Weekend Roundup

Under the State House Dome, Tom Fahey leads with the state budget debate:

IT WAS ALL about taxes last week. The House's $11.5 billion spending plan for the next two years relies on existing taxes, higher taxes and new taxes.

And, Republicans were quick to charge, the good chance of higher property taxes on top of it all.

The House budget, passed by the Democratic majority, leaves a $133 million hole in local aid. That's a lot of money for local government to make up, and it has only one place to look:- property taxes.

Democrats argue the budget also increases aid to education by $123 million. That education money can't be used to plow roads or fix a town-hall roof. But it does offset some of the pressure schools used to put on property taxes.

An additional $37 million or so in local road funding also eases property tax pressures, Democrats say.

Lauren Dorgan gives State Senators a Easter present of not having to talk about controversial social issues by penning a preview of the budget debate in the Senate in her column in the Concord Monitor:

It being a holiday, I decided to give senators a little break from being cornered on social issues and instead checked in with them on the budget. Senate Finance has quite an interesting lineup: Manchester Sen. Lou D'Allesandro, the happy warrior for expanded gambling, chairs the committee, backed up by spry vice chairman Harold Janeway of Webster, a leading anti-gambling voice.

Asked if there are any absolute non-starters for him in the budget, Janeway said, "I don't think so. Because gambling isn't in the budget."

Says D'Allesandro, of all of the taxing measures: I'm not enamored with (the tax on gambling winnings), and I'm not enamored with the legacy tax, the estate tax," he said. "I'm enamored with non-tax revenue because I think that makes a lot of sense."
Where do you find that? "I find that through the expansion of gaming and the offering of the licenses to people," D'Allesandro said.

Neither man said he could predict whether the Senate Finance Committee would get behind gambling as a budget fix. "I'm not an oddsmaker," said D'Allesandro. "I'm a realist."

The one tax that won't have "any trouble," D'Allesandro said, is the 35-cent-a-pack cigarette tax, which he said is "pretty popular."

Both senators say that the first problem for the Senate is $83 million large - the school building aid money that Gov. John Lynch wanted to borrow. House lawmakers disagreed, stripping it from the capital budget - without adding it to the operating budget, saying that they hoped senators could find a way to finance the program.

In the Nashua Telegraph, Kevin Landrigan leads with the social issues, but also includes a history lesson on the 1990 budget debate when Republican Leadership pushed for higher taxes:

Here's what was in that 1990 tax package that went through when Stratham Republican Rep. Doug Scamman was House speaker, former lobbyist Bill Bartlett of Kingston was Senate president and the governor was current U.S. Sen. Gregg.

Cigarette tax: raised 4 cents per pack.

Liquor tax: a new fee of 96 cents per case charged to distillers.

Telecommunications tax: a new tax of 5 percent on telephone calls, replacing a state tax on telephone company real estate.

Beer tax: raised to 35 cents per gallon from 30 cents.

Room and meals tax: raised to 8 percent from 7 percent.

Gas tax: raised to 16 cents from 14 cents per gallon.

Real-estate transfer tax: raised to 6 percent from 4.75 percent, charged to both the seller and buyer.

Wine discount: cut the break for restaurants buying wine from state liquor stores from 20 to 15 percent.

Bingo tax: increased to 7 percent from 5 percent.

State park fees: increased 25 percent.

Corporate franchise fees: a new levy raising $2.3 million.

Backyard Economics is BACKWARD Economics

My favorite website, Cafe Hayek, alerts me to a post on Charlie's favorite website, Carpe Diem, about the absurdity of "localism" as an economic philosophy:

Using Backyard Economics logic, Duval County residents should only support Duval County businesses, and should avoid patronizing out-of-county businesses.

But let's go one step further. By the same logic, cities located in Duval County like Jacksonville Beach should only patronize shops, restaurants, and businesses in Jacksonville Beach, and avoid out-of-city businesses. But then the logic would also apply to even smaller geographical areas like neighborhoods within Jacksonville Beach (don't buy "out-of-neighborhood"), a neighborhood resident's own block (patronize only "in-block businesses"), and then ultimately a resident's own household.

In other words, the logic of Backyard Economics for state economies like Florida ultimately leads to an individual household's OWN BACKYARD (literally), and complete and total economic self-sufficiency at the household level (don't buy any "out-of-household" goods or services).

Russ Roberts, who posts at Cafe Hayek, said it well in a lecture I attended several years ago. "Self-sufficiency is the road to poverty."

Washington Post News Alert

Major metropolitan newspapers are shedding readership and revenue. You can blame the Internet, the economy, or an apathetic American public. Just don't question their priorities or the quality of their journalism, because the big papers obviously know what really matters.

I received the following "News Alert" from the Washington Post last night at 11:00pm.

________________________________
News Alert
11:00 p.m. ET Saturday, April 11, 2009
The First Puppy Makes a Big Splash

The biggest mystery of the Obama White House's first 100 days has been revealed: The first puppy -- the one that the Washington press corps has been yelping about for months -- is a 6-month-old Portuguese water dog given to Malia and Sasha as a gift by Sen. Edward M. Kennedy. The little guy's name? Bo.
For more information, visit washingtonpost.com
________________________________
Wow, that news really couldn't wait until morning. Happy Easter!

A deliberate failure: The House's bad budget

The Union Leader editorial page blasts the budget approved by the House yesteday, noting that even those who wrote it don't want it pass in its current form:

Representatives approved spending $11.5 billion (up from $10.2 billion just two years ago) although everyone knew there was not enough revenue to cover the cost. They passed the spending on Wednesday, then yesterday took up the tax hikes and new taxes that would be needed to fund the spending.

Representatives didn't include $83 million in local school construction aid the state has always funded. Instead, they kept that money so they could continue funding social services. Local governments will have to raise taxes if this budget becomes law.

Budget Roundup

Lots of coverage of yesterday's budget debate in the House, where Democrats pushed through an 11% increase in overall spending and a slew of new and increased taxes largely along party lines.

In the Concord Monitor, Lauren Dorgan outlines who will pay for the spending spree:

Few are untouched under the House budget plan, which largely follows that proposed by Democratic Gov. John Lynch. One key difference: While Lynch expected current state revenue to hold steady for the next two years, House budget crafters foresaw a $140 million decline.

Drivers, gamblers, smokers, diners and hotel patrons would all pay new or increased taxes.

The state's wealthiest residents would pay two new taxes crafted by House budget writers: an 8 percent estate tax on inherited estates above a $2 million threshold and the 5 percent capital gains tax on all gains over $5,000 per person. The estate tax is expected to reel in $10 million over two years, while the capital gains tax is expected to bring in $75 million.

State employees who aren't laid off will pay more into their pension system - and those who are laid off would lose for the next two years their "bumping rights," seniority protections fiercely guarded by unions that allow more senior employees to bump junior employees from their jobs. Retired state employees who are under the age of 65 would no longer have free state-provided health insurance; they'd have to pay 11.5 percent of their pensions.

In the Nashua Telegraph, Kevin Landrigan lists jsut some of the many changes to the state's finances:

Among its 197 state law changes to accommodate the budget, the trailer bill would create a new saltwater fishing license of $15 a year and raise annual boat fees and the cost of a motor vehicle inspection sticker along with other fee increases.

It also withdraws $110 million from a quasi-public authority set up 30 years ago to help physicians afford medical malpractice insurance.

Opponents noted the state did not invest any money in this authority and physicians would likely challenge in court the state's right to claim any of it.

Supporters said this move still leaves a $50 million surplus in the account.

Rep. David Hess, R-Hooksett, said taxing capital gains would stifle investment and cause some of the state's wealthiest residents to leave.

"We are targeting first of all our best, our brightest and our most successful," Hess said.

Rep. Robert Walsh, D-Manchester, said the state cannot afford to do without the $75 million the capital gains levy would bring in and taxes only those who made large investment profits.

"This measure will only affect those citizens with an ability to pay," Walsh said.

Tom Fahey outlines some of the policy changes in the bill in this morning's Union Leasder:

In addition to the tax package, the bill makes changes that allow four district courts to close; give the liquor commission flexibility to close stores and sign agreements with private stores; allow tracks to simulcast races from other locations without running live race events, and allow the commercialization of state welcome centers and rest areas.

The bill also eliminates bumping rights among state workers, 250 of whom are expected to be laid off.

House backs $200M in higher taxes

On the Union Leader's online page, Tom Fahey summarizes some of the new taxes approved by the New Hampshire House this afternoon:

The tax changes are expected to raise $202.5 million over the next two years to support government operations. The gas tax increase should bring in another $125 million, with $37 million of it headed to cities and towns for upkeep of local roads.

Rep. Marjorie Smith, D-Durham, chair of the House Finance committee, said the tax package does not include a broad-based tax, such as sales or income tax.

“It is the best mix we could come up with of revenues that will not bring harm to our economy or our neighbors,” Smith said.

Rep. Neal Kurk, R-Weare, criticized the tax plan and the budget. “We have adopted a budget that spends more than we can afford within our existing tax structure, and the response has been to raise taxes to pay for higher spending,” he said.

Democrats argued that in a deep recession in 1990, Republicans raised and created a series of taxes.

”What we have all day long … is ‘Do as I say, not as I did’,” majority floor leader Rep. Daniel Eaton, D-Stoddard, said, prompting a few boos.

Republicans tried to kill each of the tax measures, but were beaten back each time by the Democratic majority.

Lawmakers approve spending plan

Update: Tom Fahey has an excellent write-up on the budget in this morning's Union Leader. It doesn't appear to be available online.

Lauren Dorgan summarizes the state of the budget in this morning's Concord Monitor:

House lawmakers last night approved $11.5 billion worth of spending in the next two-year budget. Today, they will vote on how to pay for it.

The House approved by a 193-174 margin the spending plan for 2010 and 2011 recommended by the Democrats on the House Finance Committee - the plan that involves scores of layoffs for state employees, preserves some local aid while suspending other programs and sends more funding to many social and human service programs than Gov. John Lynch recommended.

Democratic leaders said that as the national recession continues and state revenue sinks, they made hard choices to keep down spending; their plan represents about a 2.5 percent increase in general-fund spending.

"We struggled mightily to make sure we provided essential services to those people who had no other opportunity than to turn to the state," said Rep. Marjorie Smith, the Durham Democrat who chairs the Finance Committee.

Republicans said those cuts didn't go far enough and, as a consequence, will make taxes climb too high.

"If this spending spree by the majority party continues, there will never be enough tax and fee increases to fund it," said Minority Leader Sherm Packard, a Londonderry Republican.

Check out our extensive budget coverage on NHWatchdog's new YouTube Channel.

Charlie Arlinghaus on NH Today

Josiah Bartlett Center President Charlie Arlinghaus joined Jack Heath on "NH Today" on 107.7 WTPL to discuss the $11.5 billion New Hampshire budget.

NH Today with Jack Heath

Watchdog and Bulldog

Grant Bosse joins Bulldog Brian Tilton on "Bulldog Live" on 107.7 WTPL to discuss the state budget and the Josiah Bartlett Center's "Watchdog Project". Watch for yourself:

Segment 1- The State Budget


Segment 2- The Watchdog Project

Going up: The budget's trajectory

The Union Leader notices a trend in state budgets; they go up no matter how the economy is performing:

Just two years ago, the budget for the state of New Hampshire exceeded $10 billion for the first time. Today, House Democrats propose a budget they say would make "painful" cuts to state programs and services while spending $11.5 billion.

How more than 11 percent budget growth in two years could equal painful cuts is one of the great mysteries of government.

The regional consumer price index rose just 3.5 percent from 2007 to 2008, and prices from January 2008 to January of this year are basically flat. How can state government grow more than three times faster than inflation while revenues grow more slowly?

WGIR Podcast

Listen to Grant Bosse as his talks about the state budget, and the Josiah Bartlett Center's new web video project, with Charlie Sherman on WGIR.

Or download the podcast here.

NH budget battle primed to begin

In the Nashua Telegraph, Kevin Landrigan sets the stage for this week's budget debate in the New Hampshire House:

House Finance Committee Chairwoman Marjorie Smith said everyone paying for, getting and delivering state services must sacrifice to help the state preserve essential services while facing the worst recession since the Great Depression.

"The committee made significant and painful cuts in the operating budgets of every agency," Smith wrote in her formal argument to the House.

House Republicans will offer 16 separate amendments to produce their alternative plan that would cut state spending by 2.6 percent and eliminate the need to raise existing taxes or create new ones.

This would be achieved primarily through across-the-board cuts nearly twice as big as the House has adopted in the past two decades.

"Taking millions of dollars out of the private sector inflicts further suffering on individuals who may have already lost their jobs, had their salaries and benefits reduced or face foreclosure from their homes," said state Rep. Neal Kurk, R-Weare.

"Individuals can't stimulate the economy with their spending because the state has more of their income, and they, in turn, have less to spend."

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.