Archive for August, 2011

Downshifting has to stop now!

Dear Readers:

Below is an excellent article by Rep. Marjorie Porter of Hillsborough. She lays it on the line: New Hampshire cannot continue to provide the services we expect–an excellent university system, a social safety net, help for children in crisis, care for the mentally ill, state parks, etc.–on our existing revenue structure. She says there will be tough choices. This legislature is unlikely to restore many of the cuts made two years ago, because the current mix of taxes won’t bring in enough money. Which leads to her unspoken question: will NH voters continue to choose leaders (particularly governors) who pledge no new taxes and/or no change in the way we tax?

Mark Fernald

Recently, the Monadnock Ledger-Transcript published an editorial entitled “Downshifting has to stop now.” Cities, towns, and school districts have been hit hard by the cuts enacted by the legislature last term, they say. Too many costs of government have been shifted from the state down to the local level, and property taxes keep going up. Property taxpayers simply cannot afford it any more. Specifically mentioned was the effect on local school and town budgets of the elimination of state contributions towards the retirement system for public employees. Promises were made during campaign season to stop the downshifting. Citizens must hold this new legislature accountable to these promises.

I agree with the sentiment of this editorial. Actions taken last term have had a dramatic impact on our local taxes. The state used to contribute 35% of school districts’ and municipalities’ retirement costs. Last term, that was cut back to 0%. This cut alone will cost the Hillsboro-Deering schools a little more than $250,000. The school board is struggling now with this reality. What will they be forced to cut?

And this was only one of the cuts made—there are many others. More people are relying on local town welfare offices as a result of cuts to human services. More people with mental health issues are ending up in local jails as a result of cuts to the mental health system. Fewer funds to towns for road repair means local budgets must increase. Cuts to the Children in Need of Services (CHINS) program means local schools and towns are left on their own when troubled children need help. I could go on and on.

And this, dear readers, is what is keeping me up at night. Given our current tax structure, there is really not much the legislature can do to fix it. Not unless something changes, and changes quickly.

Consider these facts:

According to the Legislative Budget Assistant’s Office (these are non-partisan number-crunchers), state revenues have increased 10% in the last decade, while inflation has increased costs by 27%.

Actions taken last term will effectively decrease revenues between $50-100M this biennium. That means current spending must decrease that much to break even.

Formerly, the CHINS program serviced 500 kids statewide, and was aimed at catching kids before they broke the law. Last term, this was cut back to funding for 50 kids, and they must be violent now to get help.

The NH gas tax is eighteen cents/gallon. It was last raised in 1991, under Governor Gregg. At that time, a gallon of gas cost $1.14. Proceeds from the gas tax funds state road and bridge repair, and 12% of the proceeds go back to cities and towns for local road maintenance.

In 2000, 38% of NH roads were classified as being in good repair, and 18% were in poor repair. By 2012, these figures had been reversed. Now, 19% of our roads are in good repair, 37% in poor repair. 174 state bridges are red-listed. Currently, 22% of municipal bridges are red-listed.

The Feds are suing the state, saying our mental health system is broken and does not meet minimum standards. Once we were held up as a model for the country.

Hospitals are suing the state over the huge tax increase forced upon them last term. The state is trying to save money—to the tune of $1.5M a month—by moving our Medicaid system to a managed care model. Things are being held up because hospitals are not willing to sign on given the current state of affairs. Estimates are that this will cost the state $16M in savings.

Our women’s prison is inadequate, and the state is being sued for discriminatory practices. Our men’s prison needs major upgrading as well.

Tourism is one of the state’s major industries, and proceeds from the rooms and meals tax make up about 12% of state revenues. Last term, the entire budget for tourism promotion was eliminated.

NH ranks last in the nation in support for public higher education. Our graduates have the highest student loan debt in the country. The State’s contribution to the budget for the university system was slashed by almost 50% last term.

The major sources of state revenues in the Granite State are business taxes. We have some of the highest business tax rates in the country.

US News ranks NH the richest state in the union, with a median income of $66,303. There are approximately 27,000 millionaires in the state.

27,115 children live in poverty in NH.

57% of voters in the last election supported a constitutional amendment banning any new personal income tax in the state.

Governor-elect Hassan has taken “the pledge,” promising to veto any state income or sales tax.

So yes, voters should hold us accountable for the downshifting of the cost of government to local property tax payers. But are you, the citizens of the state, willing to allow us to increase revenues by raising taxes at the state level so the downshifting can stop? If not, we have no options. Because, despite what you have heard, it IS a revenue problem, not a spending problem, in New Hampshire.

Talk about a rock and hard place.

Marjorie Porter is in her second term in the New Hampshire House, representing the towns of Antrim, Hillsborough and Windsor. She is the Chair of the Municipal and County Government Committee.

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Everyone knows how to grow the state economy: bring more money into the state by attracting new tourists, shoppers and businesses.July 17, 2011 2:00 AM
Every nonprofit knows how to maximize its budget: qualify for matching funds whenever possible.

The biggest source of money for New Hampshire is the federal government. Dozens of federal grants are available to states, but a state must put up its own money to receive the federal money.

The new state budget rejects over half a billion dollars of federal matching funds because the Legislature was unwilling to come up with state money to qualify New Hampshire for those matching funds.

The cut in the state budget exceeds the entire payroll of BAE Systems in 2009. If BAE left the state, it would be recognized as an economic calamity. Not surprisingly, the new state budget is equally calamitous:

The budgets of our hospitals have been cut by over 5 percent due to reduced payments for care delivered to those without insurance. Layoffs and declining services are inevitable.
The state government, and agencies that contract with the state, are cutting hundreds of jobs.
State aid to the university system has been cut 45 percent. Tuition that was already the highest in the nation will increase by nearly 10 percent. Staff and course offerings will be cut.

The loss of $500 million will ripple through New Hampshire’s economy, affecting not only the agencies that ran those programs and the people who benefitted from them, but also the businesses that prospered as those dollars were spent. Economic growth may be cut 1 percent, at a time when we are struggling to grow by 2.5 percent per year.

In their zeal to cut the state budget, legislators overlooked the purpose of government, which was eloquently explained by Abraham Lincoln:

“The legitimate object of government is to do for the people what needs to be done, but which they can not, by individual effort, do at all, or so well, for themselves. . . . There are many such things . . . roads, bridges and the like; providing for the helpless young and afflicted; common schools . . . the criminal and civil departments.”

The ‘Party of Lincoln’ has made its deepest cuts in . . . roads, the helpless, education, and the court system.

Governing is about making choices. Our Legislature has cut the cigarette tax, and created a waiting list for the severely disabled. It cut the budget of the community colleges by 20 percent, and increased funding for charter schools. It cut the auto registration fee by $30 — a loss of $90 million that will cut paving, road repairs, and the rebuilding of dangerous bridges.

Last winter, the Republican leadership announced that everyone would have to sacrifice in order to balance the budget, but as they hacked large chunks out of our state government, they did not ask anyone to pay one cent more to maintain state services. In a recent UNH poll, 73 percent said we should consider both spending cuts and tax increases to balance the budget. Voters value our state services, and are willing to pay for them. The Legislature is not.

The Republican leadership says they had no choice other than draconian cuts because the state was “broke.” Nonsense.

New Hampshire has the highest median income in the nation. Our state and local tax burden is the second-lowest in the nation. We could pay a little more and still be the state with the second-lowest tax burden.

We have no general income tax, no retail sales tax, and no estate tax. The wealthy enjoy nearly the lowest tax burden of anyone in the industrialized world.

Instead of cutting the state budget by 11 percent, we could have asked our wealthiest citizens to pay their fair share of the cost of government through a capital gains tax or an estate tax. Every dollar raised would have been matched by the federal government, bringing new money into the state.

The $125 million cut from hospitals may actually end up costing New Hampshire citizens more. Hospitals will probably increase rates for those with private insurance to make up the shortfall, and if those without insurance are turned away, they will go to town welfare offices for assistance in paying their medical bills.

The city of Manchester has a new budget that reduces police and fire department positions, but avoids other draconian cuts. Republican Mayor Ted Gatsas understood the wisdom of a small tax increase to maintain essential services. The Legislature does not. In Manchester, city taxpayers will pay 3.5 percent more. At the state level, we could have maintained state services and the federal government would have paid nearly half the bill — if we hadn’t turned the money down.

Mark Fernald is a former state senator and was the 2002 Democratic nominee for governor.