taxes for maintenance of that road.

Public-private partnerships are another option being embraced by states facing funding shortfalls. This does not involve selling public assets, but rather leasing highways to private companies for a fee and allowing the companies to collect money from highway users. The company is able to operate the highway more efficiently, while the state can leverage the funds to pay for infrastructure improvements elsewhere.

Fosters supports Lynch Pay Raise Proposal

Fosters' Daily Democrat editorializes in favor of the Lynch Pay Raise Rollback, which will not get a hearing in the Legislature:
Gov. John Lynch has asked state employees to defer a 5.5 percent pay increase until July 1. He and the people of New Hampshire are waiting for an answer from unions that represent those employees.

"Our nation is facing an unprecedented economic downturn, with serious ramifications for our state budget," Lynch said in a press release Wednesday. "We have taken a number of steps, including millions in cuts to state programs and services to help balance our budget, and additional work is needed. Under the circumstances, I believe it is reasonable and responsible to defer the January 5.5 pay increase for state employees."

The governor's suggestion is, indeed, "reasonable and responsible."

Proposal to Roll Back Pay Raises Hits Brick Wall

Lauren Dorgan reports in the Concord Monitor that Governor John Lynch's proposal to roll back pay raises is hitting a brick wall, for union and nonunion state employees alike:

All state employees are set to receive a 5.5 percent pay raise Jan. 1. But with the state budget in crisis - 2009 revenue is now expected to fall $250 million behind original projections - Lynch has targeted pay raises as one way to save money.

"We have taken a number of steps, including millions in cuts to state programs and services to help balance our budget, and additional work is needed," Lynch said in a statement yesterday. "Under the circumstances, I believe it is reasonable and responsible to defer the January 5.5 percent pay increase for state employees."

Lynch, a Democrat, has pushed the Legislature to meet next week to defer pay increases for nonunion employees who work for the state, including lawyers, managers, and those who work for the judicial and legislative branches. Meanwhile, Lynch has been in talks with leaders of the State Employees Association, whose pay raises are guaranteed by contract. For union members to lose their raises, they would have to first vote to reopen contract talks and then vote to ratify a pay freeze.

So far, neither of the governor's efforts has proven fruitful.

Tom Fahey also reports in the Union Leader on the House and Senate leaders shooting down Lynch's suggestion:
Lawmakers have decided not to act on Gov. John Lynch's proposal to save up to $2 million by deferring pay raises for state workers not represented by unions.

To kill the raises, the Legislature has to act before the end of the year. Last week House and Senate leaders reserved next Wednesday as a day when legislators could return for the money-saving move.

But yesterday, Speaker of the House Terie Norelli and Senate President Sylvia Larsen said they will not call lawmakers to Concord next week to pass a bill rescinding the raise. Dec. 17 had been set as a potential date for action, but the two said the issue was not ready to bring before 424 lawmakers.

Wednesday, December 10, 2008

"I don't think we can run the justice system."

Chief Justice John Broderick claims that cutting the Judicial System's budget by 3% is impossible, despite Governor John Lynch's request that all segments of state government submit such plans. Lauren Dorgan gets the Chief's thoughts on the budget in this morning's Concord Monitor:

The judicial branch is operating without seven judges - a number Broderick described as extraordinary - with positions at almost every level left open by Gov. John Lynch.

"I don't remember any time in my now 36 years as a lawyer and judge in New Hampshire when there've been seven vacancies at one time," Broderick said.

At the request of the governor, Broderick laid out in a recent letter a series of steps the judicial branch could take to further cut its budget. The top of the list: holding open until the summer the Supreme Court vacancy that will be created when Justice Richard Galway steps down in February.

Broderick is not one of the Governor's department heads, but the presiding officer of a co-equal branch of government. But like the Governor, he still relies on the Legislature, and New Hampshire taxpayers, to pay his bills.

A bailout of states would hurt New Hampshire and America


With the bailout frenzy in full swing, governors have now bellied up to the bar and are asking the new President to turn on the printing press one more time and flood the states with billions of dollars. The irony of having a profligate and deficit-ridden federal government help fix state budget deficits shouldn't be lost on any of us. But for smaller states, this is certain to be a bad deal. Our smaller and more frugal piglets will be pushed away from the federal trough by the prize-winning hogs from the larger, free-spending states.

After Washington spent hundreds of billions of dollars on bankers, insurance companies, auto companies and whoever else, state governors lined up for a bit of federal welfare. At the National Governors Association meeting, the governors asked President-elect Obama to sign them up and please bail out the states.

To be fair, President Bush has done much of the heavy lifting. He's successfully rebranded the federal government as George's Bailout and Backstop Agency -- you snooze, we lose. The feds have now abandoned any pretensions toward balanced budgets or anything approaching fiscal responsibility.

Balanced Budget Amendment? That's the old GOP. The new GOP is all about credit card spending. Surpluses? A quaint relic of the Clinton administration. Yet, despite federal dismissals of fiscal responsibility as archaic, they feel nostalgic about states being required to balance their budgets so they want to help.

Soon-to-be President Obama has agreed to assemble a spending package to help states. The price tag will be hundreds of billions. News reports talk about $136 billion of "shovel ready" spending projects -- roads, bridges and the like -- that are to begin construction almost immediately.

Here's where the politics begin. The federal government could take construction money, which is collected from all across the country, and dole it out equally to each state. Divide $150 billion among 300 million people and each state would receive about a half billion per million people -- $650 million in New Hampshire. That's about twice the size of our highway trust fund.

Equal distribution would amount to revenue sharing. No pork, no politically motivated winners and losers. States that overspent and ran up bigger deficits wouldn't get rewarded with more than their share. Frugal states could bank the money and spend it sensibly over time.

But that sort of politically neutral aid is unlikely to happen. According to The New York Times this week, "Mr. Obama's plan, if enacted, would be in part a government-directed industrial policy, with lawmakers and administration officials picking winners and losers among private projects and raining large amounts of taxpayer money on them."

Concern about Washington picking winners and losers is one of the reasons Gov. Mark Sanford of South Carolina wrote an op-ed titled "Please Don't Bail Out My State." Sanford doesn't want bad behavior rewarded.

As an example, he points out that small, community banks with lending standards are fine, but big banks that made bad decisions are being sent billions. A state bailout will likely be the same. Big states with lots of votes will receive billions at the expense of smaller states that took care of their finances.

Money will be collected from taxpayers all across the country and sent to states that spent money they didn't have. In essence, money will be transferred from well-managed states to poorly managed ones. If any sort of bailout is to go through, bad management must not be rewarded. States that managed themselves well should not be punished.

Secondly, Washington should not pick winners and losers. The whole point of a federal system is to let people in Nebraska decide what's best for Nebraska, not transfer that decision to a Washington bureaucracy. If you must send money to a state, let the people in that state decide what the best use of that money is.

Finally, consider just cancelling the whole thing. The federal budget isn't balanced. The Bush legacy is massive federal debt. Any additional spending is deficit spending. The federal government doesn't have the money, but it will borrow it to help balance state budgets. The governors don't want their states to have to borrow money or cut spending, so they ask the federal government to borrow money and cut spending.

A state bailout is a bad deal for federal taxpayers (all of us), bad for small states with less political power and bad for well managed states.

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

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Tuesday, December 9, 2008

At least they have their priorities in order

The Keene Sentinel reports on what will surely be one of the most pressing issues facing New Hampshire, after the budget deficit, education funding, the pension system, etc...
Incoming state Rep. Steven W. Lindsey, D-Keene, has filed a bill to bring a cat to the N.H. House of Representatives.

His mantra?

“A house cat for the House.”

Lindsey, 48, said the feline — which he envisions as being fixed, shorthaired and having a similarly friendly disposition as his own cat, Mischief — would serve a variety of purposes.

But whether or not the initiative will fly among his fellow lawmakers remains to be seen.

Editorial Roundup

Both the Union Leader and Concord Monitor editorial pages weigh in on the state's budget problems.

The UL warns against modernizing the Liquor System as a quick fix to fill the budget hole:

Lawmakers can go astray, however, if they start looking at this as an opportunity to balance the state budget with one-time revenue. Four years ago, Maine leased its wholesale liquor operation to a private investment firm for $125 million. Such a figure is enough to tempt legislators who face a big budget deficit and don't really want to cut spending.

But using one-time cash to plug the budget hole is a terrible idea that will only delay the inevitable day of reckoning.

The UL also comments on a recent audit of the state's vehicle fleet:
For instance, most state agencies do not have required policies governing vehicle use. Sixty-nine percent of state vehicles have not been approved by the governor and Executive Council, and agencies simply replace vehicles without determining whether their continued use is needed.
Meanwhile, the Monitor wonders why the Liquor Commission is buying a tricked-out van while the Judicial Branch is looking at severe cuts:

Now about that mobile police van. The van, which is currently in storage, cost $355,000 plus another $67,000 for additions like a heat-seeking camera, subscriptions to satellite TV and radio service and a flat-screen TV that can be used to display evidence or to allow agents to watch the news while waiting to process drunken drivers. The van contains two cells, a bathroom and breath-testing equipment.

The mobile command center no doubt will, as liquor commissioner Mark Bodi says, improve the evidence used in court and prove useful in emergencies. But Bodi practically tied himself in knots while trying to justify its purchase during the worst economic downturn in decades. It will, for example, be helpful when educating people about the dangers of drunken driving, he said. Not while it's in storage, it won't.

Monday, December 8, 2008

Dude, where's my car?

One of the sweetest perks of working your way up the state bureaucratic ladder is a state vehicle. But the Associated Press finds that New Hampshire lacks adequate oversight over how those vehicles are assigned and used:

New Hampshire does a poor job keeping track of the nearly 2,000 passenger vehicles used by state employees, according to a recent audit.

There is no formal statewide monitoring of the vehicles, nor is there any statewide agency in charge of requisitioning, maintaining or disposing of cars. Some departments have written policies and fleet managers; some do not. Instead, each department makes decisions for itself, leading to a dearth of quality data and poor use of resources, the audit found. While some employees are reimbursed hefty sums for using their own cars, many cars go underused.

Heritage Foundation on the bailout

The Heritage Foundation's blog has a great post on the U.S. auto industry, which is much broader than the Big Three.

They are also kind enough to comment favorably on NHWatchdog.

Pat Buchanan made the protectionist argument on Hardball with Chris Matthews and our own Senior Research Fellow James Gattuso appropriately disproves it. Grant Bosse has it right when he says,

Bailing out the Big Three is subsidizing failure. And you only subsidize something when you want more of it.”

FYI, Honda opened up a new plant in Indiana just two weeks ago.

Saturday, December 6, 2008

Lawmakers get creative.

Never underestimate the ingenuity of the American spirit, or the creativity of lawmakers looking to separate taxpayers from their money.

In Georgia, one county will start sending out $500 tickets to residents who don't recycle:

While neighboring counties encourage recycling, Gwinnett County’s new solid waste management ordinance puts teeth into it. The ordinance provides for a civil fine of $500 for violations, which includes those who fail to “source separate residential recovered materials.”

Mandatory recycling is not common in metro Atlanta, but Gwinnett County Commission Chairman Charles Bannister said the move is in line with a state policy that local governments develop plans to reduce solid waste by 25 percent.

Who is and isn't recycling sufficiently will be left to the discretion of local bureaucrats:
“We don’t intend for this to be the garbage gestapo, running around, looking in people’s garbage about what’s there and what’s not there,” said Connie Wiggins, executive director of Gwinnett Clean and Beautiful, which is administering Gwinnett’s waste disposal program. “I believe the fine applies to all categories, and certainly, if we saw excessive abuses of materials being thrown in the garbage.”
And in Rhode Island, the Public Transit Authority is looking for more revenue from several sources, more tolls, higher has taxes, and maybe even taxing drivers based on their mileage:

•Both new and higher fuel taxes. The proposals include increasing the gasoline tax, now 30 cents, by up to 15 cents per gallon by 2016, which would raise an estimated $64 million per year. They also include a new “petroleum products gross earning tax,” beginning with the equivalent of 10 cents per gallon of gasoline in 2010 and adding another 5 cents in 2014. That would affect all petroleum products, from gasoline and aviation fuel to those made from petroleum derivatives, such as plastics, paint and fertilizer. It would eventually raise about $66 million per year, the draft report says.

•Car registration fees, now $60 for two years, would rise $40 per year immediately and could more than double, to $140, by 2013, depending on which version was used, raising up to $46 million per year.

•A new mileage fee. The $150-million plan would not include it, but the $300-million plan would impose a half-cent-per-mile fee, raising an estimated $50 million per year. But officials said yesterday that they expect to eliminate the transfer of some sales tax revenue to the transportation system, proposed elsewhere in the report. Raising the mileage fee to 1 cent per mile would make up the difference.

At a half-cent per mile, driving 10,000 miles per year would cost $50 per vehicle. One cent would cost $100.

Also referred to as a VMT fee (for vehicle miles traveled), the mileage fee would be based on odometer readings reported by vehicle owners when they renew their registrations. The mileage could be verified during mandatory auto inspections, the study says. Robert A. Shawver, the DOT’s assistant director, said that although one state, Oregon, is pilot-testing a similar fee, Rhode Island’s would be the first of its kind in the country.

•Tolls. The $150-million plan could include tolls, $3 per car and $6 per truck, only at the Connecticut border, yielding an estimated $39 million per year. The $300-million plan would include similar tolls where all of the state’s interstate highways (Routes 95, 295 and 195) cross the state line, and would raise $60 million per year.

Friday, December 5, 2008

Breaking the Liquor Store Monopoly?

New Hampshire has long relied on sales of hard alcohol at state owned stores for revenue. While other states impose hefty taxes on vodka, scotch, and rum, New Hampshire keeps prices down by simply pocketing the profit on each bottle, and barring the sale of anything harder than Pinot Noir in grocery stores.

But in an effort to boost state revenues, Liquor Commissioner Mark Bodi is floating the idea of putting Jack Daniels next to Bud Light and the Yellowtail Chardonney at your local supermarmket. Josh Rogers reports for New Hampshire Public Radio:


About 5 minutes into his testimony to state budget writers Monday, Commissioner Mark Bodi made a glancing mention to what could prove the most conspicuous shift in state alcohol marketing policy since grocers were given permission to sell wine 30 years ago.

“The commission is currently reviewing how we might expand the sales of spirits specifically through greater agency store operations. However that review continues and I’m not in position today to offer any short estimates as to what the likely revenue from any expansion of agency stores would create.”

Outside the hearing room, Commissioner Bodi continued to play things pretty close to the vest. When asked for a ballpark notion of what state might gain by putting hard liquor in grocery stores, he said millions and left it at that. Bodi did say however, that new agency stores would be tailored to meet the needs of consumers and retailers alike.

“In areas where there are strong demands, grocery stores would have a significant number of spirit offerings. In areas where there is lower demand, you would have an opportunity for a small mom-and-pop store to add a few skews of vodka and bourbon as a convenience item.”

Gas Tax Trial Balloon still floating

Tom Fahey reports in the Union Leader that Governor John Lynch is giving the idea of raising New Hampshire's gas tax a lukewarm reception:
Lawmakers from both parties say the state needs to increase its gasoline tax to keep highways maintained, but Gov. John Lynch is not convinced of that yet.

Lynch said this week he hasn't changed his stance against a gas tax hike, but he left room to be persuaded it is the right move.

He said the state needed to figure out how much highway work needed to be done and how much it would cost before talking about raising revenue. He noted a federal economic stimulus package was expected to send money for highway and bridge construction to all states.

"That may be part of the overall financing package going forward," Lynch said.

Thursday, December 4, 2008

So big you can see it from space

Jonah Goldberg puts the mounting federal bailout in perspective:

The costs of Washington's bailout fiesta are now so huge, you can see them from space.

The latest number, which includes the Citigroup rescue, is $7.7 trillion. That's roughly half of America's gross domestic product.

Wednesday, December 3, 2008

Provecher Re-Elected State Treasurer

Cathy Provencher has been unanimously re-elected State Treasurer by a Joint Convention of the New Hampshire House and Senate.

The Most Popular Politician in New Hampshire

His popularity ratings would make John Lynch blush. His winning streak beats Ray Burton's. He was unopposed while unanimously winning a 17th term. He's Bill Gardner, and he will be New Hampshire's Secretary of State for another two years.

The House and Senate meet in Joint Convention at the beginning of each two-year session to elect two Constitutional Officers, Secretary of State and State Treasurer. State Senators Jack Barnes (R-Raymond) and Lou D'Allesandro (D-Manchester) nominated Gardner to the post. D'Allesandro said that New Hampshire's elections are the best in the world, thanks to the work of Gardner and his staff.

Gardner was elected to the New Hampshire House in 1972, as a Democrat from Manchester. After two terms, he was elected Secretary of State by the House and Senate in 1976. As Secretary, Gardner probably oversees more elections every other year than anyone else on the planet. With 400 House Members, 24 State Senators, five Executive Councilors, a Governor, and ten full sets of County Officers, Gardner was responsible for over 1,500 candidates in the September Primary and November General election.

Gardner is also required by law to serve as defender of New Hampshire's First in the Nation Primary. The Legislature has given the Secretary of State broad power to set the date of the Primary, largely based on its confidence in Gardner. He is confident that New Hampshire will keep its First in the Nation status in 2012.

Barring a serious primary challenge to President-Elect Obama, the Democratic Party isn't likely to make waves with the nominating calendar. And the Republican National Committee amended its rules at the summer convention, cementing New Hampshire and South Carolina as the only Primaries that can be held before February 1st, 2012. Iowa, and perhaps Nevada, will hold an earlier caucus, but Gardner must only guard against elections similar to New Hampshire's, primaries that assign delegates to the national conventions.

Gardner's last act before signing nearly 500 election certificates is to administer the dozens of recounts requested each election year. This year, none of the recounts changed the results reported on election night. Years before the nation ever heard of hanging chads, Gardner moved New Hampshire away from punch card ballots. All cities and towns either count their ballots by hand, or use "Optiscan" ballots, which still require every voters to put ink on paper, and more importantly, leave a solid and traceable paper trail. Gardner says that the recounts showed a few problems at the ballot box this year, including one set of ballots that appears to have been entered into the machine twice, but that none of these errors affected the outcome of any election.

State Senate Leadership

Brian Lawson at PolitickerNH.com reports on the State Senate leadership elections:
The state senate elected state Sen. Sylvia Larsen (D-Concord) for another term as senate president...

State Sen. Peter Bragdon (R-Milford) was also elected to be the Senate Republican leader. A week after the election the state senate Republican caucus nominated Bragdon to lead the caucus. Bragdon's nomination was a surprise as many observers expected state Sen. Ted Gatsas (R-Manchester) to continue serving in that role.

The senate also voted today to reappoint Tammy Wright as Senate Clerk, Robert Buchholz as Assistant Senate Clerk and Carleton "Kit" Marshall as Sergeant-at-Arms.

Sword Elected House Sargent At Arms

Walter Sword has been unanimously elected as House Sargent At Arms.

Sword has worked on the House staff for the past ten years.

Wadsworth Re-Elected House Clerk

House Clerk Karen Wadsworth has been unanimously re-elected House Clerk.

This is Wadsworth's eighth term.

Norelli Re-Elected

House Speaker Terri Norelli has been elected to a second term.

With 391 Members newly sworn and voting, Norelli received 230 votes.

Minority Leader Sherm Packard received 104 votes, and Republican Bob Rowe received 53 votes.

Democrat Kris Roberts received three write-in votes and one ballot was blank.

Three Way Race for Speaker

Okay, it's not much of a race. Terri Norelli will soon be re-elected Speaker of the House.

The Republican Caucus has nominated Minority Leader Sherm Packard.

Representative Robert Rowe (R-Amherst) is also seeking the gavel, and is making a unique case from the floor. He wants more partisanship in order to get less partisanship.

By separating the Speaker's Office from the Democratic and Republican Caucuses, Rowe says the Speaker can meet the needs of all 400 Members, and the two party caucuses can make their cases in a less confrontational fashion. Rowe would change House rules so that rather than appointing the Majority and Minority Leaders, each would be elected by their caucuses.

Currently, the Speaker selects the Majority Leader and respects the nomination of the opposing party for Minority Leader. Rowe also promises a more open process, saying that too often last term, House leadership shut off debate in Committee and stacked debate on the House floor.

UPDATE- I just spoke with Representative Rowe as the balloting is concluding. He says he had received pledges of support from several Democrats, and that if Sherm Packard hadn't placed his name in nomination, it would have been a very close race.

"I've been a moderate, consensus-builder, and I'm running because this House has changed. Hostility. Get even. I was listening to the nominating speeches, and thought I must have served in a different Legislature for the past two years," Rowe said.

Give everyone the same choices the Obamas have


Even before taking office, Barack Obama's choices give us a great example of a change we can make in New Hampshire just by following his example. But it's not a choice he made as President-elect; it's a choice he's making as a father.

Shortly after the election, Barack and Michelle Obama visited the White House. Like any good parents, decisions about their children were high on the agenda. The Obamas had to consider dozens of options to find the right choice for a school for their children. They settled on a well-known school in the District of Columbia, but only after considering quite a few options and deciding what was the right fit for their children's educational needs.

Figuring out what is best for your children is an important priority in anyone's life, but it's different for the Obamas. The Obamas are rich, and the education system most people of more modest means operate in doesn't offer the same choices the Obamas faced.

For most families in the country and in New Hampshire, the education decision is premade for them. If you live at 1600 Pennsylvania Ave., then you go to this school. No school visits, no work to find the right fit for your kids. There's one school based on your zip code.

In many cases, particularly in New Hampshire, that one geographically assigned school is a pretty good choice for most kids. But it isn't and can't be a good choice for all kids. Kids are different. Their needs are different. Their learning styles are different. Their educational achievement is different. What their parents want for them is different.

I think most of us would agree that the Obamas' experience was better. They had many choices for their kids. They could consider a variety of options and decide which school was best for their particular circumstances and their children. They did the same thing back in Chicago. They considered their options and chose a local school, but a privately run one. No one begrudges them the choice they made. Most of us admire the care they took to do what was best for their children.

They have a high family income, so they have choices. People with a low family income may have just as many educational considerations, but they have essentially no choices.

None of us would argue that the Obamas should send their kids to a school picked solely on the basis of their geography. Even if he weren't President, if they were just two professionals with kids living in that neighborhood, we would agree that the children's education would be better by considering a number of options.

That same dynamic is true of a family living in Merrimack or Dover. Assigning each child a school on the basis of which street he happens to live on is convenient, but it isn't the same as making a good choice based on the child and his needs.

There are many ways to change the system to allow more options for parents without throwing out the current system we have. In most cases, for most kids, the local neighborhood school will probably be a good choice. Wealthier parents who decide their children need something else or find a different school with a better fit can choose that option. We need to find a way to create more options for children of more limited means.

A few years ago, the Legislature considered and almost adopted a 21st century scholarship bill to increase educational choices for lower-income families. The bill would have created a fund and given scholarships to children of modest means to use at any approved school in the state. Those children and their parents would have more options, just as the Obamas do.

It doesn't have to work precisely that way. The important thing is to address the economic obstacle that creates a very different set of decisions for richer kids and poorer kids. Today, rich kids have choices; poor kids don't. Most kids, rich or poor, go to the assigned school. But in an ideal system, every parent would go through what the Obamas went through. We would consider many different options for each child and choose a school on the basis of the child, not on the basis of geography or administrative convenience. There's no reason not to make that change today in New Hampshire.

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

Organization Day

The New Hampshire House and Senate are organizing themselves today, as required by the State Constitution. The House just completed its roll call of the 400 Members-Elect, and will administer the Oath of Office en masse. 390 Members-Elect answered the call.

Anyone missing the Roll Call will be sworn in before the next session they attend.

The Governor will now be summoned to the House Chamber to give the Oath. The newly-inaugurated Members will then elect their officers, including Speaker of the House, as well as the House Clerk and House Sargent at Arms. The Senate will do the same for their Members and Officers.

Once both chambers are set up, they will meet in Joint Session to choose two additional Constitutional officers, the Secretary of State and State Treasurer.

Tuesday, December 2, 2008

Telegraph all over state budget

Kevin Landrigan blankets the state budget this morning, with a pair of pieces.

First, he reports on the growing shortfall in the state Highway Fund, along with the hopes for free money to start flowing from the Obama Administration:
A federal stimulus package from President-elect Barack Obama would help pay for much-delayed projects, but does little to deal with a projected, $153 million deficit facing the Department of Transportation, Commissioner George Campbell said Monday.

"A lot of people think if we get a 100 percent fully funded stimulus package that it's going to solve all our problems, but it's not,'' Campbell told a legislative commission that will soon prepare a final report on the state highway fund.
Then, Landrigan turns his attention to health care, as State Health and Human Services Commissioner Nick Toumpas says that rising health care costs will keep going up:
"A business as usual approach will not be available. We need to fundamentally examine what we do and how we do it," Toumpas said.

Spending to maintain current services from all sources (including federal grants and local property taxes) would go up 16.5 percent over the same period. The total health and human services budget would increase from $3.3 billion in the current two years to $4.4 billion in the next two. For the past several months, Toumpas has engaged in an agency-wide dialogue with stakeholders to figure out how to more efficiently deliver services.

"Our ability to tweak rates and cut on the margins is just not going to fly moving forward," Toumpas said.
Both Campbell and Toumpas are telling legislators that the structural problems in their departments goes far beyond the current economic slowdown. State budget writers have been placing far too much blame on national economic conditions, and not enough on their own choices. They will have to make far different choices this year in order to close that gap.

Campus costs: Sorry, no big raises

Despite an historically large budget deficit, New Hampshire Department heads have asked the Governor for huge increases across state government. While these wish lists don't have much to do with the budget actually proposed by the Governor or adopted by the Legislature, the University System is seeking a 9% increase next year, drawing criticism from the editorial page of the Union Leader:

Yet USNH officials displayed a tin ear by merely giving lip service to the slowing economy while asking last month for such a big increase in state aid and reiterating the plan to raise tuition by 5 percent.

USNH also boasts that its cost of attendance (tuition, fees, room and board) rose less than 6 percent a year this decade. But that is well above the rate of inflation. Each year USNH schools get a little less affordable for the average New Hampshire family.

Monday, December 1, 2008

Pat Buchanan- Really, really wrong on trade

Pat Buchanan has a knack for being as wrong on trade issues as it's possible to be. In this morning's Op-Ed, Buchanan argues that "What's good for GM is good for the GOP."

And to let the auto industry die is to write America out of much of the economic future of the planet.

In a good year, like 2005, Americans buy more than 17 million new cars, and West Europeans as many. Tens of millions in Eastern Europe, Russia, China, India and Southeast Asia are now moving into the middle class each year. These folks will all need or want one or two family cars. If we let the U.S. auto industry die, that immense and burgeoning market will be lost forever to America, and ceded to Asia.

"Who cares?" comes the free-traders' reply. Japanese and Koreans are setting up factories here. They can pick up the slack.

But that means Americans will work for and depend on foreign companies for a necessity of our national life as vital as the imported oil and gas on which our cars and trucks operate. All the profits of the mighty automobile industry in America will be sent abroad.

I'll leave the politics to others for now, though trying to outbid Democrats for the love of union workers seems like a losing strategy. The protectionist policy behind Buchanan's argument is what's really at fault. Buchanan would pump billions in taxpayer dollars in failing companies, bailing them out for the decades of bad decisions that have led to their decline. American consumers have turned away from "American" cars because they are more expensive, and less reliable, than comparable "foreign" cars. I use quotes because I have a hard times telling the difference between a Ford assembled in Mexico and a Honda made in the U.S.A. Which is more American?

If taxpayers refuse to bail out the Big Three, the U.S. auto industry won't die. It will change significantly. Ford or GM might even be bought up by a foreign company, just as Daimler did to Chrysler earlier this decade. But that new owner won't start shipping immense profits overseas. It will take on the problems of the company it buys. Some labor agreements might get restructured, bringing pay and pensions back to competitive levels. Some of that pension obligation might even get shifted to taxpayers, but that's a problem with our pension system, not the auto industry. None of these details represents a decent reason to protect poorly run companies from feeling the consequences of their bad decisions.

Bailing out the Big Three is subsidizing failure. And you only subsidize something when you want more of it.

Revolting Developments

Tough economic times and rampant government spending are boosting the efforts of taxpayer groups in New Hampshire. But instead of the State House, these groups are concentrating on City and Town Halls across the Granite State. Chris Dornin profiles the trend in the New Hampshire Sunday News:

Republican Mayor Frank Guinta of Manchester tried and failed to get the Democrat-controlled board of aldermen to put a cap before voters this fall.

"There were enough petition signatures, but they voted to do it next November," Guinta said. "A cap would force the city to choose priorities and find cost efficiencies. In a recession, you can't spend what you don't have. A vote of 10 out of the 14 aldermen could still override the cap in case of emergencies."

Naile said officials in Concord and Manchester will come to regret blocking a vote in 2008.

Concord officials filed suit recently to keep the matter from ever coming to a vote. He thinks they will lose.

"They're rightly scared of this," Naile said. "They made a mistake. When it finally goes to vote next November, the economy will be even worse. We'll be whipping up our troops over it."

Mike Biundo chairs the New Hampshire Advantage Coalition and said the taxpayer rights movement is huge and growing.

"In addition to Concord and Manchester, we've been in touch with folks in Londonderry and Merrimack about caps," he said. "Some folks in Andover are interested. The one in Somersworth (this month) only failed by 8 percent. The recession is fueling it. People are looking for tax relief."

Taxes and Fees

The Legislature holds its Organization Day on Wednesday, and doesn't start legislating until January, but incoming lawmakers have already filed a bevy of levies on New Hampshire's taxpayers. Tom Fahey rounds up the proposed taxes and fees in this week's Under the State House Dome:
Lawmakers have filed a dozen tax bills so far on gasoline, tobacco, bottles, beer, income (three of those), even fireworks.

One resurrects the Legacy and Succession tax (better known as the death tax) that produced $25 million a year before it was repealed in 2002.

Safety Commissioner John Barthelmes told lawmakers he'd like several bills to bump up a couple of fees his agency collects.

Want to register your boat? Get ready to dig deeper to help the navigation safety fund that covers enforcement of boating speed limits.

Wednesday, November 26, 2008

Legislators can balance the budget if their priorities are straight


While the state still struggles to fix a $250 million budget deficit in the last year of this budget, a much bigger problem looms just after the new year. The next budget will start with the largest budget hole in recent history. Politicians of all stripes will need to put principle over politics and avoid the sniping that too often replaces debate in modern times.

Legislators dealing with the current two-year budget had to resolve a $71 million revenue shortfall in the first year and an additional $250 million problem in the second year. A series of spending cuts, small tax increases and borrowing has trimmed the second-year deficit to $75 million. However, some of these proposals have put problems off until next year's budget.

As the governor prepares a budget proposal due in February, estimates of the gap between current programs and likely tax revenues range between $250 million and $800 million. Although much depends on whether the economy recovers quickly, a good median estimate is that we face a $500 million problem. By almost any measure, this will be the most difficult budget in many years.

Many politicians and outside observers will be tempted to pick apart the details of any proposal to score points against their political opponents. Instead of squabbling over details, politicians should agree on broad goals to limit the games that can be played over small points selected out of context.

Broadly speaking, I think the vast majority of elected officials can agree on the end goal. At the end of the budget cycle, regular expenditures and regular revenues should be in balance. That may sound like a fairly simple goal to the average citizen who has no choice but to balance his or her own budget. However, New Hampshire's budget is not balanced that way and is not currently required to be balanced that way.

The last couple budgets, for example, have spent more than they hoped to raise. The current budget got in trouble because revenues fell quite a bit short of the estimates used to balance spending. However, even if revenues had come in as budgeted rather than $300 million short, the state's general fund had planned to spend $108 million more than it hoped to raise.

The extra spending was balanced with one-time revenue sources, notably surplus money from the previous budget. Generally, regular recurring programs should be paid for with regular recurring tax revenues, not one-time windfalls, just as you wouldn't pay for a mortgage payment with an unexpected lottery windfall.

Getting back to a truly balanced budget will take both years of the next two-year state budget. In the current economic climate, it is reasonable to expect the first year to be a transition period. Many unusual and one-time sources are being used to balance the current budget, and it will take some time to readjust.

The current budget will be balanced with $40 million of "bonded" or borrowed money. It also includes a series of one-time revenues, such as a large transfer from the Pease Development Authority and the governor's recent proposal to take $15 million from other dedicated funds to bail out the state general fund. In addition, the incoming President is likely to propose a bailout package that could include $50 million to $100 million in one-time aid to the state.

The one-time revenue and borrowed money cannot be expected on a regular basis. Therefore the state must wean itself from it. Adjustments to spending this year and next must be made so that spending and revenue in the second year of the next budget balance.

Once the budget is restored to balance, our sloppy balancedbudget law should be amended. Each year the budget should be in balance, and surpluses carried forward from the previous year should not be counted toward balancing current spending and revenue. The sloppiness of the existing law makes it possible to defer some decisions and put off problems into the second of the two budget years.

The legislative session will see many arguments and debates over raising taxes, cutting spending, finding new revenue sources and changing the budget process. But both parties and most factions ought to be able to agree on the ultimate goal of getting back to balance at the end of the second year. Agreement on that goal offers some hope that the real debates will center on differences of principle and put at least some modest limits on less productive political bickering.

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

Tuesday, November 25, 2008

Gas Tax on the Horizon?

With gas prices dropping under $2 a gallon for the first time in over three years, maybe New Hampshire drivers are willing to pay higher gas taxes. Maybe not. But some lawmakers are turning to the gas pump to try to replenish a Highway Trust Fund depleted by spending on other agencies and drivers staying home this summer.

The Concord Monitor reports on two Representatives who see higher gas taxes as the only way to pay for roads:

Rep. David Campbell, who has chaired this year's committee to study the highway fund, has said he will sponsor a gas-tax-increase bill. He said he hasn't sorted out all the details - including how big a raise he'll support - because it's not clear how much federal aid the state will receive. But, he said, he's come to believe that cutting alone won't right the road budget.

"At some point you can't cut the highway fund any more," said Campbell, who is not related to the transportation commissioner. "Are you going to cut winter salt? Are you going to cut snowplowing? Are you going to cut paving?"

Campbell, a Nashua Democrat, said he has backing from both sides of the political aisle.

"It's something that I'm hopeful the leadership of both parties, in both parties, can get behind," he said. "If they don't, I want them, whoever they are, to answer for the consequences if we don't do it. Show me where we're going to cut."

Rep. Candace Bouchard, a Concord Democrat who chairs the Public Works and Highways Committee, said she will support Campbell's bill.

"I'm pretty hopeful that people will understand the need to maintain our transportation system," Bouchard said. "I think we need to make our argument and show everyone that we've done our homework."

New Hampshire drivers currently pay 38 cents per gallon in gas taxes, 19.4 cents to New Hampshire, and 18.4 cents to Washington.

The Editorial Page

The Union Leader comes out against tapping New Hampshire's Rainy Day Fund to pay down the state's budget deficit:
The budget situation is likely to get worse next year. Tapping reserves now would leave less in savings for a real emergency. As bad as things seem now, this isn't a real emergency.

And depleting savings now would only delay the inevitable cuts. By contrast, cutting now saves more over the long term and reduces the amount that might be needed from the rainy day fund down the road.

That's why Lynch should have made the additional $75 million in cuts he has already identified as needed, but has decided to delay until next year.
Drawing down the Rainy Day Fund would not only remove the safety net against even tougher times, but would have serious implications for New Hampshire's bond rating, making it even harder to finance long-term capital projects like roads, schools, and bridges. Then again, bo

Meanwhile, Foster's Daily Democrat describes last week's proposed cuts as "reaching to meat and bone":
Friday's cuts will affect everything from school aid to overtime and carpooling.

Water and pollution grants will be deferred until next year. LCHIP will not enter into any more funding commitments this year, and the program will repay the state for the $3 million in its budget last year.

The current University System of New Hampshire budget will be slashed by $4.5 million, and the community colleges will lose $1.7 million. The university system and community colleges have agreed to not raise tuitions to cover the losses.

The agency with the largest budget — historically more than half of all state funding — is the Department of Health and Human Services. It is HHS that is the most people-related department in the state, administering to often the most needy and most vulnerable members of our society — people to whom we have a moral and financial obligation.
Many of the Governor's cuts are superficial, such as directing state agencies to reduce overtime and travel where possible. Others simply defer spending into the 2009 budget, adding millions to next year's mounting deficit. None of the cuts proposed last week eliminate state jobs or bring agency spending back near where it was before last year's record increases. The tough spending cuts are coming, but they haven't happened yet.