Gov. John Lynch's recent columns on these pages are effective political spin, but I don't think they stand up well to the scrutiny of a little fact checking. Rejecting the state budget up for a vote today won't cause chaos and may result in a somewhat more liberal or somewhat more conservative budget, but it definitely will allow for an open and honest debate about significant changes that were made outside of New Hampshire's normally admirable and transparent process.
According to the governor, this budget will "decrease state spending for the next two years" and closes tax loopholes because of revenue problems. That sounds nice, but it isn't really the case.
State spending by any measure we use is increasing, not decreasing. Two years ago, the governor criticized me for using just the general fund (the amount we raise with regular taxes) in my budget analysis. He preferred to use the percentage increase for total state spending. The two-year budget being considered spends $11.55 billion over two years, an increase of about $1.2 billion over the current budget (see the totals sheet for each budget as passed on the Legislative Budget Assistant Web site at www.gencourt.state.nh.us/ns/). That's an increase of 10 percent -- not a decrease.
The more traditional number, and the one the governor used in his budget address this year, is general fund spending. In fiscal year 2009, we will spend $1.505 billion. That includes liquor commission spending and certain fine revenue for the Department of Safety, both of which are being moved out of the general fund in this budget to make the spending number seem smaller. Spending for FY 2010 including those two categories is $1.558 billion, a 3.5 percent increase -- not a decrease.
By the way, spending goes up even if you pretend that making the liquor commission its own fund counts as cutting it.
The other calculation is to divide the two years of the current budget by the two years of the last budget. The 2008-09 budget will end up spending $3.019 billion. The 2010-11 budget if you include liquor and safety will be about $3.152 billion, a 3 percent increase. One caution is that the state is going to borrow the money for school building aid, about $80 million, up from $40 million in the last biennium. It doesn't get calculated as general fund spending because it's borrowed.
Whatever statistic you use, spending is increasing by a relatively modest amount. It is not decreasing.
The governor mentions some of the things he's proud of in the budget and the tough decisions that were made. The budget makes many tough decisions. However, it also makes some very poor ones.
The budget borrows $80 million to pay for building aid. Borrowing money for operating expenses is terrible fiscal management akin to using a credit card to pay your mortgage.
Even less defensible, the budget borrows an $18 million pension contribution and uses it instead for general fund expenses. Lawmakers acknowledge that the OPEB contribution (for retiree benefits) will have to be paid back, but they say they need the money. A state borrowing money from employee pension funds is always dangerous. It's worse today because the state has a combined $7 billion shortfall in its retirement obligations.
With both Democrats and Republicans talking about voting against the budget (for different reasons), the governor trots out the ominous warning that a continuing resolution will "cost the state $11 million a month more than this budget."
The $11 million is not a spending cost. It is the combined monthly value of all of the tax hikes in the current budget. If you don't hike taxes soon enough, we miss out on the money.
But the tax hikes are the sticking point. At the 11th hour, the governor and his staff proposed a series of tax increases that had not been in his budget and had not been debated in the House or Senate. The taxes on business (or loophole closures, if you support them) were adopted without any business group being able to see the language or make an argument. Some argue the new tax creates a serious disincentive for entrepreneurs, but we haven't had that debate yet.
Similarly, campsites have never been included in the rooms and meals tax. But without any opportunity to protest, any hearings or discussion, campground owners woke up one morning to a new tax; sorry, "loophole closure." It may be a good idea, but we didn't get to have that debate.
A continuing resolution would allow more time to debate serious and significant changes rather than sliding them in at the last minute. All that will be lost is the early implementation of those tax increases that haven't yet been debated and therefore aren't included.
The budget spends more, taxes more and borrows more. The Earth will not crumble if legislators want to have an open and honest process.
Charles M. Arlinghaus is president of the Josiah Bartlett Center, a free-market think tank in Concord.
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