The House can set better budget priorities today

By CHARLES M. ARLINGHAUS

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.

For fairness's sake, tax estates, capital gains

In all the budget coverage this morning, I missed the Concord Monitor editorial in favor taxing both capital gains and inheritences, just to be fair:

The "death tax" re-branding was a misnomer. The tax really falls on the inheritors of an estate and should be called the "lucky survivors tax," since if you die before the owner of the estate dies, you lose. In that sense, the inheritance tax is no different than a tax on gambling winnings.

There you have it. Trying to keep a farm or small business in the family is just like buying a lottery ticket. The Monitor concludes its argument with the first and last chorus of all taxers, the government needs the money:

This year more than ever, the state needs the money. Gov. John Lynch and the Legislature have been curbing services to people who really need them, postponing projects and planning to lay off hundreds of state employees. An estate tax and capital gains tax aren't the answer to New Hampshire's chronic revenue woes and unfair tax structure, but they are a step in the right direction.

Josiah Bartlett Center Launches Web Video Project

Online video news reports posted through NH Watchdog

(CONCORD) The Josiah Bartlett Center for Public Policy has entered the world of video podcasting, launching a web video project through its investigative branch, New Hampshire Watchdog. Veteran reporter Grant Bosse posted the first two video reports about the dueling state budget plans presented by House Democrats and Republicans. Both plans will be considered by the full House later this week.

Part I: House Finance Committee Budget Presentation

Part II: House Republican Caucus Alternative Budget

“The Josiah Bartlett Center is well known for its reliable analysis of New Hampshire issues,” said Center President Charlie Arlinghaus. “Now we can use new tools like YouTube, Facebook, and our NHWatchdog blog to spread that work across New Hampshire.”

Bosse brings both journalistic and State House experience to his new assignment, having worked for the New Hampshire House and U.S. Senate, as well as being an award-winning reporter at radio stations WGIR and WTSL.

“TV, radio, and newspapers have time and space constraints that make it almost impossible to provide in-depth coverage of complex issues like the state budget,” Bosse added. “But with just a digital video camera and a laptop, the Josiah Bartlett Center can provide in-depth coverage to both policy makers and the public.”

NH Watchdog on Facebook
NH Watchdog on YouTube

House Budget Briefing Online

The New Hampshire has posted the entire Finance Committee budget presentation online.

You can watch the two-hour forum here:

http://www.gencourt.state.nh.us/housevideo/sessions/2009/HB1Briefing.asx

And you can watch our report on the forum here:


And the Republican Alternative Budget here:

New Hampshire isn't feeling stimulated

A new study shows New Hampshire near the bottom in per person aid from the federal stimulus bill. Kevin Landrigan writes in the Nashua Telegraph that the Granite State lags far behind its neighbors in receiving federal money:

New Hampshire finishes in the bottom 10 in the country and lowest in the Northeast for federal money per person coming from the $87 billion stimulus package, according to a report.

All other New England states rank in the top 20 while New Hampshire is 40th, according to Brian Gottlob with PolEcon Research of Dover.

From the six largest grant programs under the stimulus, New Hampshire will receive $818 million or about $620 per person, the study concluded.

In the Union Leader, John DiStaso and Tom Fahey also examine the conclusions of the new report:

"Two industries, health care and public education, least affected by the current recession will receive the largest source of stimulus funding in New Hampshire," concludes the report by economist Brian Gottlob of PolEcon Research of Dover.

The study was paid for by an independent watchdog group called STEWARD, an acronym for Stimulate the Economy Without Accumulating Record Debt. The organization was formed in February by Nashua businessman Fred Tausch, a former Barack Obama supporter who quickly became frustrated with the President's spending programs.

Budget Coverage

The State House press corps covers yesterday's dueling budget presentations.

In the Concord Monitor, Lauren Dorgan reports that the House Democratic budget has something for everyone...to hate:

Liberal critics said that budget writers cut too much from the needy and from state employees and should have turned to income taxes or taxes on the rich to fund state operations fairly. Conservatives contended that the taxes contained in the budget were excessive and that one of the taxes - a 5 percent levy on capital gains - is an income tax. Others balked at cuts to local aid, which they said would drive up property tax bills.

For their part, House Republicans unveiled a budget plan of their own that they heralded as "truly balanced," which they said would increase no taxes and maintain $123 million worth of aid to cities and towns not included in the Democratic budget, $83 million of which is school building aid. There was just one catch: Republicans called for more than $300 million worth of cuts to the budget without specifying what should go, instead calling on the leaders of most state agencies to figure out how to institute 13.5 percent across-the-board spending reductions.

In the Nashua Telegraph, Kevin Landrigan writes that the Finance Committee's plan was attacked from the right and the left:

"We are living in a recession, and in a time of recession, it is bad public policy to raise taxes," said Rep. Neal Kurk, R-Weare.

The House budget would impose a new 5 percent tax on capital gains of more than $5,000 a year, an 8 percent tax on estates worth more than $2 million and a 10 percent tax on gambling winnings greater than $600 at one time.

The House budget also would raise existing taxes on gasoline, cigarettes, hotel room rentals and restaurant meals and suspend for two years a planned cut in the insurance tax.

In state spending, the proposal of House budget writers would raise spending 3 percent over the next two years. The House GOP alternative would cut state spending 2 percent.

In the Union Leader, Tom Fahey says Democrats attempt to share the pain, while the GOP has picked a budget battle:

Democrats admit there's a lot to dislike in the $11.5 billion budget they want the House to pass this week, but they say it's better than the Republican alternative.

The GOP, however, says Democrats have balanced their two-year budget plan with a critical misstep of raising taxes during a recession, and by holding money back from communities.

The two sides exchanged criticisms yesterday, as Democrats outlined their version to more than 100 lawmakers at a budget information session. Republicans declined the chance to make their case at the session, and held a news conference afterward.

Dueling Budgets at the State House

The House Finance Committee and the House Republican Caucus presented competing budgets at the State House today. NH Watchdog reports.

Part I, House Finance Committee


Part II, House Republican Caucus

Liquor Stores may get makeover

The Nashua Telegraph and Union Leader run Travis Anderson's piece for the Associated Press examining the history of liquor sales in New Hampshire, and Commissioner Mark Bodi's push to revamp the system by consolidating power over alcohol sales in his hands:

In New Hampshire, a run for Johnny Walker Red in 1934 felt like a trip to Red China as customers passed written orders to clerks in drab warehouses. Tim Sink, president of the Greater Concord Chamber of Commerce, says that system lasted into the '60s and '70s.

"The stores were tucked away in these seedy areas of downtowns," he said. "It was almost like we were ashamed that they were there."

Large stores now sit just off Interstate 93 in Hooksett and at key entry points from neighboring states. Out-of-state buyers account for half of sales, and Lynch wants to lease restaurant space near the border stores – at welcome centers – to give travelers another reason to stop.

"If we are honest, these welcome centers are not very welcoming," he told lawmakers.

Bodi wants to spruce up 25 stores over the next five years but says it will take longer if he can't streamline contracting. In one extreme illustration of that problem, he said delays getting a contract approved meant it took months to fix a broken store window recently.

Weekend Roundup

Lots of budget talk in this weekend's political columns.

First, Kevin Landrigan writes in the Nashua Telegraph that Fred Tausch and his group, Stimulating The Economy Without Assumulating Record Debt (STEWARD) is examining how the federal stimulus bill with impact New Hampshire:

On Monday, the group will release results of an economic analysis study done by Brian Gottlob, who has his own Seacoast consulting business and produces an ongoing report on economic trends.

In the report, Gottlob identified more than $920 million in stimulus money already headed to New Hampshire. That total is incomplete, he wrote, because it doesn't include what competitive grants New Hampshire projects may win in the coming months. Here's how Gottlob gets to this massive number:

• Education: $258 million.

• Medicaid: $250 million.

• Transportation: $129 million.

• Individual income support: $79 million.

• Environment: $63 million.

• Energy-weatherization: $61.7 million.

• State fiscal stabilization aid: $36 million.

• Housing: $33.5 million.

• Health care: $9.3 million.

Gottlob noted the two largest pools of money would be used to help pay for the next two-year state budget.

Landrigan also reports that budget writers are working to restore the $83 million in building aid that the House Finance Committee killed:

The House Finance Committee decided that since Lynch wouldn't put it in his state budget, the House panel wouldn't either, and the Senate can decide where it fits in its priorities.

Lynch press secretary Colin Manning said the governor is committed to making sure it finds a home.

"It's got to be somewhere,'' Manning said.

House Finance Committee Chairman Marjorie Smith, D-Durham, noted state law makes clear that school building aid is "subject to appropriation,'' which is legal speak for anywhere up to 100 percent, depending on how much the Legislature has on hand.

Landrigan also goes department by department to identify the winners and losers in the House Finance Budget.

In the Union Leader, Tom Fahey pens his weekly Under the State House Dome column and looks ahead to this week's budget debate in the House:

On a party-line vote last week, the House Finance Committee passed a budget much like Gov. John Lynch's plan. Both versions maintain a roughly $50 million reserve, or Rainy Day Fund, after they tap it for about $40 million in June. They both have a tobacco-tax increase, a gambling tax and a hike in the Rooms and Meals tax.

But there are some key changes. For one thing, new taxes on estates and capital gains were nowhere in Lynch's plan. The House added $16 million to cut down the wait list for services to the developmentally disabled; $2 million for cancer prevention, $1 million for HIV-/AIDS programs and money for catastrophic illness victims and suicide prevention.

Lynch's plan to give the state Liquor Commission more business clout fell by the wayside. Liquor has more work to do before it can start closing marginal stores and setting up liquor sales in private stores, the committee said.

In the Concord Monitor, Lauren Dorgan's column points out that even those who wrote this budget don't like it very much. Dorgan says the budget news is much grimmer than when Lynch gave a somber budget address in February:

Now we know that we didn't know from grim. House budget-writers backed two taxes on the wealthy, an estate tax and a capital-gains tax, on top of keeping most of Lynch's cuts in place (while adding back a few social programs, like cancer prevention).

The worst part: Even then, the budget still didn't balance, leading budget-writers to call for an additional 1.25 percent across-the-board cut, leaving agencies to decide where to find the money. (The Republican alternative budget did more than that, including a 13 percent across-the-board cut at many state agencies.)

State budget plan burdens city, town taxpayers

The Portsmouth Hereld editorializes against cost-shifting in the state budget, as Governor Lynch's plan scoops up federal stimulus money slated for cities and towns:

We are rapidly learning as Lynch's budget makes its way through the Legislature that much of the federal money will be filtered through state agencies, and those agencies will be taking the majority of the funding for state projects, such as the repaving of a portion of Route 101, and precious little will be left for the cities and towns.

Add to that cuts to the rooms and meals taxes returned to municipalities, the complete elimination of revenue sharing and an decrease in the percentage the state pays into the retirement system, and town officials are becoming more and more anxious about what all this will do to the tax rates they worked so hard to keep low this year.

The Herald concludes that Lynch is attempting to balance the state budget on the backs of local taxpayers:

That the state has financial problems we have no doubt, but the governor should not attempt to rectify that situation by further burdening New Hampshire citizens already struggling to make ends meet.

Vote big boost for PSNH scrubbers

David Brooks and Kevin Landrigan report in the Nashua Telegraph about a key Senate committee voting down a move against the Bow power plant:

hursday's unanimous ruling by the Senate Energy, Environment and Economic Development Committee doesn't end the complicated debate, since the legislation must still be taken up by the entire Senate, and a legal fight is waiting to be heard by the state Supreme Court.

But the vote was a big win for Public Service of New Hampshire as well as for the unions that had rallied against the bill, which would have required the Public Utilities Commission to oversee a study about whether the scrubbers were still in the public interest.

Union officials, who packed an earlier hearing on the bill, SB 152, said the legislation might threaten at least 200 construction jobs over the next three years at the plant.

Rep. Smith's budget: The Flee to Florida Act

The Union Leader comes out strongly against the many tax hikes contained in the House Finance Committee's budget, and urges Gov. Lynch to do the same before investors and entrepreneurs flee the Granite State:

If Gov. John Lynch wants to drive investors, businesses and retirees out of the state, he should swiftly announce his support for the budget released this week by Rep. Marjorie Smith's House Finance Committee.

The committee's $11 billion budget spends roughly $31 million more than the state spends now. More importantly, it finances much of that increase via three new taxes: one on estates, one on capital gains and one on gambling winnings. In addition, it increases a host of other taxes and fees, including the rooms and meals tax, fuel tax and tobacco tax.

The estate and capital gains taxes should alarm the governor enough to draw a veto threat. We'd say "an immediate veto threat," but the governor has already let a day go by without comment.

House Finance passes budget that nobody wants

Lauren Dorgan reports in the Concord Monitor that no one of the House Finance Committee likes the budget that it approved yesterday, yet somehow it passed:

The budget passed the committee on a 14-9 party-line vote, with Democrats voting yes and Republicans no. The entire House will vote on the budget next week; after that, Senate budget writers will craft their own version before legislators from both bodies settle on a final version in June.

The budget drew little praise from anyone. Committee Chairwoman Marjorie Smith said she would not take a vote on whether "anyone in this room thought this was a good budget" and said she would be happy to see senators rework it.

"I think this is a horrible budget. Absolutely a horrible budget," said Rep. Dan Eaton, a Stoddard Democrat and the House's majority floor leader, who nonetheless voted for the plan. "It was improved vastly over what we received (from the governor)."

The Republicans who helped craft parts of the plan but ultimately voted against it panned the taxes in particular.

"In these economic times, the idea of increasing taxes, I think, goes against all the wisdom economists have given us," said Rep. Neal Kurk of Weare, the ranking House Republican. "It's the equivalent of kicking a man when he's down."

Gov. John Lynch didn't like the plan much, either. Spokesman Colin Manning listed "many concerns" about problems with the House budget, saying it "underfunds essential operations," including the attorney general's office, deprives the liquor commission of "flexibility" to become more like a business and relies on across-the-board cuts without "tough policy decisions" about where to trim. On the revenue side, Manning said Lynch had "concerns" but declined to state whether the governor would support either a capital gains or an estate tax.

The House Democratic budget includes a 5% tax on capital gains, reinstates the death tax at 8%, and increases spending from Governor Lynch's budget proposal.

State retirees, drivers to pay under tax plan

Lauren Dorgan reports in the Concord Monitor about the $11 billion budget plan approved yesterday by the House Finance Committee:

Drivers would pay nearly twice as much in state gas tax, which would rise from 18 to 33 cents. Retired state employees who are younger than 65 would, for the first time, have to help pay for their state-provided health insurance. New Hampshire's dogs and ponies would get a break, as the state's current three racetracks will be permitted to quit running races of live animals while continuing to simulcast out-of-state contests.

The House Finance Committee yesterday voted to recommend all three of those changes - along with scores of others - as its legislators nearly finalized their version of the $11 billion state budget for 2010 and 2011 in a daylong meeting yesterday. The committee is expected to finish its work today, taking up Health and Human Services programs and proposals to institute new estate and capital gains taxes before voting on the whole budget package. The whole House will vote on the budget next week, before sending it on to the Senate.

Crafting budget a grueling, 4-stage process

In the Nashua Telegraph, Kevin Landrigan reports on the long and winding road of putting together New Hampshire's two-year state budget:

Gov. John Lynch took the stage first on Feb. 12, offering his two-year spending plan that employs $400 million in federal stimulus money to cushion the state from a severe recession expected to shrink state revenues this year by at least $250 million.

But legally, Lynch's work ended in preparing his 1,200-page document. The governor must wait on what the two branches of the Legislature do with his tax and spending plans.

Lynch offered a plan that in non-school state dollars spent $40 million, or 1 percent, less over the next two years.

The three-term Democrat kept promises to raise state aid to public schools $123 million in 2010 and 2011. Taken together, that translates to a 2.3 percent increase.

Burning the state's economy with higher tobacco taxes

By CHARLES M. ARLINGHAUS

Our disgust with smoking itself and our hatred of the great demon tobacco companies clouds our judgment and leads us to adopt tax increases that affect the people hurt most by a recession.
New Hampshire is on the verge of passing its fourth cigarette tax increase in the past five years. If the tax were levied on something other than cigarettes, it would be rejected.

Cigarettes are still a legal product and the source of much economic activity. It's not a matter of smokers buying directly from a manufacturer. For decades, New Hampshire has had a significantly lower cigarette tax than its neighboring states. The result is that many citizens from Maine, Vermont and Massachusetts make trips across the border to purchase cigarettes here.

It is generally assumed that roughly 40 percent of New Hampshire cigarette sales are to out-of-state customers. These customers are sensitive to tax changes. For example, when we raised taxes in 2005, our sales declined by about 7 million packs, while Massachusetts saw an increase of 8.5 million.

Our total loss was a little less because we gained at the expense of the much smaller Maine market. Economist Scott Moody studied the sales of a convenience store chain operating in both states. After Maine increased its tax by $1 per pack, the chain's stores in two Maine border counties saw decreases of between 7 and 10 percent, while its New Hampshire stores saw an 8 percent increase.

Cigarettes are a higher-margin item and out-of-state customers typically buy other goods as well. For small stores struggling in a difficult economic environment, driving away any customers is a problem. A significant loss in a higher-margin item could make the difference between survival and closing up shop.

Some policymakers believe that as long as our price is lower than the price in neighboring states, a tax hike will have little or no impact on sales. Our recent experience suggests instead that any tax increase has a psychological effect that translates into lower sales.

In the past, when Massachusetts raised taxes and we didn't, our sales increased, and vice versa. In 2008, Massachusetts raised its tax by a $1 per pack. We should have seen a significant windfall. But we also announced our intention to raise our tax by 25 cents. Although our tax would be still be $1 lower than theirs, that had a negative impact on sales.

Through the first eight months of this fiscal year, sales are about the same as they were last year. To be fair, with cigarette consumption declining a few percentage points each year, this is probably a slight increase in share but not nearly as much as we would have expected.

The psychological impact of any increase drives business away or creates a sense of equivalence in a consumer's mind.

Massachusetts will not be raising its tax this year, so any increase in our tax will likely lead to a significant sales loss for New Hampshire stores. This economic loss would ordinarily be problematic in a recession, but because the product is tobacco, normal rules are suspended.

The other major failure of cigarette taxes is that they are significantly regressive. Because people in lower-income levels are disproportionately more likely to smoke, they pay a significantly higher proportion of cigarette taxes. The Tax Foundation studied options for raising $35 billion at the federal level and "concluded that a cigarette tax increase hurts the poor more than virtually any other way of raising money to fund State Children's Health Insurance Program expansion."

The purpose of the proposed increase, like the three other increases in the last four years, is to raise money to fund the general purposes of government. To increase revenue exclusively through the most regressive option available is poor public policy.

The politicians most likely to support the cigarette tax hike are generally sensitive to the concerns about its harm to the poor and harm to small business, so why do they keep doing it?

The short answer is because it's smoking. Small increases in cigarette taxes do have a small effect in reducing the number of smokers. At least some subset of tax supporters would increase the tax $2 or $3 instead of 35 cents to try and make smoking unaffordable or more likely drive it underground.

More than a general anti-smoking attitude, it is paradoxically New Hampshire's anti-tax attitude that creates support for cigarette tax hikes. Many tax supporters will admit privately that they think raising the cigarette tax is bad policy, but they do it because they believe government needs more money and smokers are the path of least resistance.

Small businesses and poor people get caught in the crossfire, but they're just collateral damage.

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

Amendment X: Detergent Smuggling in Washington State

Laws have consequences. Laws making it harder for people to wash their dishes will drive people to evade those laws. Washington is dealing with banned chemicals coming across its borders, dishwasher detergent:

The quest for squeaky-clean dishes has turned some law-abiding people in Spokane into dishwater-detergent smugglers. They are bringing Cascade or Electrasol in from out of state because the eco-friendly varieties required under Washington state law don't work as well. Spokane County became the launch pad last July for the nation's strictest ban on dishwasher detergent made with phosphates, a measure aimed at reducing water pollution. The ban will be expanded statewide in July 2010, the same time similar laws take effect in several other states.

We tried to protect those who need help most

In today's Concord Monitor, House Finance Chairwoman Marjorie Smith justifies the budget that her Committee will likely approve today. Smith pens an op-ed outlining where Finance is increasing spending over Gov. John Lynch's budget proposal:

The governor's budget left many valuable and innovative programs on the cutting room floor. We have, nonetheless, been able to address some needs that had not been in the budget or had been funded at a lower level.

We decided to:

• Return rooms and meals revenue to cities and towns;

• Fully fund education adequacy according to the formula approved by the General Court in the last session;

• Provide additional money to cities and towns, the Department of Resources and Economic Development and Fish and Game Department, and as a result of inclusion of the gas tax in the budget;

• Support Family Resource Centers which assist at-risk families.

• Support Senior Volunteers, Foster Grandparents and RSVP - programs that provide assistance to seniors and school children;

• Support the Catastrophic Illness Program, which provides minimal assistance to those with serious illnesses;

• Fund family planning at the maintenance level;

• Provide funding for AIDS services organizations;

• Increase funding for programs to divert at-risk youths from the juvenile system;

• Fund the Governor's Commission on Drug and Alcohol programs at the 2009 level, and

• Fund the Comprehensive Cancer Plan at 25 percent of maintenance level.

State employee unions declare an 'income tax'

State employees facing budget cuts have come up with a new way to descibe smaller government. They say it's an income tax. Lauren Dorgan reports in the Concord Monitor and state workers and retirees are trying to redefine receiving less money from the taxpayers as "an income tax" on state workers and pensioners:

Two of the proposals that have generated protests from union leaders, employees and retirees will likely have their first major vote today, when the full House Finance Committee takes a vote on the state budget. They are:

Temporarily boosting public employees' contributions to the New Hampshire Retirement System by 2 percent, to 7 or 11 percent of every paycheck, depending on what the employee does, a measure backed by lawmakers on a finance subcommittee.

Having retired state employees under 65 years old pay a portion of the premiums for their state-provided health insurance for the first time, a move proposed by Gov. John Lynch and backed by the subcommittee. Lynch, a Democrat, proposed a charge of $100 a month for a single person. House lawmakers have suggested instead charging 11.5 percent of the pension for each of the roughly 2,400 state retirees who take advantage of the health care plan. That way, lawmakers said, those who draw the smallest pensions won't shoulder an excessive burden.

Borrowed money: No debt for school aid

The Union Leader comes out against Gov. John Lynch's plan to borrow money to pay for state school construction aid on this morning's editorial page:

Last year, Gov. John Lynch got legislators to agree to bond about $40 million in building aid for local school districts. This year, he has proposed borrowing another $83 million over the next two years for the same purpose. Legislators should say no.

The governor justifies this move by saying that, well, this money pays for capital projects so it's OK to borrow it. But his plan amounts to borrowing the money twice.

Local school districts borrow money for construction projects. The state has long paid a share of these costs by giving localities grants from the general fund. If the state borrows money to pay off locally borrowed money, as Lynch proposes, then it increases the debt -- and the interest -- for those projects.

That's not smart. It's like making your monthly credit card payment with money borrowed from another credit card.

Budget Concerns

While high-profile bills dealing with social issues got most of the attention last week, Kevin Landrigan continutes to supply excellent coverage of New Hampshire budget mess in the pages of the Nashua Telegraph. In his weekly column, Landrigan reports on how Governor John Lynch's plan to borrow against operating funds is endangering the state's capital budget:

Lynch had enough to worry about trying to get his complex state budget through the House of Representatives.

Now it's looking more and more like his two-year capital budget could be in tatters before too long.

As noted, Lynch used a variety of maneuvers to balance his two-year spending plan, and one that has received little attention is the proposal to float state-backed bonds and make $84 million in school building aid payments to school districts.

One byproduct of this is that for the next two years, it would gobble up 60 percent of state bonds to do public works construction projects.

"Once you do that, you cease having a capital budget," said Nashua Democratic Rep. David Campbell, vice chairman of the House Public Works and Highways Committee. "If we do that, then we might as well not bother putting one together, because we can't possibly meet the needs."

Campbell and others worry that setting this precedent for a popular local aid program couldn't easily be undone once the economy recovers.

Landrigan also lists some of the budget changes under consideration by the House Ways and Means Committee:

Budget "hole": At one point early last week, the House subcommittee recommended spending that dwarfed the amount of expected revenue even with proposed new taxes on capital gains and estates.

The gap closed by week's end. House budget writers cranked the budget up by $14 million over what Lynch had budgeted to come in from prescription drug discounts and they dropped estimates for welfare caseloads as much as $20 million below Lynch estimates.

State layoffs: The proposal adds back two dozen employees, or nearly 30 percent of layoffs Lynch called for in Corrections with the closing of the state prison in Laconia.

Medicaid ouch: House budget writers learned at least $25 million in federal stimulus money given to the state has to go straight to county budget coffers because counties pick up all the non-federal share of nursing home and other costs.

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Amendment X: Michigan Film Incentive

The Mackinac Center for Public Policy investigates whether the tax incentives that Michigan provides to film movies and televisions shows in state deliver on the amount of jobs created:

When movies are filmed in Michigan, the studios have to pay Michigan business taxes. Under this program though, state government will give filmmakers a refund check for up to 42 percent of the money they spend in Michigan. That means a movie company that spends $10 million in Michigan could get a check for more than $4 million. That’s even after the film companies pay their own taxes.

In effect, Michigan taxpayers will foot the bill every time the refund is more than the movie company’s taxes, and there’s no limit as to how large the refund could be. In return the state is supposed to get more jobs and revenue.

Click the link to see the Mackinac Center's video.

State is wrongly seizing private funds

By CHARLES M. ARLINGHAUS

New Hampshire's budget is being balanced this year in part by turning private insurance funds into government money and appropriating the funds for government use. The raid illustrates how fiscal problems can tempt a government to limit property rights and rationalize behavior it would never consider otherwise.

The state's current financial crisis is well known. During the governor's budget address, he announced his intention to use $110 million from a little-known medical malpractice fund to balance the budget. His announcement immediately sent policy makers scrambling to find out exactly what the fund was.

No one knew there was $110 million available to the government sitting in an untapped fund. When legislators had passed a bill a few weeks earlier to clear out surpluses in other dedicated funds, they had found only about $16 million. The governor had waved a magic wand and -- presto! -- a huge chunk of money materialized.

It turned out there was good reason no one knew it was available. That's because it's neither state money nor a government program. The medical malpractice fund is a privately funded high-risk insurance pool administered by a private company through a provision in state law for joint underwriting agreements. The state doesn't pay for it or administer it. It is merely set up through state rules that allow for such joint agreements.

The co-operative fund assesses premiums and holds the money in trust against future charges. When it has a balance, it invests those funds according to a formula set up by its rules. The premiums and investment have been more than enough to pay charges, so the pool has a surplus.

This is exactly how mutual or cooperative insurance works. In the case of a typical mutual insurance cooperative, excess funds not needed to pay premiums are returned as a dividend to those who paid premiums. This may be how your car insurance works. In my case, we pay premiums throughout the year and then receive a check refunding excess premiums.

In fact, the cooperative medical malpractice fund has exactly the same provision. The money is held in trust but must be remitted to members or premium payers should there be a surplus. The wording is available in the rules on the insurance department's Web site. (It's rule 1703.07.)

The rule specifically requires that if premiums exceed the amount required to pay losses and expenses, they shall be distributed first to members and then the fund must "distribute the excess to such health care providers covered by the association as is just and equitable."

There's nothing weird about this. It is how any mutual insurance organization operates. Premiums are held in trust to pay claims. If you don't have claims, the premiums are not justified and cannot be justified.

The explicit rules of the underwriting agreement don't provide a third paragraph that says "yeah, but if the state's having trouble balancing its budget then nobody gets his money back and the state can just take it."

The state has a long memo from the Attorney General's Office that explains why in the attorney general's opinion no entity has enough standing "such that it could successfully challenge a legislative act to transfer the funds to the General Fund." Essentially the state argues that because joint agreements are allowed by statute, statute can be used to seize their funds. I'm not sure anyone who set up the fund realized that.

The attorney general also cites cases in other states where the state court allowed the legislature to take the money. In those cases, the agreement did not have rules providing for the distribution of any excess funds.

The governor and the attorney general's memo have also argued that a disbursement would be an unacceptable distortion of the market despite the rule requiring it. It is difficult to see how the very same disbursement my insurance company makes to me, and yours makes to you, is unacceptable just because the government desires the money. If it is, in fact, an unacceptable practice, then wouldn't all mutual insurance companies have to be abolished by state law? And wouldn't the state have made a huge mistake in approving the rules that govern this cooperative?

Ultimately, this is a seizure of private funds justified only by the cash crunch the state finds itself in. Argentina recently did something similar. Faced with a larger crisis than we face, the government nationalized private retirement funds, the equivalent of our 401(k) funds. The government seized billions in private funds to help its own cash flow. It was uniformly attacked as an unacceptable assault on private property. Let's not follow that bad example.

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

Mass., NH lawmakers unite to fight border tolls on I-93

Kevin Landrigran reports in the Nashua Telegraph on the joint effort by Massachusetts and New Hampshire lawmakers to avoid a pair of dueling toll booths along the border:

Lawmakers said they created the Border Coalition to prevent a bidding war as state officials compete for federal support to erect a New Hampshire toll in the southbound lane of Interstate 93 in Salem and Massachusetts tolls just over the state line."The amount of support I get from the public is overwhelming," said state Rep. Frank Sapareto, R-Derry, who worked with Massachusetts lawmakers to form the coalition.

"I haven't met anyone who is strongly in favor of putting tolls up there."

Sapareto got 65 New Hampshire lawmakers to join after a few hours of buttonholing individuals during a recent House session.

The New Hampshire House has 399 members.

Only five Massachusetts senators have signed up from that body, which has 40 members.

"We've not had an easy time of it in either state getting Democrats to get on board," Sapareto said.

Utility players: Dangerous regulations

The Union Leader editorializes against a pair of bills that is sees as legislative micromanagement of Public Service Company of New Hampshire:

In 2006, the state required Public Service of New Hampshire to install a mercury scrubber at its Merrimack Station coal-burning power plant in Bow. The law did not cap the price of the project. In the meantime, the estimated cost has risen from $250 million to $457 million. House Bill 496 would cap the amount of PSNH ratepayer dollars that could go to the scrubber project at $250 million.
This makes zero sense. It would scrap the project, which would put the plant out of compliance with emissions regulations, which would force the plant's closure. PSNH would then have to buy power on the market, costing ratepayers much more than the scrubber would cost.

Tobey School could remain open one year

For years, budget writers have looked towards closing the state-owned Tobey School, which would save money by sending troubled teens to less-costly private institutions. Governor John Lynch proposed the move in his budget address. Yesterday, the House Finance Committee voted to put off the closure for at least a year:

But lawmakers yesterday said they felt that closing the school at the end of June, as Lynch's plan proposed, was too soon. Daniel Barrick reports on the vote in this morning's Concord Monitor:

"I'm ready to close Tobey School today, but it might make more sense to delay," said Rep. Fran Wendelboe, a Republican from New Hampton. "I think we owe them a year. This was awful abrupt."

The proposal approved yesterday would fund Tobey for another year while directing the state health department to study whether the school could merge in some way with the Anna Philbrook Center, a state-run facility that treats preteens with mental illnesses.

Weekend Roundup

In the Nashua Telegrap, Kevin Landrigan reports on the proposed capital gains tax passed by the House Ways and Means Committee, and reflects on the last time this idea came up:

A decade ago, the dilemma was how to solve an education funding mess as the result of the state Supreme Court decision that judged over-reliance on local property taxes to be unconstitutional.

By now, it's well known that lawmakers and then-Gov. Jeanne Shaheen ultimately went for a statewide property tax and other hikes in existing state taxes to more than triple state aid to public schools.

In the midst of that debate, however, Shaheen got squarely behind raising the capital gains tax and raising the state's tax on corporate profits 1 percent (HB 117) as her preferred solution.

The state Senate agreed in passing her version by a 14-8 margin.

Tom Fahey writes in his Under the State House Dome column in the Sunday News about the proposed budget savings from cuts to state employee health plans:

Retired state workers will have three months to get used to a new health-insurance program. The Legislative Fiscal Committee voted unanimously Friday to move all retirees into the same point-of-service program active workers get. The change is part of Gov. John Lynch's budget plan, and saves an estimated $2.4 million.

Retirees at the meeting worried that their costs, especially for pharmaceuticals and hospital visits, will soar while they stay on fixed state pensions.

House and Senate members said the most onerous part of the switch was dropped. Administrative Services Commissioner Linda Hodgdon pulled a proposed $100 monthly premium for retirees under age 65 from the plan. However, that charge remains in the mix for consideration with the rest of the 2010-11 state budget. Taken together, the
premium and plan change save $10 million.

In the Concord Monitor, Lauren Dorgan tells us about a group of New Hampshire and Massachusetts lawmakers trying to disfuse the border war:

United against tolls

Lawmakers from New Hampshire and Massachusetts will join up in Concord tomorrow at noontime to announce united opposition to tolls on Interstate 93 in either state. They're calling themselves the Border Coalition.

Foster's editorial page notes that the federal stimulus is seen by local officials as a way to fix their budgets, at least for the short term:

Does the pot runneth over? If it does, there are a lot of people getting in line to dip their ladles in the caldron before there is a spillover and the excess goes elsewhere.

The so-called stimulus fund is looked at hungrily by officials at every level of government. The only emergencies county and local officials acknowledge are the ones within several miles of their offices. They have started to think of the stimulus fund as a deep well from which they might draw relief. The fund is taking the shape of "found money."

Every state, city, town and hamlet in the country is trying to get its hands on some of the three-year funding.

Stimulus funds are seen as a way to balance budgets in a manner that denies there is hole in the economy through which the nation's wealth is flowing.

Big Yogurt Fights Back

You can't take on a powerful political force like Big Yogurt without expecting some backlash. Today, Gary Hirshberg responds to Charlie Arlinghaus's column about the Bow power plant:

In recent months, many states have re-examined coal projects. Last week, Louisiana's Public Service Commission temporarily suspended work on the $1.8 billion Little Gypsy repowering project to "review the economics" of a new petroleum coke and coal upgrade in light of lower gas prices, climate change concerns and rising project costs.

PSNH has stated that it welcomes public review of the scrubber project. But all the company has done is hire lawyers, lobbyists, and public relations consultants to oppose legislation that would require one.

Sunshine Week looks at NH Court System

The Nashua Telegraph continues its Sunshine Week with a look at New Hampshire's Court System:

The state’s Supreme Court posts its rulings and hearings schedule online, and there is a wealth of system wide information on the state courts’ Web site.

The courts are years away from offering online access to lower court case records and officials already have decided to keep most of those documents off the Internet due to privacy concerns. Online case records will show the persons involved and the status of each case, such as hearing dates or notes on the final disposition, but not actual case documents.

Check out the Telegraph's complete Sunshine Week Coverage.

Big Yogurt vs. Big Coal

By CHARLES M. ARLINGHAUS

In the biggest political grudge match of the year, Big Yogurt is taking on Big Coal, with hundreds of millions of dollars hanging in the balance.

A few years ago, the Legislature passed a law requiring the state's largest utility, Public Service of New Hampshire (PSNH), to install a mercury scrubber on its coal-fueled power plant in Bow. Because the cost of construction is rising, the expected cost of the multi-year project rose from about $250 million to about $450 million.

Because PSNH is a public utility, the cost of operating the plant is borne directly by ratepayers. Think of public utilities not as private companies but as quasi-government departments. We provide electricity to every citizen and contract over the long term with a single company in the service area. PSNH is the provider of that service for the largest part of the state. Its costs and profits are strictly regulated in filings before the Public Utilities Commission.

This is a double-edged sword for ratepayers. For many years, we had among the highest electric rates in the region because we were paying off the building costs of power plants. Recently, that has turned into an advantage as the large plants have been paid off. Think of it as finally paying off the mortgage on your house.

In addition, we reap the cost benefits of coal being among the cheapest power sources. Rather than paying the much higher market rate for power, ratepayers benefit from the current low cost of coal being produced at a plant that has finally been paid for.

Adding pollution control equipment is expensive and raises the cost of providing that electricity. The cost of the mercury scrubber will be spread over 15 years. It will add a little less than a third of a cent to the electric rate.

Because PSNH is a regulated utility, its rate of return on capital is strictly regulated as well. Investors putting up the capital know that there is a limited positive gain from their investment, but also very limited risk because return is guaranteed. Because PSNH is guaranteed a return on capital, it has come under attack. Opponents now call PSNH 'Big Coal,' as if the company officers weren't locals sitting in a refurbished mill in Manchester but evil, greedy executives secretly plotting to strip-mine half of West Virginia, turn mountains into valleys, and generally be mean to birds and puppies.

This is where debate has gone in America. Our opponents are never people with a different idea. Instead they are Big Something, and we're the little guy fighting the good fight against them. Stonyfield Farm CEO Gary Hirshberg is leading the opposition against the new mercury scrubber. He asks us if we're going to let Big Coal push us around.

Unfortunately for the cheap electricity side, Hirshberg is an organic yogurt maker. It's hard to attack Big Yogurt or Big Enzyme. Are you going to let Big Enzyme digest you? See, it doesn't work.

The financial argument for the project needn't degenerate into name calling. We spent decades paying off the mortgage, and now the plant is cheap to run. As long as the plant is cheaper than buying the electricity elsewhere, it makes sense to run it. When it isn't, it should be closed.

To run it, we need to install a mercury scrubber. If we install a scrubber, will electricity still be cheaper than buying it and bringing it into the state? The price increase under the scrubber will be .31 cents. According to testimony before the Public Utilities Commission, the comparable cost of buying electricity would be an additional .73 cents. That price difference sounds small, but it means scrapping the scrubber would cost more than twice as much -- more than $1 billion in total.

So while the cost of a scrubber sounds like a lot, it's actually $500 million less than the only alternative.

One scenario that would make the scrubber more expensive is if President Obama pushes through a tax on coal, and only coal, to try to shut down some of the coal plants around the country. That seems unlikely. The President's stimulus package actually includes money for a new coal plant. In a difficult economy, adding taxes to hike the price of electricity isn't exactly stimulus.

In addition, the scrubber project adds about 1,000 jobs to the current economy, especially in the hard-hit construction area. No one should support the scrubber as a jobs program, but think of it as a side benefit.

At the end of the day, we've finally paid off a plant. It has a long life yet, and we should save ourselves the $500 million.

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

AP: State may charge for health care

Norma Love of the Associated Press reports on one way state budget writers are looking to reduce costs; requiring health care copayments from retired state workers younger than 65:

State government retirees younger than 65 would start paying for their health insurance if legislators approve the plan Friday.

The 2,400 such retirees do not pay a premium now but would start paying $100 a month for themselves and $100 for their spouses on July 1 if the Legislative Fiscal Committee approves.

The committee also will consider aligning health coverage for 10,000 retirees and their spouses with the plan for active employees to save money. The proposal also would change the prescription drug benefit.

All retired employees except those under the state troopers' health plan would be affected.

More details on state budget

In his column in the Sunday Telegraph, Kevin Landrigan combs through the legislation implementing the state budget, HB 2, and finds a number of changes not included in the Governor's Budget Address:

• State workers: Anyone hired after July 1 will have to contribute more toward their retirement – 40 percent more, as their "investment'' in the pension will go up from 5 percent to 7 percent of their wages. Turnpike/Interstate Division: This melds the state turnpikes and interstate highways into a single division with a new director and also a new director of policy and administration in the Department of Transportation.

The move is key to Lynch's plan to use turnpike toll dollars to spend on stretches of interstate state highways. For example, the state's highway fund for years has paid for the maintenance of Interstate 89.

It's pivotal to Transportation Commissioner George Campbell's bid to ultimately install a tollbooth on Interstate 93 in Salem near the Massachusetts border.

Design build: This allows the DOT to place any and all of its construction work through this faster track without traditional competitive bidding. Current law allows this only for projects up to $5 million.

Public kindergarten: Lynch had already said he would seek state-backed bonds for 2010-11 to make payments for school construction projects.

The Legislature gave him permission to do that last spring for 2009.

This bill adds to that a $3.6 million bond to finance state support of public kindergarten building space.

Juvenile diversion programs: State law sets aside 6 percent of all spending for troubled youths for diversion programs run in local communities that keep juveniles from ending up criminally delinquent or worse.

This change cuts that earmark to 3 percent.

Self-insurance reserve: Former Gov. Craig Benson converted to a self-insured health-insurance plan that a managed-care company runs for the state. The move created a one-time cash boon in excess of $20 million.

The Lynch change cuts what has to stay in reserve in that account from 8.3 percent to 5 percent of annual claims.

A smaller reserve means more of that cash can come out to support state spending.

Deputy commissioner: Administrative Services Commissioner Linda Hodgdon would get a deputy, but would have to find money elsewhere in her budget to pay the salary.

Print media: Lynch would permit any ad seeking state job applications or requests for proposals to do state work to be advertised on the state's Web site rather than in local or statewide newspapers. The change only requires an ad be bought that alerts the public to the Web site address for all information.

Telegraph launches Sunshine Week

The Nashua Telegraph has launched Sunshine Week, a special report on open government in New Hampshire:

During the course of the week, we will present you with a series of news-you-can-use stories to better familiarize you with the information available on state and local government Web sites.

Specifically, you will learn:

• What state government is doing to help you track how New Hampshire's share of the federal stimulus money is being prioritized and spent.

• What kind of information can be found (standardized test scores) and not found (teacher certification status) on the state Department of Education Web site.

• What court records are available on state and federal government Web sites.

• An overview broadly detailing the type of data you are likely to find on your city or town's Web site.

Check here for complete coverage throughout the week.

"Meet the New Press" Podcasts

Here's the complete podcast from yesterday's edition of "Meet the New Press".

Hour 1, Segment 3- the effects of suspending revenue sharing on local budgets.

Hour 1, Segment 4- More discussion on the history of revenue sharing.

Hour 2, Segment 2- The DOT's plan to transfer $120 million out of the Turnpike Fund.

Watchdog on the Radio

I'll be joining the gang from Granite Grok tomorrow morning on WEMJ's "Meet the New Press" from 9-11. Listen live on Newstalk 1490 WEMJ, or streaming live right here.

Arlinghaus responds to Campbell column

Charles Arlinghaus, President of the Josiah Bartlett Center for Public Policy, has posted a response to Commissioner George Campbell's column in this morning's Union Leader:

I have found the commissioner to be a very pleasant and sincere man. I applaud him for wanting us to be less ill-informed. I'm pretty sure though that he didn't challange any of the data I used. Perhaps he can refer us to other public documents. A few points.

(1) he doesn't dispute my assertion that the DOT does a terrific job and we annually take more bridges off the red list than are added to it. The study I refereneced is older but more recent documents include similar and updated data here: http://www.nh.gov/dot/org/projectdevelopment/planning/documents/03-04_Bridge.pdf
This from the commisioner's website announces that we annually remove about 45 bridges while only 32 are added. Good job.

(2) I think I used the term 10 year highway plan although we have officialy changed the name to 10 year Transportation Plan. But I use that document specifically because I had thought the commissioner told me that it was what the department's priority. Find it here: http://www.nh.gov/dot/org/projectdevelopment/planning/documents/09-18_TenYrPlan.pdf page 2 of the introduction (after the bill and all that stuff) says specifically that the plan has 2.3 billion of projects and 2.1 billion of revenue. I don't think that document is either ill-informed or misleading.

(3) The central assertion of my piece is not that $120 million is a bad evaluation. Obviously it's a good one and that's why they selected that piece of road for the transfer. My assertion is that the transfer itself allows money to be transfered from the turnpike fund to the highway fund and get around the prohibition on the use of toll money for anything but the turnpikes. You'll note from his text that he doesn't dispute that. One would hope not. After all it was the governor who said as much in his budget speech to the legislature. The speech is here: http://www.governor.nh.gov/speeches/documents/021209budget.htm

The line is "This plan includes having our turnpike system purchase a part of Interstate 95 that is now part of the Highway system. That sale, funded by a 50-cent increase at the Hampton toll, will provide $15 million a year for the Highway Fund."

I'll check with the commissioner to see what other public documents he wants us to look at and report back later. For now I'm just happy to note that my piece was based on his own documents and that he doesn't dispute any of them. Despite the tone of a sentence here or there, I appreciate the compliment.

Charlie Arlinghaus, Canterbury

Campbell calls for more highway money

Transportation Commissioner George Campbell makes the case for more money for his department in this morning's Union Leader, and takes a shot at Bartlett Center President Charles Arlinghaus's column from earlier this week:

Taking care of New Hampshire's highways and bridges is a serious matter. The safety of the traveling public and the utility of the system for travelers and businesses are at the foundation of New Hampshire's economy.

So when an ill-informed and misleading opinion by Union Leader columnist Charles Arlinghaus is published, it's my responsibility as commissioner of the New Hampshire Department of Transportation (DOT) to respond with the facts.

The most troubling assertion Arlinghaus made in Wednesday's column ("The governor's strange proposal to raise highway money") is that New Hampshire is not facing a transportation funding crisis. DOT's funding needs have been well documented and cannot be easily dismissed. I can assure you from dealing with it firsthand on a daily basis that we are confronting imminent and critical financial challenges of meeting both the operational needs of maintaining the system and the capital needs of improving it.

Limiting Spending: Local voters lead the way

As state and federal lawmakers pass record spending bills, New Hampshire voters are showing much more fiscal restraint at Town Meeting. Both the Union Leader and Nashua Telegraph note this year's streak of yankee frugality:

Union Leader:

There is no reason to think the voters would hold a different opinion when it comes to the state budget. The evidence suggests widespread disapproval of higher taxes and spending across the state. (City officials ought to take notice of this public mood as well.)
If legislators were listening at all on Tuesday, they couldn't mistake the message: No new spending; no new taxes. The only question is: Were they listening?

Nashua Telegraph:

The headlines in Wednesday's Telegraph said it all: "Kindergarten flunks / Hudson voters nix plan to fund program;" "Most articles rejected / Litchfield voters not in spending mood Tuesday;" "Modular classrooms voted down / (Milford) voters narrowly reject $1.7m bond for half-day kindergarten classes at Jacques;" "(Lyndeborough) voters reject adding kindergarten space."

Of course, when it comes to town spending, one taxpayer's loss is another taxpayer's gain. It all depends where one stands on the issue at hand.

The big losers Tuesday night were supporters of public kindergarten in Hudson, proponents of bonds to build public kindergarten space or to repair municipal roads, and town employees who were up for raises in new labor contracts.

The big winners? At least in the short term, taxpayers who didn't want these costly items to impact their next tax bill.

Bartlett Center reports property tax impact of ending revenue sharing

Bartlett Center reports property tax impact of ending revenue sharing
Berlin Facing Highest Property Tax Hike in NH

(Concord) The Josiah Bartlett Center for Public Policy today released
a report outlining how a legislative proposal to end revenue sharing
would impact local property tax rates. Berlin taxpayers would face an
increase of $3.16 per thousand in their tax rate unless state revenues
were replaced by other sources. A dozen New Hampshire communities
would face increases of over a $1.00 per thousand.

Read the Full Report

COMPLETE TOWN BY TOWN LIST

"For forty years, New Hampshire communities have relied on their share
of the Business Profits Tax and Rooms and Meals Tax to fund local
government," said the report's author, Grant Bosse. "Ending revenue
sharing would force local taxpayers to foot the bill for fixing the
state's out-of-control budget."

The Bartlett Center relied on revenue data from the New Hampshire
Municipal Association and local property values from the state
Department of Revenue Administration in calculating the local tax
impact across New Hampshire. Governor John Lynch proposed suspending
the state's two largest revenue sharing formulas in his February
Budget Address, cutting $160 million that would otherwise go to cities
and towns. Lynch has since backed away from suspending one revenue
stream, while continue to support suspending the other. Both sources
of local revenue would be suspending under House Bill 2, know pending
before the House Finance Committee.

"New Hampshire towns voted on their annual budgets last night, but
their tax rate might go even higher if the Legislature ends revenue
sharing," Bosse added. "Lawmakers would be forcing local taxpayers to
bear the burden of their budget problem."

The Josiah Bartlett Center for Public Policy is a free market think
tank based in Concord, New Hampshire. For more information go to
http://www.jbartlett.org/.

-30-

The governor's strange proposal to raise highway money

By CHARLES M. ARLINGHAUS

The State of New Hampshire wants to pay itself $120 million with interest. This odd financial ploy from Gov. John Lynch's budget started as an attempt to get around legal restrictions on certain revenue and to avoid raising the gas tax. Instead, the New Hampshire House voted last week for the strange gimmick and to almost double the gas tax.

Gov. Lynch has traditionally opposed raising the gas tax and hasn't announced whether he would veto the House's hike. Instead, in his budget he came up with a clever way to get around legal restrictions on the use of transportation money by having the state sell a piece of road back to itself.

It's well known that the state constitution requires gas taxes, vehicle registration revenue and some other fees to be spent only on highways or traffic supervision. The money can support things like state police doing highway enforcement, but otherwise it has to go toward building and maintaining roads.

Tolls collected on the turnpikes are even more limited. Tolls are a user fee and can be spent only on the toll roads themselves. They are kept in a separate turnpike fund for use on what are legally defined as the turnpikes. After the toll increase two years ago, the turnpike fund is flush with money that can't be spent on any other roads.

Here's where clever accounting comes in. The eastern turnpike includes Interstate 95 up to the Spaulding Turnpike and the Spaulding Turnpike through Rochester. The state wants to take the remaining mile of I-95 not currently part of the turnpike system and transfer it to the turnpike system. The turnpike in exchange would pay the highway fund $120 million plus interest.

At first it sounds goofy, like a man negotiating with himself in the mirror. But actually it is a clever way of dodging state law and using toll increases to fund not the turnpike but the rest of the roads in the state. The governor's budget included millions of dollars of toll increases. Raising a toll is not as unpopular as raising the gas tax, but toll money is more limited. This gimmick allows the state to use the money raised from new tolls to fund a $120 million purchase from itself, which frees millions of dollars from pesky legal restrictions.

The "sale" is expected to give the highway fund an additional $30 million in this budget and $15 million for the next six budgets after that plus interest.

For lawmakers looking to spend more money on roads, the other way to do it is to simply raise the gas tax. A group in the House has been working to do just that and got passed a bill to almost double the tax over the next three years. More surprising is that the House didn't do this instead of the governor's gimmick. It did both.

If you thought the recession would cause lawmakers to be cautious about raising tolls on people or raising the gas taxes they pay, you'd be wrong.

Listening to the rhetoric, you'd think New Hampshire's roads and bridges were falling apart and the highway fund was on the verge of insolvency. Frost heave season notwithstanding, it isn't true.

The state maintains a "red list" of the state and municipal bridges most in need of repair or replacement. Two years ago, the Department of Transportation reported that in the prior decade an average of 43 bridges came off the list each year and 30 bridges were added. In the most recent year of the study, 23 bridges were removed and nine added. So each year we remove more than we add.

The state adopts a 10-year highway plan as a list of the transportation projects we want to fund over the next decade. The plan adopted last year contained $2.3 billion worth of projects and anticipated only $2.1 billion of funding. If this were a budget, there would a $200 million deficit. But the plan isn't authorized spending. It is merely a priority list for how we spend the money we anticipate taking in.

The federal stimulus money will probably fund most of the $200 million by itself. The gas tax hike alone would fund three times that amount, and the weird selling of the road to ourselves would also cover most of it. If there isn't a crisis, we should think carefully about whether a strange accounting gimmick to bypass state law is a good idea.

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

Town Meeting Day

As New Hampshire voters head the polls for our annual rite of democracy, the Union Leader editorial page urges fiscal restraint:

Last week he changed that plan. He now says federal stimulus money will pay for the increased education aid, and he'll let localities keep $120 million of the money he was going to take for the state. But that still leaves towns with less money than they normally would have received from the state this year.

That loss comes on top of whatever losses local governments already experience because of the recession.

The safest assumption for voters is that their towns have less money than local budgets project. Therefore, the safest bet is to cut spending.

A good plan for the future would be to set firm restraints on the growth of local government. Voters in 10 towns have the chance to request such restraints today. Warrant articles on the ballot in Allenstown, Conway, Hampstead, Hudson, Kingston, Plymouth, Rindge, Rumney, Salem and Strafford urge town officials to limit the growth of spending.

Details of HB 2 emerging

Tom Fahey looks at some of the significant changes included in HB 2, the bill that accompanies the state budget, HB 1. Fahey outlines the details in his "Under the State House Dome" column in the Union Leader:

FEES IN THE DETAILS: D'Allesandro's bill to modernize the State Liquor Commission was shipped back for more committee work last week. But SLC chair Mark Bodi still gets plenty of new power under House Bill 2, where budget-related legal changes are made.

Bodi will be able to close any state liquor stores to improve the bottom line, and to license private stores to sell liquor through June 2014.

HB 2 has plenty of other details in its 56 pages -- like the 30-cent tobacco tax increase, elimination of the E-ZPass discount and $30 monthly cap, a $10 increase in motor vehicle registration fees, the closure of eight district courts, a gambling tax, a higher meals tax, a cut in the retirement fund help to cities and towns, and more.
There's also a higher license fee for hospital and nursing home beds tucked in there. It goes to $52 a bed, from the current $2.50 a bed.

Finance Committee member Rep. Fran Wendelboe thinks the state needs to stop all the fee hikes.

"How much of this is in there? I think it's atrocious that government can spend all it wants, then bill the people it oversees," she said.

Monitor Editorial on State Budget

The Concord Monitor's editorial page weighs on in Governor Lynch's budget proposal, and concludes that the revenue sharing ideas in it would pass along the state's budget burden to local property tax payers:

The policy makes it unlikely that school districts could use stimulus money to lower the school portion of the tax rate to offset an increase on the municipal side of the ledger, a strategy Lynch describes as moving money into "the right buckets." But only nine of the state's 234 municipalities have one board that oversees both the city and school budget and it's unlikely that many school boards, having suffered from inadequate state funding for decades, are going to turn the additional revenue over to municipalities without a fight.
Lynch's latest plan would mean less pain for cities and towns, but they'll still lose money. The state has plenty of revenue-raising options. It should employ those rather than taking money away from local governments, which have but one way to raise revenue - by increasing property taxes.

Tom Eaton: Gov Lynch's Budget is a Shell Game

By TOM EATON (Union Leader, March 6, 2009)

Now that the shock and awe of Gov. John Lynch's budget address has faded and we have had a chance to look at the details of his proposed budget, one fact has become clear -- the emperor has no clothes.

Gov. Lynch's proposed budget is a shell game that amounts to intergenerational theft.

We're not in this huge budget deficit because of the national economic downturn. This past budget cycle, the Democratic- controlled Legislature passed a 17 1/2 percent budget increase. For reference, the 2003 and 2005 budgets increased by about 3.5 percent, which included all essential and nondiscretionary spending. That coincided with the rate of inflation and demonstrated fiscally sound policy.

In this year's budget, Gov. Lynch claims he cut general fund spending by $40 million. But that's not exactly true. What he really did was some creative accounting. For example, he "relabeled" the State Liquor Commission budget so that it is no longer called general fund spending. This is not a cut; it is a name change. He is going to increase the agency's spending from $71 million to $91 million. But with a little creative accounting, a $20 million spending increase instead looks like a $71 million spending decrease.

Gov. Lynch also proposes bonding $83 million in school building aid -- money that used to be part of yearly general fund operating costs. The program isn't going away. The state will still send $83 million to communities for building aid. But with another sweep of Lynch's magical budget wand -- poof -- "level funding" an existing program looks like an $83 million spending cut. The reality is that the aid dollars were put on a "credit card" that our grandchildren will end up paying.

Here's another creative way to make it appear that you're cutting state spending -- announcing a state agency reorganization. However, is there an actual plan to do this? And if so, where is it? And can a plan of this magnitude really be implemented over the next two years? How much could we actually save if there was a plan that could be implemented over the next two years? Who knows? Yet Gov. Lynch's budget includes a $28 million cut in general fund spending due to reorganization. This is not a way to reduce our obligation going forward and demonstrates a worrisome pattern.

Gov. Lynch's budget proposal is full of these accounting gimmicks. State spending doesn't decrease. Many current costs are shifted or hidden. We all know that we are in the midst of a recession. This is not the time for quick fixes, yet one-time federal stimulus money is earmarked for programs we used to pay for within our budget.

Switching the funding source for the next two years doesn't solve the massive budget deficit. When the next budget comes around, projects with their costs will still be there; however, the one-time funding will be gone and the Democrats' huge budget deficit will be back and even greater.

Gov. Lynch also claims that he kept "overall aid to property taxpayers at least level." Unfortunately, that is not correct. Lynch's budget increases education funding to cities and towns by $123 million. However, it cuts other state aid programs to cities and towns by $166 million. The net result is a downshift of state spending onto local property taxpayers. That is wrong and harmful to our communities.

Perhaps the greatest feat of Gov. Lynch's budget is his attempt to take $110 million from a private, nonprofit organization. I know that sounds too bizarre to believe. But it's true. Lynch wants to take money that belongs to the New Hampshire Medical Malpractice Joint Underwriting Association and use it to balance the state budget. Remember, this is not government money and never has been. It is money that was paid by doctors and health care facilities to private insurance companies to help keep their malpractice premiums low, and it also helps retain and attract physicians and nurses. The money belongs to them.
If the state can take money from one private, nonprofit organization, why stop there?

The bottom line is that Gov. Lynch's budget increases state spending by $1.2 billion over the next two years. So despite cutting aid to communities, closing courts and Department of Motor Vehicles offices and forcing hundreds of layoffs, state spending is actually going up by 11 percent.
It is time to get back on track: fiscal discipline, good policies, job stimulation. The taxpayers and citizens of New Hampshire should receive nothing less.

Tom Eaton of Keene is the former Republican leader in the state Senate.

Legislative Round Up: Gas Tax Hike Approved

The State House Press Corps all report on yesterday's action in the House, raising the gas tax by 15-cents per gallon, and leaving the EZ Pass discount in place.

Tom Fahey in the Union Leader:

The measure, which passed 190-162, will raise an estimated $111 million a year for the state highway fund by the time the full 15-cent increase takes effect. Diesel fuel will see the same 15-cent increase, but the three hikes will be spread out until 2013 to ease the effect on truckers. The bill calls for the first five-cent increase to hit on July 1.

The House rejected, 181-161, a move to cap all E-ZPass bills at 33 uses per month, and cut in half the 30 percent discount that E-ZPass owners now enjoy.

Opponents of the bill, HB 670, said those who use the turnpikes most often should bear the highest cost of upkeep and improvements.

Lauren Dorgan in the Concord Monitor:

Bill sponsor David Campbell said that as the costs of construction have spiraled in recent years, the state has dramatically cut back on roadwork, from paving more than 500 miles a year in the mid-1990s to 260 miles this year out of the 4,300 miles of state roads. The bill, he said, would double the state's paving projects.

At the current rate, "you're not going to be repaving the roads, you're going to be rebuilding the roads at a much, much greater cost," said Campbell, a Nashua Democrat who is vice chairman of the House Public Works and Highways Committee. He added: "If we keep kicking this can down the road, eventually the can itself is going to disintegrate."

Kevin Landrigan in the Nashua Telegraph:

"This is the least painful, fairest and most complete way to solve the problem, not for just two years but for 10 years,'' said state Rep. David Campbell, D-Nashua, the sponsor of the gas increase measure.

But House Republican Leader Sherman Packard said any increase will hurt families struggling in this economy, and the bill would cost the average trucker up to $1,000 more a year.

"Now is not the time to hit the people who can barely afford to put gas in their car,'' Packard said.

We shouldn't pay for Chicago's boondoggle

By CHARLES M. ARLINGHAUS

If the mayor of the city of Chicago wants to waste $20 billion on his airport, it shouldn't matter to the people of New Hampshire. Unfortunately, what happens in Chicago affects whether our roads are repaved and our bridges are rebuilt.

Political power determines which giant piece of public works excess we get to watch in any given decade. Granite Staters have had a ringside seat for watching one of the biggest boondoggles in American history. The good people of Boston decided that their city would be much prettier if they could take the Central Artery and put it in a tunnel so we didn't have to look at the ugly elevated highway.

It would look a lot nicer, but it was really expensive to do. The taxpayers of Boston didn't want to put up the money, and neither did the taxpayers of the whole state. Who could blame them? It would cost billions of dollars that wouldn't then be available for other, more pressing needs. Then good news for them came from Tip O'Neill.

O'Neill was the legendary speaker of U.S. House of Representatives at the time. He was a Bostonian and famously said "all politics is local." The wishes for a prettier Boston could be fulfilled if he could tap into his power and have the whole country, instead of the locals, foot the bill. The project wasn't important enough for locals to decide to do it, but federal money is free money, so what the heck?

What became known as the Big Dig ended up officially named the Tip O'Neill Tunnel. It was estimated to cost $3 billion when it started, but it will cost $22 billion when all is said and done.

Because O'Neill was so powerful, your gas taxes and mine flooded Boston. That's the same reason we almost had a Bridge to Nowhere two years ago. Republican Sen. Ted Stevens was the powerful chairman of the Senate Appropriations Committee. As long as he was in charge, there was no need for states to be sent money according to their population or number of road miles. No, the right formula was more money for me because I'm in charge.

The bridge was stopped and Sen. Stevens was bounced from office for corruption a few months ago, but not before he showered his home state with our money.

Coming along this year is a boondoggle to make the Big Dig look medium-sized. Chicago's Mayor Richard Daley has the largest airport in the world, Chicago's O'Hare. He wants to spend an estimated $20 billion to build another terminal and runways and eliminate a small town in the area, generally "improving" the airport.

There is nothing wrong with that as far I'm concerned. Some mayor wants to make changes to his airport, that's his problem. I'm not going to tell Chicago what to do anymore than I complained to Mayor Frank Guinta when the Manchester airport cut its budget last week.

The difficulty is that Mayor Daley doesn't want to run his airport by himself. He doesn't have the $20 billion he wants to spend. He doesn't want to raise taxes to get it. The airlines don't think the airport needs the changes, and the state of Illinois won't pony up the cash. So what's a poor mayor to do? He wants you and me to pay for a project that isn't important enough for his own state to fund.

The airport boondoggle looks like a really bad idea. But I shouldn't care. If Illinois wants to do something stupid, what's it to me? I live in New Hampshire. If we took the transportation money the federal government wants to give us back and just divided it up by population and road miles (there is actually a formula), no one would get extra because his senator was more powerful than someone else's. More importantly, decisions about what's important in Illinois would be made by people in Illinois, and you and I wouldn't have to have an opinion.

In New Hampshire, we do a better job of this than most states do. Money transfers from the state government to local governments are done by formula. The millions in revenue sharing are sent by formula, mostly per capita, regardless of who happens to be Senate president or House speaker. The governor can't help Hopkinton. It gets what it gets.

We should be careful with our own stimulus money so that we don't end up picking winners and losers. When they do it at the federal level, we're all losers unless we have a really big airport or the speaker of the House lives nearby.

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

Editorial Roundup

The Union Leader offers three perspectives on the state's budget crunch on this morning's editorial page.

First, Marie Harris pens a column on the importance of arts funding at the state level:

Leaving aside for a moment the incalculable effects of literature, music, theater, dance, visual art and craft on our personal lives and the lives of our children, consider the considerable leverage a single dollar spent on the arts exerts on overall job creation.

Arts organizations are the source of innumerable skilled and unskilled jobs. They attract audiences to our cities and towns, creating a demand for dozens of support industries from communication and design services to transportation to hospitality to equipment and supplies. And there are many opportunities for technologically related arts jobs in the future in a myriad of e-businesses. Artists themselves are independent small businesspeople whose activities benefit the economy.

The lead editorial argues against raising gas taxes on New Hampshire drivers:

The state gas tax is 18 cents per gallon. House Bill 644 would raise that by 15 cents to 33 cents a gallon over the next two years. New Hampshire would go from having the lowest gas tax of all of its neighbors to having the highest. (We cannot assume that proposed gas taxes in Massachusetts and Vermont will pass.)

Supposedly, New Hampshire cannot pay for all its needed road repairs and maintenance without that extra 15 cents per gallon. Yet the state diverts tens of millions of dollars a year from its highway fund for other purposes, then whines that the highway fund runs out too quickly.

And finally, the editorial page says that drivers with EZ Pass should pay the same as those without:

With widespread adoption of E-ZPass, the justification for the discount is no longer so strong. Why should people who have E-ZPass pay less than people who don't when both produce the same amount of wear on the toll roads?