Lynch's new budget contains good ideas

By CHARLES M. ARLINGHAUS

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.