Summer Recess

June 14, 2010

As New Hampshire lawmakers debated changes to the state budget—eventually passing a bill to plug a nearly $300 million hole—one might have thought they were looking at two completely different documents.

About half the debate referenced a $20 million surplus that would be left in the Rainy Day Fund after next year. The other half claimed that if this budget passed, next year’s deficit would jump from $600 million to $800 million, at least.

So goes a political debate over budget estimates. In the end, the optimistic version won, and we won’t know until the receipts come in how realistic it is. Either way, Gov. Lynch praised the legislation and is expected to sign Special Session House Bill 1 into law.

The final bill contains a mix of borrowing, federal money, spending cuts and new revenues. It’s regarded even by supporters as a patchwork solution to the state’s structural deficit—an ongoing situation of never having enough money.

Expanded gambling is not part of the solution—yet. The new bill creates a special commission to study and recommend changes to gaming regulations, allowing for the possibility of video slots or casinos. Other special committees formed include a citizen’s task force on the state budget and a group to study business taxes.

What If

The biggest debate on budget revisions centered around whether or not the funds the budget is built on will actually come through.

Many lawmakers fear that the state won’t make as much as it’s counting on from various taxes and fees. This was also a theme of last year’s budget negotiations, and indeed this year’s monthly revenues continue to fall short of projections.

Another lightning rod in this budget bill is the sale or lease of state assets. The new budget creates a commission to identify what the state might be able to “monetize.” That might mean anything from selling real estate or the rights to the state’s tobacco settlement to restructuring the Liquor Commission, according to floor debates.

Both the wisdom of any of these potential sales and the likelihood that the state could actually turn them around in the current economy were questioned.

The budget also is built on $48 million in federal money to match Medicaid reimbursements, but this is not guaranteed income. FMAP, as it’s known, has always come through in the past, maintained budget supporters. But Sen. Jeb Bradley (R-Wolfeboro) cautioned that it may take a back seat this year to other federal programs.

(No) New Taxes

It’s a mixed bag for taxes under the current budget fix. Last year’s LLC Tax is now officially repealed (pending Gov. Lynch’s signature, as of press time). Lawmakers also shot down a proposed tax on electricity generation—that’s taxing those who create electricity rather than consumers.

New money will come from increases to some taxes, notably those on non-cigarette tobacco products, bringing them up to par with cigarette taxes.

A boost to the insurance premium tax undoes an incentive scheduled for this year. Instead of lowering taxes on insurance premiums from 1.25 to 1 percent, they will go back up to 2 percent. The idea had been to promote more insurance business with the lower tax rate, but that promise has not yet borne fruit, according to Rep. Majorie Smith (D-Durham).

“This might not be the ideal year in which to deliberately collect less money for the state,” she said.

Fees for vital records like birth certificates, marriage licenses and licenses for pet shops will also go up.

Spending Cuts

Spending cuts, on top of those already issued earlier this year, total $33.5 million that would normally flow from the General Fund to virtually every department and agency.

The Department of Health and Human Services absorbs millions of dollars in cuts from many angles. Administrative costs will be saved by consolidating contracts for social and medical services, and more savings will come from downsizing at the Youth Development Center and NH Hospital. Aid to hospitals is also being cut.

The legislative and judicial branches and the Department of Environmental Services each give up about $1 million, the Department of Information Technology $2.175 million.

There was little debate about spending cuts in general, but much attention paid to “dedicated” funds. They will be tapped (or “raided,” depending on who you talk to) for more than $8 million to help balance the General Fund.

Generally speaking, dedicated funds are created for specific purposes by user fees. The state’s motorcycle rider training program, for example, is paid for by collecting an extra $5 on every motorcycle license. A statewide public boat access fund operates similarly, along with a host of other dedicated funds, including the Regional Greenhouse Gas Initiative and the Land and Community Heritage Investment Program.

RGGI is a ten-state coordinated effort to reduce power plant emissions to address climate change. It will give up $3.1 million. LCHIP is a state program to preserve natural, historic and cultural resources. LCHIP will give up $1.5 million.

People who pay these fees expect the money to fund related programs, argued Sen. Letourneau, who also challenged that tapping the funds is not constitutional. Similar protests in the House were voted down, the majority sentiment being that everyone and every fund must contribute to the cause of balancing the state budget in the current recession.

Along with the Legislature, Front Door Politics will take a summer break from weekly reports. Stay tuned for more this fall!

Filed under: Government, Money, state budget, taxes

Tags: 2010, budget, legislation, New Hampshire, NH, state house