The good news is that Gov. John Lynch has stopped digging. The bad news is that we’re not out of the hole yet. After a 24 percent increase in state spending, financed by dozens of tax and fee hikes, accounting gimmicks, and borrowing, the governor is forced to make cuts. Those cuts are significant and include layoffs, closing a courthouse and other state offices, introducing managed care to Medicaid, consolidating certain back-office functions and privatizing some programs.
The governor’s proposal could save $600 million, but the deficit is $900 million. After the four-year spending binge, New Hampshire’s deficit is over 20 percent of its budget, one of the very worst fiscal situations in the country, and now the governor has left the remaining $300 million shortfall to the Legislature to solve.
The primary shortcoming of the governor’s budget is, once again, exaggerated revenue estimates. His prior pie-in-the-sky projections is, in part, what got our fiscal crisis started in the first place. Now, the exaggerations include a 6.5 percent yearly increase in business tax revenue, well above any reasonable estimate of growth as our economy recovers in fits and starts from the recession. Thankfully, the House Ways and Means Committee has put its foot down and our new leaders have prudently said we can count on $4.4 billion in revenue, period. Excess revenues that we are lucky enough to receive will be devoted to rolling back recent tax increases and refilling the rainy-day fund that Gov. Lynch drained two years ago.
The governor also indulges in some sleight of hand on balancing the budget “without new or increased taxes.” That might be true if you don’t count the $30 car tax, due to expire in June but now destined to be permanent like all “temporary” tax hikes.
More important is the “great shift” — shift more costs down onto local communities and thus shift the blame for property tax hikes away from the governor and onto local councils, selectmen and school boards. He would eliminate the state’s pension contributions for local employees, thus allowing the state to determine the generosity of public employee pensions while forcing cities and towns to foot the bill. He also further reduces rooms and meals tax sharing, cuts certain education aid and halts funds for local wastewater management projects. In so doing, the governor balances his budget on the backs of local property taxpayers.
To balance the budget for real, the Legislature has work to do. It can start with getting aggressive with managed care for Medicaid. The governor’s proposal would save only $32 million. But a study by Anthem last year showed that New Hampshire could save $200 to $300 million merely by getting its spending down to the average of all states. Further, before a managed-care system is in effect, we could start directing Medicaid patients to have non-emergency procedures performed at the lowest-cost provider within 30 miles of their home. That could save tens of millions of dollars this year.
Additionally, we can implement a single-vendor management system for state contracts, consolidate legal offices and reduce many top-level management positions. Let’s start asking tough questions. Why do we have a “Chancellor’s Office” at UNH when we already have a professional and business-savvy university president on the job? Why does the Department of Transportation have a “Bureau of Environment” when we already have a Department of Environmental Services?
We have to reform our budget now. Hopefully, we have learned our lesson not to count on bailouts and one-time revenues to fund ongoing expenses. Much worse is the impending tsunami of Obamacare, the biggest unfunded mandate in the history of our nation. Between raising health care costs, forcing more people onto Medicaid rolls, and impeding the health care financing systems we already have in place, Obamacare will cost New Hampshire $1 billion in its first 10 years. It will turn New Hampshire and other states into a giant health insurance company that occasionally dabbles in education, public safety and recreation. Gov. Lynch supports it — the very measure that will make it impossible for the state to climb out of its hole and repay the additional debt incurred on his watch.
As in many challenges, this fiscal crisis calls for us to look to our ingenuity, our resilience and our Constitution. Never forget that Article 38 of the New Hampshire Constitution provides that we must ensure the “constant adherence of frugality from our elected officials.” We strayed from this admonition over the last four years. Let’s get back to the New Hampshire way.
John Stephen is a business and government consultant from Manchester and also was the 2010 Republican nominee for governor.