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Wednesday, April 8, 2009

The House can set better budget priorities today


Whether the state budget passes or fails in the House today doesn't much matter. The Senate will be responsible for creating a budget that will look very little like what Gov. John Lynch proposed two months ago but will include some pieces of the compromises the House will be forced to make today.

The governor proposed a budget on Feb. 12 that ended up pleasing no one and leaving most of the hard work for the House Finance Committee. The budget sounded great in his speech, but unraveled as the details emerged.

He proposed spending millions more than we raised in taxes, using about $519 million in one-time revenues and borrowing to mask a deficit that got worse over the course of the budget. If his proposal had been passed, the state budget situation would have deteriorated dramatically over the next two years and left his successor with a bigger problem than Lynch faced this year.

Typical of the governor's budget approach was ducking a decision on school construction aid. Rather than making a decision to cut or pay for state grants to help school districts building new schools, the governor included the plan, but no money in his budget. Instead, he wanted to borrow the money, as was done as an emergency measure last year.

In a typical year, the House builds from the governor's proposal and passes a budget its members think would be good policy if the Senate did nothing but accept it. This year, the House's chief budget writer says it is a terrible budget, but the Senate will make it better.
Because even its authors don't expect it to become law, votes today and tomorrow will take on the role of policy suggestions. Lawmakers can use the votes on the floor to express preferences for increased or decreased spending, higher or lower taxes, and cutting or paying for school construction aid.

The state's capital budget managed to achieve a rare, unanimous vote of the Public Works Committee because of its attention to policy. It might serve as a model for budget writers. Just as with the regular budget, the governor's proposal avoided the hard decisions. It spent too much, and it included millions of dollars of borrowed money to pay operating costs -- the equivalent of using your credit card to pay your mortgage.

The committee started with a limit. The state treasurer used generally accepted guidelines for borrowing capacity to set a limit of $130 million. The committee used that number and crafted a budget that spent $127 million. The governor had spent $10 million more than the limit, and the majority of his spending was borrowing for operating costs.

Not every committee member agreed with each item selected, but the Public Works Committee voted unanimously because it operated within budget constraints.

For the state operating budget, lawmakers haven't decided how much money is available to be spent. I've written before about the folly of raising taxes in a recession, but the committee has proposed raising some taxes and instituting new ones, including the job-killing capital gains tax.
I've been critical before of adopting overly rosy revenue estimates. This year, the House has done a good job of adopting cautious revenue estimates for most existing taxes. They look sensible in light of current economic conditions. However, other tax policy changes have not been voted on.

Normally, the House Ways and Means Committee would consider new taxes and tax changes and bring them to the full House for a debate. In a particularly bad policy change, the Ways and Means Committee ducked its job and just asked the Finance Committee to stick them in the budget to be voted on as a whole, avoiding a vote, avoiding a debate.

Lawmakers should resist voting up or down on the whole budget without expressing policy choices. Washington-style budgeting is to throw everything but the kitchen sink into one giant bill and expect that you have no alternative but to pass it.

Because we know that what passes the House isn't anywhere near final, legislators can make individual choices that express their view of policy priorities. If you believe raising taxes in a recession is a mistake, you can vote against tax hikes. Legislators can support deeper across-the-board cuts to prioritize lower spending. Or they can restore some spending if needed.

Budgets are about policy choices. Lawmakers should use today's debate to express several clear opinions in a debate that will continue for months.

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

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