New Hampshire’s current budget “crisis” is widely attributed to excessive spending. Unfortunately, the simplicity of the argument obscures the uncomfortable fact of a failed and outdated revenue structure.
Nowhere are the consequences of this failure more evident than the likely limitation of services for the 100,000 people who rely on community health centers, the 41,000 individuals depending on community mental health centers, and the 36,000 clients (1.3 million visits) provided by licensed home health care providers. What this adds up to is that one out of 10 of us depend on public dollars.
The structural revenue deficit has been well recognized (and ignored) since 1992, when the state’s auditor called attention to the reality that state expenditures automatically grow faster than revenue. What this means, in plain English, is that our revenue cannot keep pace with inflation-adjusted expenses, let alone fund any new proposals. Simply to keep even, each budget requires new revenue (increases in existing taxes) and/or expenditure reductions in existing programs. The report further warned against the use of the structural deficit as a political weapon to bludgeon the other political party, a warning that has been regularly dismissed.
If New Hampshire’s structural deficit is so severe, how have we gotten along thus far? And why can’t we continue on this course? The answer is that the chasm between revenue and inflation-adjusted expenses has been covered by two enormous windfalls and two legislative actions: Since 1993, approximately $2.5 billion has flowed into New Hampshire from a loophole in the Medicaid law and the funds from the national tobacco settlement.
The two most important legislative actions were an income tax on small-business employees called the business enterprise tax, enacted in 1993, and the $100 million Health Care Transition Fund (1995) to be used for health-related purposes. In 2003, the last $31 million of this reserve vanished into the state’s general fund.
Every elected official from 1992 through 2002 should be especially grateful to the windfalls that rescued more than one political career from oblivion, making it possible to avoid serious discussion of how to address the structural deficit while creating the illusion that we are immune from the changes that are occurring in our state, our nation and the world.
No more windfalls
New Hampshire is fresh out of windfalls. Additionally, we’ve pushed business taxes about as far as they can go. In fact, the state’s singular reliance on business taxes poses a serious threat. In 2003, business taxes generated 18 percent of state revenue; in 2007, business taxes generated 26 percent of state revenue — a growth rate that is unlikely to be sustained. No other state has such a large percentage of state revenue coming from business taxes.
Finally, from a public health point of view, is it wise to encourage our residents to smoke and drink - through the sale of alcohol and the cigarette tax - when the total increase in health-care expenditures regularly outstrips the rise in our gross state product and currently consumes 16 percent of our economy?
New Hampshire does not have a “spending problem”; we have a “revenue problem” that will soon explode. So let’s take state revenue and tax structures off the political taboo list and enter into a civil discussion of how to make state government and local communities responsive to the growing number of New Hampshire residents who need our collective assistance.
Of course, if one is fortunate enough to not need the resources of state or local government, the anti-tax, anti-revenue argument will prevail, leaving those who depend on public services out of luck. But none of us can know for sure whether a child with developmental disabilities, autism, brain damage or chronic illness will enter our families and become an unimagined responsibility. We cannot predict when an elderly parent will need care at home. And who among us can deny the possibility that mental illness or substance abuse will affect ourselves or those whose lives we share?
We are all vulnerable, and many of us may at some point need help. Unless we can openly and honestly address the structural deficit, when we seek assistance, this is what we may hear: “The services you requested are no longer available due to a revenue problem.”
James W. Squires of Hollis, a retired physician, served in the state Senate from 1997 to 2001, where he was a member of the Finance Committee and chairman of the Public Institutions, Health and Human Services Committee.
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