By CHARLES M. ARLINGHAUS
The governor is right to continue to look at the long-term financial future of the state. But it will take more than just a commission on gambling. The state's fiscal situation is bad right now and will continue to deteriorate over the next few years. It will take more than a look at one potential revenue source to move us back to fiscal stability.
The budget as passed is nominally balanced by the addition of taxes and fees to raise more than $300 million. But the budget also uses more than $500 million in one-time sources of revenue that will not be available in two years. Couple that with temporary spending cuts, and even if nothing else happens the starting deficit for the next budget will be even larger than this year's.
Adding to our troubles, the state has developed a debt problem. U.S. Sen. Judd Gregg wrote eloquently in these pages yesterday about the federal debt problem. New Hampshire is slowly building its own mountain of debt in imitation. State debt continues to rise every year. The latest budget increases the debt limit for turnpike bonds from $586 million to $766 million.
This secured debt increase has also been joined by the equivalent of a state credit card. After a temporary experiment with borrowing $40 million for building aid to fix a short-term budget hole last year, the state has decided to pull the credit card out again and borrow another $80 million this year. These costs have been operating expenses from time immemorial, but now we're not going to pay as we go. From $40 million to $80 million is not a good trend.
The problem gets larger in dribs and drabs and accumulates until you have a mountain. Our long-term liabilities are a sign. Twenty years ago, the state's pension obligations were fully funded. Bit by bit, the funding percentage has declined. Today the state's retirement plans have pension and health unfunded liabilities of more $7 billion.
In the most recent budget, lawmakers decided to move $18 million that was supposed to begin funding some of those obligations and use it instead to solve the problems within the operating budget. Borrowing from pension funds is what companies do shortly before bankruptcy.
Of course, the $18 million would have been just a drop in the $7 billion bucket. And though it is only temporary, it is a sign of the pressures the current operating balances put on decision making. The $40 million in borrowing for school construction aid was a temporary fix last time, but it didn't go away, it grew. Suspending $50 million in revenue sharing is a temporary fix this year, but I don't think any town is banking on how temporary it will be.
Recognizing the structural problems, the governor has decided to take a closer look at gambling. He worked hard to keep gambling out of the current budget, but not because he definitely supports or opposes it. He announced he'll appoint a special commission to examine the possibilities of more gambling.
This is reminiscent of Jeanne Shaheen's blue ribbon commission a dozen years ago to look for ways to increase state revenues. Back then, the senior partner of Gregg and Son was as clear-headed about state fiscal policy as the son is clear-headed today about federal policy.
Former Gov. Hugh Gregg thought revenue commissions were premature or at least represented only one half of the coin. I've talked before about the piece he wrote for The Josiah Bartlett Center urging New Hampshire not to abandon its "unique and admirable fiscal history" in a search for the "least onerous source of new taxation."
It was good advice then, and it's good advice for the governor today. Former Gov. Gregg proposed a "red ribbon commission" to look at state spending, the other half of the budget coin. If we're going to try to decide if gambling is the least onerous source of new revenue, we'll almost certainly consider other sources of revenue as well. But if a commission is going to look at sources of revenue, ought we not also look at the increased spending that creates the pressure for gambling?
Our history is the boom and bust cycle that Gov. Gregg spoke about. Every 10 years or so a belt-tightening occurs after a period of higher spending. Steve Merrill's 1995 budget reduced spending in actual dollars. The Benson budget and the first Lynch budget in 2003 and 2005 both reduced spending compared to inflation.
If we're going to be looking at new revenues, let's not forget Gov. Gregg's admonition that there are alternatives to "the least onerous source of new taxation."
Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.
The governor is right to continue to look at the long-term financial future of the state. But it will take more than just a commission on gambling. The state's fiscal situation is bad right now and will continue to deteriorate over the next few years. It will take more than a look at one potential revenue source to move us back to fiscal stability.
The budget as passed is nominally balanced by the addition of taxes and fees to raise more than $300 million. But the budget also uses more than $500 million in one-time sources of revenue that will not be available in two years. Couple that with temporary spending cuts, and even if nothing else happens the starting deficit for the next budget will be even larger than this year's.
Adding to our troubles, the state has developed a debt problem. U.S. Sen. Judd Gregg wrote eloquently in these pages yesterday about the federal debt problem. New Hampshire is slowly building its own mountain of debt in imitation. State debt continues to rise every year. The latest budget increases the debt limit for turnpike bonds from $586 million to $766 million.
This secured debt increase has also been joined by the equivalent of a state credit card. After a temporary experiment with borrowing $40 million for building aid to fix a short-term budget hole last year, the state has decided to pull the credit card out again and borrow another $80 million this year. These costs have been operating expenses from time immemorial, but now we're not going to pay as we go. From $40 million to $80 million is not a good trend.
The problem gets larger in dribs and drabs and accumulates until you have a mountain. Our long-term liabilities are a sign. Twenty years ago, the state's pension obligations were fully funded. Bit by bit, the funding percentage has declined. Today the state's retirement plans have pension and health unfunded liabilities of more $7 billion.
In the most recent budget, lawmakers decided to move $18 million that was supposed to begin funding some of those obligations and use it instead to solve the problems within the operating budget. Borrowing from pension funds is what companies do shortly before bankruptcy.
Of course, the $18 million would have been just a drop in the $7 billion bucket. And though it is only temporary, it is a sign of the pressures the current operating balances put on decision making. The $40 million in borrowing for school construction aid was a temporary fix last time, but it didn't go away, it grew. Suspending $50 million in revenue sharing is a temporary fix this year, but I don't think any town is banking on how temporary it will be.
Recognizing the structural problems, the governor has decided to take a closer look at gambling. He worked hard to keep gambling out of the current budget, but not because he definitely supports or opposes it. He announced he'll appoint a special commission to examine the possibilities of more gambling.
This is reminiscent of Jeanne Shaheen's blue ribbon commission a dozen years ago to look for ways to increase state revenues. Back then, the senior partner of Gregg and Son was as clear-headed about state fiscal policy as the son is clear-headed today about federal policy.
Former Gov. Hugh Gregg thought revenue commissions were premature or at least represented only one half of the coin. I've talked before about the piece he wrote for The Josiah Bartlett Center urging New Hampshire not to abandon its "unique and admirable fiscal history" in a search for the "least onerous source of new taxation."
It was good advice then, and it's good advice for the governor today. Former Gov. Gregg proposed a "red ribbon commission" to look at state spending, the other half of the budget coin. If we're going to try to decide if gambling is the least onerous source of new revenue, we'll almost certainly consider other sources of revenue as well. But if a commission is going to look at sources of revenue, ought we not also look at the increased spending that creates the pressure for gambling?
Our history is the boom and bust cycle that Gov. Gregg spoke about. Every 10 years or so a belt-tightening occurs after a period of higher spending. Steve Merrill's 1995 budget reduced spending in actual dollars. The Benson budget and the first Lynch budget in 2003 and 2005 both reduced spending compared to inflation.
If we're going to be looking at new revenues, let's not forget Gov. Gregg's admonition that there are alternatives to "the least onerous source of new taxation."
Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.
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