The new health care bureaucracy

By CHARLES M. ARLINGHAUS

True health care reform will allow more options and more choices. The current plans in Washington create a central control that transfers authority from the people to the government and from the state to the federal government. Whether you believe in greater government spending or not, this is exactly the wrong approach.

Anytime Washington gets involved in any policy decision, Washington writes all the rules and tells everyone what to do. Health care is no exception. What started as a plan to find ways to cover people who don't have insurance transformed into thousands of pages of new regulations, mandates, prohibitions, oversight and general central control.

The federal government does not currently set mandates for health insurance; each state does to varying degrees. The new health care bills would transfer most of that authority to Washington. Washington will write the rules because Washington knows best.

Does Washington want to set up a few basic minimums that should be included? No. It wants to set up minimum coverage levels higher than many people's insurance today, maximum coverage levels, specific programs that every policy must include and a new administrative office to review and approve plan designs, plan changes and premium changes.

Generally, the more things a health insurance plan covers, the more expensive it is. Higher co-pays or deductibles will reduce the amount of financial risk and, therefore, the amount of the premium. More expensive plans will cover a higher percentage of "actuarial value," the amount you are expected to cost by statistical averages.

A high-deductible plan might make a lot of sense for a healthy young person, who will be covered against a catastrophe, but still have an affordable premium and, therefore, will buy insurance rather than avoiding it.

However, under the proposed reform, high deductibles are not allowed. New plans must cover at least 70 percent of value. You can keep the plan you have unless it's a budget plan. Budgets and cost-sharing are not going to be permitted. Never mind that most economists think that consumer involvement in costs is a good way to reduce the rate of premium increase.

On the other hand, while we want you to have insurance, we also don't want it to be too good. If your insurance coverage is too good, we're going to tax it. At the levels being considered in the Senate bill, New Hampshire state employees' coverage is about 25 percent too generous. In addition, about 25 percent of employers in New Hampshire give a benefit that the government thinks is too generous. Too nice to your workers? We'll tax that.

It's Goldilocks government at its best. We don't want plans that are too big or plans that are too small. Every plan needs to be just right.

Instead of Goldilocks making these judgments, we'll have a health choices commissioner. The commish will be assisted by the creation of more than 100 new bureaus and federal programs, including the Health Benefits Advisory Committee.

Our new health choices commissioner will have the authority to decide what falls into the just-right range of policy choices that are preapproved for you to choose.

Whether the final bill includes a government-run "public option" or not, the new regulations on private policies amount to more or less the same thing as the government actually running the plan. The "choices commissioner" will be able to approve or deny premiums, dictate coverage levels and "negotiate" prices. So the government will decide what coverage you can have, what it will cost and how much providers will get paid.

There are other ways to make changes in health care that don't involve a large new office in a concrete building in Washington making the rules for everyone in America.

Louis Brandeis believed that change could come from a single state serving as a laboratory of democracy to "try novel social and economic experiments without risk to the rest of the country." In theory, we could watch what happened in a state like Massachusetts and decide if it would work here.

The current proposals in Washington are the exact opposite of Brandeis' approach. A giant new bureaucracy won't allow different states to experiment with different things. Limiting plans to a narrow range of choices -- not too expensive, not too cheap -- eliminates any choices and innovation even in the design of individual plans. Centralized government planning with strict limits on thinking outside the government box does not traditionally lead to innovation.

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

No Guarantees: Eagle Times subsidy is wrong

The Union Leader comes out against the New Hampshire government backing a loan for a local newspaper.

One is the Eagle Times, the Claremont newspaper that folded earlier this year only to be reborn under a new publisher. The council agreed -- unanimously -- to have the state guarantee 75 percent of a $250,000 line of credit to the publisher. That's $181,500 for which taxpayers are on the hook if the paper goes out of business again.

This is an outrageous risk of taxpayer money.

You will get no argument from us about newspapers' value to a republic. But the civic services journalists perform are beside the point. A newspaper is a private enterprise. The state's duty is to spend taxpayer money on legitimate public services that only the state can provide. Bankrolling a business -- any business -- is not one of those functions.

Concord lawyer honored for fighting for free press

I was honored to attend last night's Nackey Loeb Dinner in Manchester to benefit the Nackey S. Loeb School of Communications. The Union Leader reports on this year's honoree for his work in opening up government records to the public.

Concord attorney William Chapman said winning the Nackey S. Loeb First Amendment Award is like getting an award for skiing. Fighting for a free press and open access to the government isn't work, he said, it's fun.

Chapman, of the Concord law firm of Orr and Reno, was honored last night at the seventh annual Loeb First Amendment Award Honors dinner at the Radisson Hotel for his 37 years of work in media law.

Chapman is considered a top authority on New Hampshire's freedom of public access and media law and has argued dozens of cases involving access to records and government proceedings on behalf of New Hampshire media outlets. Chapman also helped set the standard for protecting reporters' sources in criminal cases and public access to court and government records.

Our work on the Josiah Bartlett Center often relies on getting access to public records from state officials, who are sometimes cooperative and sometimes not. As the distinction between free speech and free press continues to diminish in importance, we are happy to salute Mr. Chapman for his life's work.

Robert Foster, the recently deceased publisher of Foster's Daily Democrat, received the annual Quill & Ink Award for his years of work putting out one of New Hampshire's finest newspapers. His contributions to journalism are noted, and will be missed.

Retiree hike hits with thud

Tom Fahey reports in the Union Leader on the cost of shoring up municipal pension programs.

Towns, cities, school districts and the state itself could see pension costs for police, teachers and other public workers increase by an average of nearly 23 percent July 1, 2011.

Consultants for the New Hampshire Retirement System yesterday recommended the rate hike. The steep increase stems from a combination of investment losses -- 18 percent for the year that ended June 30 -- and the need to catch up with a long-term funding problem that began building nearly two decades ago.

The rates won't take effect until the NHRS board of trustees formally adopts them in September 2010. At that point, they will become a factor in budget planning for towns and school budgets. A year ago, rates were projected to go up between 25 and 35 percent.

Charles M. Arlinghaus: City's revenue sharing loss was inevitable

By CHARLES M. ARLINGHAUS

The state's decision to freeze revenue sharing payments was not a criminal act. It doesn't constitute fraud. It isn't unconstitutional. It shouldn't send your town into turmoil, and it's not even a bad idea. It may have a negative impact on the Verizon Wireless Arena, but every change in state law shouldn't lead to a lawsuit.

Manchester's bond payments on the arena are guaranteed by the city's portion of the state meals and rooms tax revenue. Neither the state nor the city is on the hook for anything other than the city's share of that payment, about $4.6 million last year.

It is a risky setup for bondholders because the state meals and rooms payments are not guaranteed and have gone up and down in their short history.

The meals and rooms tax was passed in 1967 to provide additional revenue for the state, but also for the towns. The state tinkered with the share going to towns and eventually took it all. Starting in 1995, state lawmakers decided to bring back some degree of revenue sharing.

They created a formula that started small, but dedicated most of the annual rise in revenue toward increasing the share sent to the towns. In theory, the town share of the total revenue would increase until municipalities were finally receiving 40 percent of the total. Right now, they are up to about 25 percent.

In the last budget, the governor originally proposed suspending revenue sharing entirely for two years. In the end, the Legislature proposed freezing it at 2009 levels for two years.

The state canceled the other major municipal revenue sharing program anyway, and lawmakers were convinced they couldn't cut too much more without burdening towns. Manchester Mayor Frank Guinta at the time fought to restore some of the funding for fear of defaulting on the arena's bond payments.

Any revenue sharing program goes up and goes down. This program has a history over 42 years of rising, sometimes declining, sometimes disappearing entirely. Strangely, bondholders were willing to invest in a proposition secured by such an unreliable source.

If the state behaved as it had in the past, payments would go down. If it behaved as most states do in difficult economic times, payments would go down. If the state ever passed a tax cut (less likely), payments would go down.

The city's bond counsel warned the state that changes to state law might cause a lawsuit. He cited a Washington case to suggest the state can't repeal a tax the city used to pay bonds. But while a state might be obligated if it used a tax to secure a bond, it is just not reasonable to think that state action can be vetoed because of what one city decided to do with its aid payment.

Just as important, there's no reason for anyone to be surprised by this action. The governor's spokesman told the Josiah Bartlett Center when we broke the story on Monday that "Moody's raised this as a risky funding scheme when this was put together, pointing out that meals and rooms revenues are not guaranteed to be constant." There's some fear that bondholders might sue, but they knew the risks at the time and don't have much cause for surprise.

The bond counsel's proposed solution is even sillier than a lawsuit. He suggests that the old version of the law be grandfathered for any city that used the payment to secure bonds. In other words, Manchester would be rewarded for taking a risky decision, while the rest of the state would operate under a different law. Payments to your town would be frozen, but not payments to Manchester.

To be fair, paying for the arena is going to be difficult for Manchester, but every city and town in the state faced similar struggles and similar budget uncertainty. Many towns noticed the financial difficulties the state was having. I think I even wrote about it once or twice.

My own town of Canterbury is a good example of the common sense of citizen selectmen. Canterbury is not particularly frugal, just average. Our taxes have gone up by an average 5 percent each year for the last 15 years. But selectmen knew that state aid was going to be cut, so they didn't count on getting it. Instead, they cut the town budget by 6 percent, and the school budget declined as well. The end result was that our property taxes went down by 8 percent, which was needed relief to people fighting a recession.

The recession has been tough on every budget. It was expected that the state would freeze aid. The right approach is the one fiscally responsible towns have taken. Long-term obligations put pressure on the rest of your budget, but it doesn't have to stop you from cutting taxes even when state aid is frozen.

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

State revenues off by $38 million

The Union Leader reports on state revenues through October, which have come in below expectations, and added $38 million to the state's fiscal problems.

A monthly report from the Department of Administrative Services shows the state took in $204 million in taxes and other revenues last month, $12 million short of the month's budget target.

Through the first four months of this fiscal year, the state has taken in $585 million, instead of the $623 million the budget was built to have at this point. The figures include $97 million in revenue to the Medicaid program from the federal government.

The DAS report shows that overall, tax revenues this fiscal year are below last year's levels by $4.6 million, less than 1 percent. October is a major revenue producer because of the concentration of business taxes that are paid. December is the next big month on the tax calendar.

Cap city spending: Amend the charter

The Union Leader makes its case for approving the Spending Cap on the back of the Manchester ballot today.

Today, the people get to vote on the cap most aldermen wish would go away. The cap would do nothing more than prohibit city spending from rising faster than the inflation rate. That's it. Spending could still rise every year, just not as fast as before. There is no reason for aldermen, or anyone else, to be afraid of that minor restraint. But some people just can't stand the idea that they'll have to make tough decisions and actually set priorities when spending other people's money.

Cash for whom? Clunkers program a lemon

The Union Leader calls the "Cash for Clunkers" program a "colossal economic failure".

What that means is that instead of an average taxpayer cost of $4,000 per vehicle, as the Obama administration claims, the program's actual cost was $24,000 for each vehicle that otherwise would not have been sold.

And what did all that cash buy the American people? Detroit and the White House say it boosted auto production and stimulated the economy when it needed the most stimulating. But think about that. The government paid people $226 billion to buy cars in the summer instead of later in the year.

Using tax dollars to subsidize the destruction of functional automobiles is a remarkably silly idea, even if the government had been able to come up with some statistics to defend the program. But now we know that most of the people who trashed their used cars to get the program's benefit would have bought a new car even without the fatally flawed program.

Performance art: Your stimulus money at work

The Union Leader argues that federal stimulus money would have been better used to fill in the state's budget hole than to subsidize arts programs.

So when the state recently received news that it would get $293,100 in federal stimulus money earmarked specifically to "save or create" jobs, where did it go? To arts programs, of course.

The New Hampshire Arts Council announced last week that the state will use the money to preserve 42 arts jobs (a highly questionable figure).

Among the jobs subsidized by this taxpayer money are: pianist educator, exhibition gallery assistant manager, bookkeeper, gallery manager, artistic director and office assistant. Also subsidized are eight visual artists and 16 performing artists.

The editorial points out that the money was earmarked for the arts by the NEA, and the state had no authority to transfer the cash to higher priorities.

Pelosi vs. NH: Wrecking the state budget

The Union Leader argues that the new health care bill unveiled this week by House Speaker Nancy Pelosi would be bad for New Hampshire.

Under Pelosi's bill, families earning up to 150 percent of the poverty level are to be covered by Medicaid! That huge increase would have a disastrous effect on New Hampshire's budget.

This bill ought to draw an automatic "no" vote from Reps. Carol Shea-Porter and Paul Hodes. It would explode the already out-of-balance New Hampshire state budget and almost certainly result in a state income or sales tax. But Shea-Porter was on the stage with Nancy Pelosi, beaming with delight, when the speaker unveiled the plan. Maybe Hodes and Sen. Jeanne Shaheen will have more sense than to support this budget buster.

State to expand liquor stores, add fast food at I-93 rest stops

The Union Leader's Dan O'Brien reports on efforts to add services to the Hooksett rest stops on I-93 in order to generate more revenue for the Liquor Commission.

The state Department of Transportation is taking bids from developers to expand the site into an inclusive rest stop for motorists, which would include fast food restaurants, expanded informational centers, restroom facilities and renovated liquor stores.

If the project is completed, it would be the only such highway rest stop in the state.

The I-93 rest stops are a great location for a restaurant catering to hungry tourists on their way to and from lakes, mountains, and racetracks. Leasing the public space to private companies makes sense, though local fast food operators won't be happy with the competition subsidized by the state's prime real estate. The real problem with the deal is that Governor Lynch has already planned on spending the 30 years of lease payments immediately. Auctioning off such a valuable asset for a one-time boost in revenues is recklessly irresponsible. Let's hope the state takes a more responsible approach, and spends the lease revenue over the life of the lease.

Union Leader pulls political columns from web

The Union Leader posts a web banner this morning announcing that they will publish their three influential political columns, John DiStaso's "Granite Status", Scott Brooks' "City Hall", and Tom Fahey's "Under the State House Dome" only in their print edition from now on. Political junkies will no longer be able to read the must-read columns online Thursday and Sunday mornings, and blogs as this one will no longer be able to link to interesting tidbits from the columns.

The move is prompted by the stunning circulation drop seen by every major newspaper in the country. First, Craigslist took their classified ad revenue, and then the Internet took their readers. Newspapers have responded by posting their content online, but reading a story on your computer screen doesn't get you to read the expensive print ads purchased by the newspaper's advertisers. In order to continue charging for ad space, newspapers like the Union Leader need people to get the print edition delivered to their home, or pick up a piece of dead tree on the gas station on the way to work.

Taking its most valuable content offline is a risky move for New Hampshire's largest and most influential newspaper. By walling off its political coverage from the Internet, the Union Leader risks becoming irrelevant in the modern political climate. The influence of a political column isn't just on those who read it regularly. It is from sharing and spreading that information far and wide in order to set the convention wisdom within the political world.

Distaso's column, easily the most powerful political real estate in New Hampshire, now becomes less so because it will be so much harder to share his stories across the state and beyond. His column can no longer to linked to in a campaign newsletter or emailed to immediately to potential donors across the country. If a political story isn't on the Internet, it won't show up in search engine results or be part of the archive of political memory. A lot more people use Google than Lexis-Nexis.

By telling its audience that political news will no longer be available at UnionLeader.com, the paper also risks driving its best sources to other journalist. DiStaso, Fahey, and Brooks are fine reporters, but every political reporter relies extensively on tips and leads sent in by campaigns and their supporters. As a press secretary and a candidate, I often gave leads to John in hopes of making it into his column on Thursday morning. Now, it might make more sense to call Kevin Landrigan in hopes of making his Sunday column in the Nashua Telegraph. The paper's circulation might be smaller, but being able to link to it makes it a lot easier to distribute it far and wide.

The Union Leader hopes that the political influence of its columnists is too large for New Hampshire's political class to ignore. They will be forced to either pick the paper in the morning, or subscribe to the e-edition of the Union Leader, an online reproduction of the print edition available for $1.50 per week or $59.99 per year. But the Wall Street Journal and New York Times both found out that their readers wouldn't pay a premium to read their opinion pages, and dropped their subscription walls. We'll see if the Union Leader can't buck that trend.

Time has run out on the budget

By CHARLES M. ARLINGHAUS

Last week it was a tax summit, this week a spending summit. With all the talk about taxes and spending, you might think New Hampshire had another budget problem. And you know what? You'd be right.

New Hampshire often has a budget problem. In this year's version, we have both an immediate problem and a longer term problem. We have to find another $200 million to save in the next few months and then face another $600 million deficit going into the next budget.

With those sorts of extraordinary numbers on the table, no one party, branch of government or side of the bargaining table is going to be able to provide a solution. The economy isn't going to grow its way out of the problem; the federal government won't bail us out; and there isn't one silver bullet to fix everything.

The current budget includes fixing the shortfall at the end of Fiscal Year 2009 and balancing the current two-year budget. There are a lot of smaller issues that could add to the size of the problem, but there are three big issues that make up about $200 million.

First and foremost is the medical malpractice raid. The state is counting on taking $110 million from the malpractice fund known as the Joint Underwriting Agreement (JUA). Some of the money is for last year and some for the current budget, but all of it would have to be replaced. The Superior Court has ruled that the money is private property and can't be seized by the state simply because the state wants it. The governor and legislators are banking on the Supreme Court overturning the ruling.

If the ruling stands, as is more likely than not, the state is $110 million short of its budget. In addition, to balance the 2009 figures the state moved $18.4 million in stimulus funding forward from 2010, leaving the current budget another $18 million short. On top of that money, state revenues are coming in below the estimates used to balance the budget.

Based on the first quarter of returns, we will likely end the first year of the two-year budget $40 million short. Because the 2011 revenue growth was built off the 2010 base, that same shortfall would occur again in the second budget year unless the economy recovers more rapidly than expected.

The revenue shortfall, stimulus and JUA issues combine to create a $200 million gap between currently expected revenue and projected spending.

The problem is all the more important because of a fiscal time bomb waiting for us in the next budget. The current budget was balanced with hundreds of millions of one-time stimulus dollars from the federal government. Regular revenues and regular spending are $188 million apart in Fiscal Year 2011.

In addition, the budget includes a number of one-time spending reductions that are delays rather than cuts. For example, borrowing money to pay for construction aid isn't a spending cut, and municipal aid was suspended only for the current biennium. All told, the temporary reductions are $251 million over the biennium. That money is restored in the next budget.

The operating imbalance ($376 million for two years) and the temporary spending reductions mean the next budget starts out with a $625 million deficit -- if we manage to first cut $200 million out of the current budget and don't add to the problem.

The governor has suggested that a return to normal revenue growth in a robust economy will solve the problem. However, 4 percent revenue growth would mean just $92 million in 2012. Worse, because of the imbalance, typical growth in taxes and also in spending would make the deficit worse, not better. Three percent growth in spending and in taxes actually adds $18 million to the deficit. Economic growth only helps if spending is also restrained.

The good news is that the immediate problem we face will actually help us deal with the $600 million problem on the horizon. Spending cuts made to the current budget will have a triple effect. They reduce spending in the current budget and then in each year of the next two-year budget. So $100 million in cuts has a $300 million effect.

The size of the state's budget problem is as large as we've faced in our history. Last year, we faced the same problem but were able to delay it for two years because of the extraordinary federal bailout. That bailout or stimulus plan didn't fix anything. It merely bought us time. And now time is up.

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

Linda Hodgdon: Faulty information harming SEA members

Department of Administrative Services Commissioner Linda Hodgden writes a column in this morning's Union Leader claiming that bad information is harming members of the State Employees Association.

The union claimed that the state has part-timers earning $74 an hour, which is simply not correct. Part-time employees are paid a range of salaries depending on whether they are part-time judges, adjunct faculty at a community college, cleaning staff or toll attendants. The most recent data from 2009 indicates the average rate of pay for a part-time classified employee to be $14 per hour.

The union claimed the number of paid consultants has increased in this budget, which is also not true. Consultant salaries did not increase 40 percent. They are simply being reported in a much more transparent way under the new financial system that went into effect in July. A large portion of departments' contract expenditures are now correctly reported as consultants. The biggest change was at the Department of Transportation.

FOX and Obama: An abuse of power

The Union Leader editorializes that the Obama Administration's efforts to delegitimize its critics, including press coverage it doesn't like, goes over the line.

In power, this team has taken that paranoia to new heights. The administration aggressively demonizes critics, undermines opponents and bullies anyone viewed as a potential enemy. (Just ask General Motors and the U.S. Chamber of Commerce.)

The message is clear: Fall in line, or we'll use our power to attack and undermine you. That's not merely unbecoming of a President. It's unacceptable behavior for any government.

Law stings laid-off workers, employers

Tom Fahey reports in his Under the State House Dome column on higher unemployment claims leading to higher taxes for employers and longer waits for benefits for employees.

Employers will pay higher taxes in 2010 to help sustain the system, and workers will see a one-week delay in their benefits.

Under a change in state law, Gates said, a worker who is furloughed for two weeks will receive a one-week benefit. A worker out of work for 15 weeks will get 14 weeks. A worker furloughed for one week will be out of luck.

With the higher taxes employers will be paying, Gates said, "it was felt that employees ought to participate in some manner in the solution." Cutting benefits would have jeopardized a $25-a-week federal benefit enhancement, he said.

SEA realism: It's about time

The Union Leader blasts the State Employees Association for changing its tune on job losses.

The lead contract negotiator for the State Employees' Association, who previously urged SEA members to reject a job-saving employment contract because it didn't guarantee that no employees would be laid off during the recession, now says it's time for state employees to get realistic.

"This is not a time for people to expect raises to come out of a contract agreement. This is the time to save jobs, and if the administration doesn't want to save jobs, I don't know what we'll be looking at," Diana Lacey told The Associated Press.
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This is the time to save jobs? The time was weeks ago and the SEA leadership blew it.

A Spending Summit: Let's Have One

The Union Leader argues now that the Ways and Means Committee has held a two day Tax Summit, it's time for legislative leaders to put the same attention into spending.

We were happy to see that so many competing points of view were presented at this week's tax hearing. We'd be surprised if any Ways and Means Committee member had his or her view changed, but at least there was a wide-ranging discussion of how the state's revenue structure works and how the state would change if its tax base changed.

Legislators would benefit from a similar, but not identical, hearing on spending. The thoughts of analysts and economists are useful. And we might be able to learn a thing or two from the experiences of other states. But given the economic reality facing the state -- revenue declines with no end in sight -- the most useful presentations might come from administrators and other employees tasked with finding better ways to spend what money we have.

No quick-fix on state tax issues

Tom Fahey wraps up two days of Tax Summit with a story in the Union Leader, in which he turns to a certain think tank for a little history on tax reform in New Hampshire.

Josiah Bartlett Center on Public Policy president Charles Arlinghaus said it's been more like 40 years since the last real tear-down of state tax code. The work in 1970 produced the business profits tax, now a mainstay of state revenues. He said the BPT "created a sea change" by shifting state tax policy to encourage business investment, and set the stage for an economic boom that lasted through the 1990s.

Arlinghaus said he takes issue with the conservative Tax Foundation's rankings that put New Hampshire at the bottom of the heap in terms of business taxes. He said the foundation, in its rankings, doesn't count a key business enterprise tax credit that companies can take.

AP: NH's workers sue to get 'bumping' rights back

The Union Leader runs the AP story on the State Employees Association going to court to restore bumping rights for senior state workers.

The State Employees' Association filed suit Thursday in Merrimack County Superior Court arguing that the Legislature violated senior workers' constitutionally protected contract rights when it suspended bumping rights as part of the budget.

The union argues bumping rights are protected for employees with at least 10 years experience even though bumping is part of personnel rules, not in the union's contract with the state. The union says senior workers have an expectation of the right as part of their overall compensation.

New Hampshire governors from both parties have tried with little success to get rid of bumping rights, which prevent allow highly-paid employees to take the jobs of more junior colleagues if they get laid off. The practice delays the savings from any layoffs, possibly forcing more drastic cuts down the line, and sets off a chain on demotions through state government.