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Friday, February 27, 2009

A Trojan horse: The stimulus bill trick

The Union Leader warns on its editorial page about the dangers of accepting money in the federal stimulus bill that will worsen New Hampshire's long-term budget problem:

Gov. John Lynch has caught on to the scam that is the federal stimulus bill. He sees that some stimulus money would commit New Hampshire to higher state spending in the long run. He said on Monday he would consider rejecting that money.
The same day, he said New Hampshire should receive $50 million in Medicaid money from the stimulus bill by the end of the week. His office expects to include in the next state budget another $180 million in Medicaid subsidies from the stimulus bill. That money comes with strings that tie the state to higher Medicaid spending.

To get the Medicaid money, New Hampshire must agree not to eliminate any services or change eligibility requirements in a way that would reduce caseloads.

To get more welfare money, the state has to put more people on welfare.

To get more money for unemployment benefits, the state has to change its laws to allow more people to qualify for the benefits.

Wednesday, February 25, 2009

Lynch's new budget contains good ideas


Gov. John Lynch's proposed budget for 2009-2010 creates important policy priorities and sets a good path not just for the rest of the budget process but for the future.

I have been critical of the budget for not moving revenues and expenditures closer to balance over the next 2 1/2 years and instead relying on one-time revenue sources to delay the hard decisions. We shouldn't lose sight of that, but the budget also includes a lot of good ideas that deserve to be implemented.

The reality of the budget is dictated by the serious financial crisis. In the four months remaining in the current two-year budget, the governor estimates a deficit of $125 million to $140 million. He must adjust spending and revenues to erase that deficit and then close a shortfall in the next two-year budget.

According to the governor, it would cost $1 billion more than we can expect to raise in current taxes to fund agency budget requests. The agencies never get what they wish for, but even a spending freeze would reduce the budget hole to only about $550 million.

There are two ways to cut spending. One is the hunt and peck method. People who don't manage departments and don't have detailed information hope to find the latest bridge to nowhere or state nursery we don't need. Some cuts will come from hunting and pecking, but the ideas tend to be more serendipitous and less strategic.

The governor pointed out a few hunt-and-peck-style proposals, such as cutting a geography program at Keene State, but the bulk of his savings come from something that we might call directed management. Gov. Lynch has 18 department heads and a host of agencies under his direction. His managers are much more intimately familiar with the details of their operations than he or anyone else in state government. The budget makes many changes that they came up with, but it also includes what used to be caricatured as "across-the-board cuts." Lynch doesn't make every agency cut 10 percent of its budget. Rather, he assigns a dollar amount to an agency and expects the management team to identify cuts in that amount.

This helps avoid a problem Gov. Walter Peterson has talked about. Peterson noted that when a governor asks his commissioners for cuts, the less helpful ones will propose cutting their most popular programs, knowing full well that no legislature would approve such a thing. Directed management avoids that by specifying not the program but the dollar amount.

Lynch's proposed budget directs unspecified cuts in the Bureau of Land and Tax Appeals, Health and Human Services, the judicial branch, the legislative branch, the Executive Council, Safety, Transportation, the Liquor Commission and the Community College System.

He cuts more than $65 million through these back of the budget footnotes. Directed management is a good way to make the most of the valuable management team we have working in state government. We should hope the Legislature does even more of it as the budget moves forward.

More than just managing spending reductions, the governor has proposed changing how we do things. Much is made of the proposed 350 layoffs, but the governor isn't cutting state employees as much as changing what they do. In fact, the budget calls for the total number of state employees to increase from 12,439 to 12,517. Some areas may shrink, but there will be more employees in total.

Conservatives and liberals alike are looking at criminal justice reform. Two decades ago, Sen. Gordon Humphrey talked about electronic bracelets and home confinement. The governor has proposed revisiting that idea. Ten years ago, Charlie Russell (in a paper for the Josiah Bartlett Center) proposed better use of treatment programs to try to keep prisoners from coming back once they were released. The governor wants to look at that idea as well.

No one would suggest that violent crime doesn't demand swift and certain jail time. But the governor is absolutely right to look at ideas to save the state money and make society safer.

Many other principles in the governor's speech point the way forward to reform. The liquor commission's job can be equally well accomplished in "agency stores" as in state-run stores. In fact, wine sales occur half in state-owned stores and half in private stores. No reason then not to look at letting stores that sell wine and fortified wine also sell spirits.

The governor also had sensible things to say about combining state departments in the long term, eliminating dedicated revenues and sunsetting state agencies. If you want to rethink state government, that's a good start.

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

Monday, February 23, 2009

Watchdog on the Radio

I'll be guest-hosting "Bulldog Live" this afternoon on the Pulse from 1pm to 3pm.

You can listen on The Pulse Network (107.7FM, 107.1FM, 94.3 and AM1400 (Upper Valley)) and www.wtplfm.com.

Call in with your questions and comments at (866) 823-1077.

We'll be joined by Governor John Sununu, and talk Oscars with Amy Diaz from the Hippo Press.

Friday, February 20, 2009

Concord stands to lose $3 million

Governor Lynch's plan to confiscate local revenue sharing and use it to balance the state budget is meeting resistance at City Hall. Shira Schoenberg reports on how the Lynch Budget would hit Concord in this morning's Concord Monitor:
The city of Concord is falling deeper and deeper into a budget hole. City Manager Tom Aspell warned the city council this week that if Gov. John Lynch's proposed budget passes, the city would lose $3.2 million in state revenue. That loss would bring the total gap between expected revenue and the amount of money needed to maintain current service levels to $6.5 million, out of an approximately $50 million budget.

The amount of missing money is equivalent to the operating budgets of the recreation department, human services department and library combined, plus a good chunk of the city administration. And city officials have set a goal of not raising the property tax rate.

Thursday, February 19, 2009

The Governor’s Budget: A Good First Step. But There's More To Do.

By Rep. Neal M. Kurk

The governor is to be commended for putting forth a state budget for 2010/11 that, while growing by 12% overall, holds the line on state tax-funded spending. In the face of declining state tax and fee revenues, the governor’s budget eliminates or reduces some state government programs and associated staff positions, lowers health benefit costs, improves operating efficiencies and frees the state liquor commission to produce greater profits. Unfortunately, the governor’s budget is neither balanced by traditional standards nor is it sustainable into the future.

About $83 million of the state’s share of local school debt service on local school building bonds will no longer be paid from state taxes but will be paid by borrowing the money. While bringing in other funds to balance the budget, borrowing to pay for on-going operating expenses is bad public policy. It’s like borrowing to help pay the mortgage. Indeed, state law prohibits bonding operating expenses. By our traditional standards, the governor’s budget is not in balance.

The governor’s budget is not sustainable into the future. In the face of significant decreases in state revenues, state-funded spending for 2010/11 remains at about the same level as in 2008/09. A significant part of the difference is covered with one-time money. This includes selling state assets, like the Concord liquor warehouse ($4 million), receiving up-front payments for leasing land around state liquor stores ($27 million), reducing the surplus in a state medical malpractice insurance fund ($60 million) and selling 1.5 miles of I-95 in Portsmouth to the turnpike system ($125 million). This helps balance the next budget, but what happens in future budgets? It’s unlikely that stronger state revenues in 2012/13 will cover both inflationary increases and fill this one-time revenue hole.

Increased taxes and fees are also part of the governor’s proposal. Three tax increases boost the general fund: the tax on rooms and meals increases by 9% -- from 8% to 8.75% ($40 million); the tobacco tax goes up by another 35c ($70 million); and a new tax on gambling winnings raises $16 million. The highway fund gains from a $10 increase in the fee to register a vehicle ($24 million) and E-Z Pass changes ($8 million). These are legitimate ways to balance a budget, but they are inappropriate in a recession and run counter to federal efforts to lower taxes in order to stimulate the economy.

Downshifting -- lowering the state’s financial burden by increasing municipalities’ financial burden -- is perhaps the most difficult part of the governor’s budget to accept. State aid to cities and towns is cut in three areas.

First, the state’s share of municipal employees’ pensions is cut from 35% to 30%. Second, state aid for new water and sewer projects is eliminated. Third, and most significant, state revenue sharing, a decades-old program, has been eliminated, costing cities and towns and their property taxpayers a whopping $166 million over the next two years. Under the governor’s plan, the revenue-sharing money lost to municipalities is offset by additional federal stimulus money given to local school districts. In theory, higher municipal taxes will be offset by lower school taxes, and property taxpayers will be held harmless.

But even if property taxpayers’ total tax bill is unaffected, the spending/taxing balance between schools and towns will have been tilted, and tilted dramatically, in favor of schools. With lower tax rates, it will be easier for schools to increase spending. Conversely, with higher tax rates, it will be harder for cities and towns to increase spending. Municipal infrastructure and services will suffer.

The legislature has its work cut out for it.

Neal M. Kurk is Republican state representative who lives in Weare. He can be reached at 592-7253.

Wednesday, February 18, 2009

Lynch's Budget: The Wolf Is At The State House Door

Veteran State House reporter and editor John Milne has an interesting take on New Hampshire's budget crisis in this week's column in the Caledonian Record:
As Gov. John H. Lynch called for spending cuts and layoffs in last Thursday's message laying out a $3 billion general fund budget over the next two years, I sat in the back of Representatives' Hall and in my mind conjured up the image of a family, frantic because a bill collector's at the door.

Mom stalls the repo man while the kids rummage through coat pockets and bureau drawers, looking for quarters and dimes that might have fallen under the socks. Dad thumbs through the telephone book, hoping that he can get his rich uncle to pay the money he's promised. He's thinking about buying a couple of lottery tickets in hopes of hitting the jackpot. The youngest daughter finds a coffee can, long forgotten on a closet shelf, containing a couple of $20 bills.

They might manage to pay the collector enough to keep him quiet, but the family had to put off paying other bills. They think, maybe, they can get Dad's uncle to directly pay those other creditors. They've stopped buying lattes at Starbucks, even tall coffees at Dunkin's, and now agree to stop getting pizza on Friday nights.

All this time their teen-aged son is playing his video games and listening to music, oblivious to the frenzy around him.

The governor's proposed budget is still in the red


The governor's first draft of a budget made some important suggestions for lawmakers to consider. But it leaves much work to be done and a huge problem of around a half billion dollars.

The problem Gov. John Lynch faced going into the budget process was enormous. If no changes were made, we would face a current-year shortfall of $122 million and a hole in the coming budget of an additional $677 million over two years. In other words, as the governor prepared his budget, he knew that he had to make changes to reduce spending or increase revenues by $799 million just to balance the state's operating spending.

On the spending side, freezing general fund spending at current levels for two years would reduce the hole in the coming two-year budget to around $450 million.

In his speech, the governor suggested he had reduced general fund spending by $43 million, or 1 percent. The problem is that his so-called reduction is based not on actual cuts but on hiding money previously counted as general fund spending.

For example, the liquor commission spending increased 28 percent from $71 million in the last budget to $91 million in this budget. Yet the liquor commission is moved offline into its own fund, so the increase is counted as $71 million spending cut.

Another $83 million in pseudo-spending cuts comes from borrowing $83 million to pay for school aid. We're still spending the money, but because we're borrowing it, we score it as a spending cut. Real general fund spending isn't being cut but is being increased by hundreds of millions of dollars.

The governor should be commended for proposing some real changes to spending that will generate a lot of controversy but are important to consider when money is so tight. He's proposed changing how we deliver many services to reduce administration costs, whether combining district court offices, closing a prison or consolidating state agencies. He's also cutting almost 800 positions, the majority through attrition, but some through layoffs.

That the budget increases despite all of those changes just shows how difficult reducing spending can be and how much more work needs to be done. That's part of the reason the governor took the unusual step of saying at the beginning and end of his speech that this first draft is just one road map and that he would continue to work with the Legislature over the next four months.

The end point for all parties and all factions is, as the governor said, a balanced budget. But the current budget fails to achieve this. Annual revenues and annual expenditures are not balanced. The budget requires the use of close to a half billion dollars of one-time revenue sources, including the borrowing mentioned earlier, draining a medical malpractice insurance fund and using federal stimulus money to replace state spending for one budget. It also spends the rest of the previous surplus funds and reduces the rainy day fund substantially. Reserves that had been as high as $151 million two years ago will be reduced by two-thirds.

Because the budget crisis is as bad as any in the modern history of the state, most policy makers understand that this budget will end up serving as a transition to get us back to fiscal respectability. The size of the hole we dug for ourselves will require that we use some one-time money to get us back to normal.

The problem with the current proposal is that it uses more and more one-time funds rather than gradually weaning the state off. Closing the current deficit of $120 million with revenue sources that don't recur is acceptable, but then we should slowly move toward real balance until regular ongoing revenue sources support or nearly support operating expenditures.

Even if we allow for a transition period, fiscal year 2011, the second year of the budget being debated, should come close to having revenues and spending match. It doesn't. Revenues in 2011, including a temporary increase in federal Medicaid dollars, are $2.3 billion. Net spending in the same year is projected to $2.4 billion, creating a gap of $131 million.

As the House and Senate consider additional spending changes, it will be important to consider ideas, not politics. The problem is so big and we are so far from solving it that everyone will have to pitch in. The governor's proposal was step one, but we have quite a few big steps left.

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

Tuesday, February 17, 2009

Carving up the stimulus

President Obama is expected to ring the dinner bell today by signing the $787 billion "Stimulus" package into law. New Hampshire has already designating a stimulus czar to help hand out the federal money. Lauren Dorgan reports on the project in this morning's Concord Monitor:
But it isn't exactly clear yet where all that money will go. Money from the bill is expected to help patch the state budget and to speed construction on roads and schools. Yesterday, Bud Fitch, the state's new stimulus czar, pored over the 1,000-page bill, compiling a spreadsheet and tabulating what's coming to New Hampshire, using various distribution formulae and knowledge of what New Hampshire officials and residents can apply for through a competitive grant process for the calculation. Other pots of money will be distributed by yet-to-be-written rules from federal agencies.

"Part of my charge is to identify the ones that potentially could be sought by New Hampshire, or somebody in New Hampshire," Fitch said.

Friday, February 13, 2009

Hippo Press looks at Transportation Priorities

Jeff Mucciarone looks into New Hampshire's Transportation priorities in this week's edition of the Hippo Press:
The state DOT is requesting $535 million from the federal stimulus package, including $300 million for construction of a commuter rail from Lowell to Manchester, something not included in the state’s 10-year plan, which was approved in June 2008. More than 60 percent of the DOT wish list is for projects not considered priorities by the legislature, Bosse said.

The initial argument was that the federal government would require considerable funds to be used on rail projects, but that may not be the case now. Bosse said as of last week it looked like the state would receive about $11 million for rail projects. No one was necessarily expecting the full $300 million — and certainly not the full $535 million overall expected to come to the state — but some hoped amounts would be much higher for rail projects in particular, Bosse said.

Thursday, February 12, 2009

List of Court Closures

Colin Manning, Governor Lynch's Press Secretary, has provided the list of eight District Courts that would be closed under the Governor's Budget submitted this morning:

New London

According to Manning, the list of underperforming liquor stores to be closed has not yet been finalized.

Here are the source documents for the budget:

Governor's Operating Budget
Governor's Capital Budget
Governor's Executive Budget Summary
Complete Operating Budget

Budget Address

Here is the complete text of the Governor's Budget Address.

Live Blogging the Budget Address

Amended to fix some of the typos caused by working on a folding chair in the back of the House Chamber.

11:04AM- Lynch closes with a call to work together. We'll post details on his budget proposal once the spreadsheets are available.

11:03AM- Super-Safety- Lynch would move all law enforcement functions under the Department of Safety, including Fish & Game, Liquor and Racing and Charitable Gaming. He would also merge Agriculture, Fish & Game, Parks and Culture Resources into a Department of Natural and Cultural Resources, and merge Resources and Economic Development with Employment Security.

11:00AM- Bumping- Lynch wants to eliminate "bumping" privileges, which allow senior state employees to take the job of a lower-level employee if their position is elimiated. This will be a major hurdle with the SEA.

10:58AM- Lynch wants to consolidate the dozens of regulatory and licensing boards under state government, rather than the largely volunteer boards they are now. Lynch wants to consolidate their staff and adminstrative expenses.

10:56AM- Vehicle Surcharge- Lynch's call for a $10 per vehicle surcharge on vehicle registration drew the first audible response of his address, a loud gasp from several spots in the Chamber.

10:55AM- Roads and Bridges- Lynch would transfer part of I-95 from the Highway System to the Turnpike System, which would allow the use of toll revenues to pay for that road. Lynch funds this transfer with a 50 cent increase in the Hampton toll.
There is also a 50 cent increase in the Bedford toll, and various other toll increases statewide.

10:52AM- Taxes- Lynch proposes a 35 cent increase in the tobacco tax, a .75% increase in meals and rooms, and a tax on gambling winnings over $600.
Lynch repeats his promise to veto either a sales or income tax.
He remains skeptical of expanded gambling.

10:51AM- Revenues- Lynch estimates that the 2009 deficit will be $275 million. He is counting on $50 million in federal Medicaid money, using $50 million from the medical malpractice insurance fund, and taking $38 million from the Rainy Day Fund.
Lynch would use another $60 million from the medical malpractice insurace fund to balance the 2010-2011 budget.

10:49AM- Liquor Stores- Lynch proposes closing under-performing stores, but building one or two new stores in growing markets. Lynch advocates leasing land next to Liquor Stores, including those at the Hooksett and Hampton Welcome Centers, and selling the Concord Warehouse. Lynch would also give the Liquor Commission greater authority to close and open stores and set prices.

10:47AM- Courts- $68 million for Fiscal Year 2010.
Lynch wants to close eight district courts, saving $2 million a year.

10:44AM- Corrections- Lynch proposes closing the Lakes Regions Facility, and includes Capital Budget money to design and site a new Women's Prison. Between 100 and 200 non-violent illegal immigrant inmates are scheduled to be deported. Lynch wants to enter an agreement with U.S. Immigration to speed these deportations, and reconfigure the Berlin Prison to house more inmates. Lynch is also proposing expaneded use of electronic monitoring, versus incarceration.
Lynch wants to coordinate with neighboring states to build a 2,000-3,000 Northern New England Correctional Facility.

10:38AM- HHS- $721 million, just below 2009 levels.
Lynch also proposes closing the Tobey School and eliminates the catastophic illness program.

10:37AM- Lynch calls for a slight increase in Community College and University System budgets. (The Executive Summary includes a large increase in Community College spending, and nearly level funding for the University System.)

10:36- Governor Lynch is giving a few examples of program cuts:
Geography Education at Keene State College
Administrative Services switching to a four day a week cleaning schedule
International Trade Office moving from Portsmouth to Concord.
Closing down regional DMV offices.
No new grants from Environmental Services.

10:33AM- Layoffs- Lynch's budget defunds 400 vacant positions, and calls for layoffs of 250 to 300 state employees.

10:32AM- Lynch is proposing a new state health plan, which he says would save $3.5 million over the next two years, some of which would be given to workers directly in a one-time payment.

10:31AM- Retirement System- Younger retirees will be paying $100 a month for Medicare, which retirees over 65 already pay. Retirees will also see benefits cut to mirror those of active state employees.

10:28AM- Ends revenue sharing of rooms and meals taxes and reduces state contribution to retirement costs from 35% to 30%. Lynch calls for sending Feneral Bailout money directly to towns instead.

10:27AM- $123 million for "adequency" to local schools.

10:25AM- Lynch is projecting ahead to 2012-2013, and assuming revenues rebound. He says if that happens, then his budget is "sustainable."

10:23AM- "This budget spends $2.97 billion in general funds over the biennium. That is $40 million- or one percent less- than estimated actual spending for fiscal years 2008-2009." This figure is after the 17.5% increase in General Fund spending, which has since been pared back slightly by the Governor and Fiscal Committee.

10:21AM- "This budget represents one road map for how we can address our state budget. It is not the only road we can follow."

10:10AM- Governor Lynch has given John DiStaso a sneak peek of his budget proposal, which you can read at the UnionLeader.com
The state appropriated $3.2 billion in the current two-year budget from general state tax sources. The total budget was $10.3 billion when spending from federal and other sources was included.

Lynch has already said whole programs will be eliminated in the next budget - making layoffs unavoidable. State House insiders predict several hundred people could lose their jobs out of the 11,500 who work for the state.

Lynch also has indicated that some state aid to cities and towns some could be reduced. The state distributed $550 million to communities over the current two-year budget, not counting school adequacy grants. Reductions in state aid could mean higher property taxes.

10:08AM- You can listen to the Address online here.

We're live from the State House, where Governor John Lynch will deliver his Budget Proposal to the Legislature. By law, this is the only time that New Hampshire's budget actually has to be balanced.

Wednesday, February 11, 2009

Stimulus may worsen state budget woes


The bill formerly known as "stimulus" has gradually morphed into a gigantic Christmas tree that no longer promises to help, but rather threatens the fiscal stability of state and local governments.

With recession on our minds, the federal government began pushing the idea of using government spending to help the economy a year ago. In February 2008, George Bush pushed through stimulus checks to taxpayers costing a mere $168 billion -- chump change after the trillions in debt he was busy running up.

It turned out neither the $500 check he sent you nor the massive deficit spending managed to stave off the recession. It doesn't matter; we're going to try it again anyway.

Last October, they upped the ante and decided to print $700 billion to send initially to banks and then to car companies. Without it, we were told, we faced another Great Depression. It had to be a huge number to convince markets we were serious. So far, they're not convinced.

The next big idea was infrastructure. Instead of giving you money to pay bills or buy a TV, which is made overseas anyway, let's take lots of government money to pay directly for roads and the like. The idea is to give the money to state and local government to build roads, fix bridges. We build stuff, right here, right now.

President Obama talked about spending money only on "shovel-ready" projects. We weren't going to plan new things that would take a while, but we would immediately infuse the economy with billions of dollars in every state. The phrase "shovel-ready" was a good summary: "shovels" because these projects were substantive dirt-and-bricks-and-pavement kinds of things, and "ready" because it would happen immediately, if not sooner.

Remember, though, that Washington is a town without fiscal discipline of any kind. A giant spending bill like this wanders through, and everyone will take the opportunity to add a little here and there. As a result, the bill has become enormous and complicated.

We're told that the Senate "slashed" $100 billion off the House version of the bill, yet the Senate ended up spending $19 billion more ($838 billion versus $819 billion, according to Bloomberg). That sort of math goes a long way toward explaining the nation's debt problems.

Simplicity has also gone out the window. The spreadsheet summary of the bill contains more than 400 line items (I've posted it on www.jbartlett.org). The Washington Post published a flowchart of where the money is going. It will make your head spin.

If the $800 billion were divided up by population, New Hampshire would receive a grant for about $3.5 billion. Instead, we were told this week that the state will receive about $130 million for roads, bridges and trains.

The rest of the money will go to programs that don't necessarily need a shovel and aren't ready. In fact, the Congressional Budget Office found that only $107 billion (about 13 percent) of the package will be spent the first year. By the end of 2010, about half of the so-called stimulus will be busy providing "immediate help."

The sad truth is that any bill in Washington becomes a political football and is used to pay for other programs people weren't able to pass on their own. Just about everything the government does will be rationalized by some congressman as "helpful for the economy."

At the state and local level, everyone still sees dollar signs. Local wish lists total $2.4 billion. How many of those projects are things we would do if we were spending our own money? The danger is using the lure of "free money" to do things you might not otherwise do instead of paying for existing priorities.

At the state level, there is a risk that lawmakers will use one-time bailouts from the feds to cover up a serious budget problem. With revenues continuing to deteriorate, the next budget will be close to $600 million short, even if lawmakers freeze state spending for two years. If that hole is papered over with one-time grants from the federal government, the problem will be merely delayed, not fixed.

Bailouts and other one-time grants ought to be used for projects, such as bridges, that are one-time capital expenses. A one-time windfall can't support operating expenses that will recur year after year.

We stand at a crossroads. The governor has a great opportunity to lead us down the right path when he presents his budget tomorrow. At the beginning of the year, he said that we got into this budget mess ourselves and we need to solve it ourselves. His budget can and should be based on a solid financial foundation, not one-time, evaporating revenue. That sort of fiscal leadership will earn broad support irrespective of partisanship.

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

Monday, February 9, 2009

SNL Hits the Stimulus

Saturday Night Live might not be funny most of the time, but their poltical skits still manage to skewer whoever is in power, and at least partially reflect what people are thinking about our political leaders:

Wednesday, February 4, 2009

NH House votes another $16.3 million in cuts

Kevin Landrigan reports in the Telegraph Online about today's vote to cut $16.3 million in state spending:
The House of Representatives overwhelmingly voted today to cut spending $16.3 million as the latest attempt to close a larger hole in the current state budget.

Gov. John Lynch offered these changes earlier this month.

Once Lynch signs them as soon as later this week, it would still leave the state with at least $65 million in the red for the year ending June 30.

Hugh Gregg deserves attention now, too


The wrong Gregg is in the news today. Instead of paying attention to the job prospects of our current senior senator, we should be looking to the common sense advice of his father, a man who served as governor during difficult economic times.

Hugh Gregg's advice and actions during the state's economic troubles 60 years ago and then again during the last recession can provide a useful road map for Gov. John Lynch and the Legislature today.

When the senior Gregg became governor in 1952, his predecessor, Sherman Adams, had proposed sales taxes in each of his two budgets. Adams had been so adamant that many opinion leaders decried Gregg as naive when he pledged to balance the budget without any tax hikes or broad-based tax.

At the time, the state had a huge surplus built up during World War II. It had been whittled during the intervening years, and people assumed Gregg would run operating deficits and draw down the state surpluses. Instead, he balanced the budget by keeping spending essentially flat for two years and ended up adding to the surplus.

Fast forward 50 years. The state was again facing a similar problem. An income tax had passed each house in 1999, but was narrowly defeated on reconsideration by the House. Headed into a recession and facing a budget shortfall, Gov. Jeanne Shaheen had a tax commission look at alternatives for raising money.

Hugh Gregg worried that New Hampshire would walk away from "its unique and admirable fiscal history." In an opinion piece for the Josiah Bartlett Center, he argued that there were alternatives to finding the "least onerous source of new taxation."

Having watched the boom and bust cycles of state spending for half a century, he argued that "When business is good and help wanted signs are posted everywhere, governments tend to be profligate and don't worry too much about tightening their budgets." That certainly sounds like the recent fiscal history of the state.

Gregg pointed to former Gov. Hugh Gallen for a solution. Gallen had formed a commission to study government efficiency and find ways to reduce or consolidate programs. It proposed $58 million worth of efficiencies -- more than 10 percent of the budget at that time -- but few of its suggestions were implemented.

Seizing on Gregg's advice, a few years later Gov. Craig Benson formed an efficiency commission headed by respected business executive Mike Hickey. The commission recommended changes that would save $400 million over five years. Many of its suggestions were not implemented.

We needn't adopt the exact forms Hugh Gregg suggested, but the ideas are valid.

In the face of a recession, we shouldn't raise taxes. Even the Obama administration is proposing cutting rather than raising taxes to spur economic activity. Raising taxes raises the price of economic activity. We want more activity, not less of it. Let's take tax increases off the table. Let's extend that same consideration to cigarette taxes as well.

Smokers are an easy target, but we've hit them three times in the last four years. The cigarette tax rate is 160 percent higher than it was four years ago and has tripled in the last decade. The people most likely to smoke are also the most economically vulnerable, especially during this economic downturn. Taxing them first doesn't seem like sensible policy.

Gov. Lynch seems to be taking a page out of Hugh Gregg's playbook in his public statements about the budget he's preparing. Closeted in budget negotiations, he's spoken publicly about reducing the size of government and ruled out most forms of taxation.

The governor has at his disposal a better efficiency commission. Theoretically, the heads of each department know the details of the state budget better than anyone else. Directed to do so by the governor and the Legislature, department heads can find and implement efficiencies better than any individual legislator hunting and pecking through thousands of pages of budgets.

Recent budgets have always included directed management cuts. Instead of specific cuts, the budget will include a footnote telling the commissioner of a department to find and report to the Legislature on, say, $3 million of additional cuts beyond the budgeted amount. This is a good way of using the expertise of those most familiar with government operations.

The budget problem is larger than it has ever been. Even if we manage to freeze spending at current levels for two years, the Legislature will have to find $538 million of additional reductions (or revenue increases).

But the task is not insurmountable. The amount of revenue we will raise in fiscal year 2009 and probably next year is the same amount we spent in 2007.

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

Tuesday, February 3, 2009

NHBR: Rail Service in NH: "very" shovel-ready

Bob Sanders reports in New Hampshire Business Review that supporters of the proposed commuter rail line from Lowell to Manchester claim that work can be completed within a year:
“All the pieces of the puzzle are on the table,” said Mike Izbicki, interim executive director of New Hampshire Rail Transit Authority. “This is a very real project. This is the closest we’ve ever seen it — a real chance for rail to Manchester and maybe even to Concord.”

“This is very ready,” agreed New Hampshire Department of Transportation Commissioner George Campbell, who estimates that it would take two years for service to be put in place once the money is renewed.

But Dave Fink, president of Pan Am Systems, which owns the track and would presumably be doing most of the “shoveling” is even more optimistic. He thinks the necessary work can be done in a year. According to Fink, it would take a month to order the materials, and, in the current economy, there would be no problem calling back people, or hiring new ones, to do the work.
Rep. Candace Bouchard chairs the House Public Works and Highways Committee, and she adds a comment to the online version of the story:
It is not that I am not a fan of rail. For the stimulus goal of creating jobs, building rail would create jobs. However, I am not convinced that at this time the proposed rail in New Hampshire is the most cost effective alternative to move passenger vehicles off the highways. The decision to use buses on I-93 for a commuter service was the correct one. But I do believe the state has to plan for the future. The Rail Authority is a way to do the needed planning, develop an operating budget and source of revenue. I do have concerns the use of state CMAQ funds are being considered. A lot is said about the success of the Down Easter but it is important to remember that Maine heavily subsidizes that service. It is not that I would rather see the funds spent on east-west highway links, such as upgrading roads between Concord and Portsmouth. What I said was transit - buses. An east -west service would fill a lacking public transportation need.
Representative Candace Bouchard

Monday, February 2, 2009

Amendment X: The Oregon Moving Van Cartel

The Cato Institute looks into efforts to break the cartel preventing competition for moving companies in Oregon: