The Democrats in control of the state Legislature have come up with a novel way to balance the projected deficit in the state’s 2008-09 $10 billion budget: borrow and spend. Their usual approach to the problem — tax and spend — is, apparently, so last century.
After a woefully inadequate and half-hearted attempt to cut spending to cover the estimated $200 million shortfall, these Democrats raised taxes. But two increases in the cigarette tax, a new tax on gambling and multiple increases in various fees and fines weren’t enough for them. So they decided to borrow up to $80 million to pay the state’s share of our school districts’ debt service on school construction — yes, borrowing money to pay for borrowed money—and guarantee another $10.5 million debt prepayment. This is debt our citizens will spend decades repaying.
Even a 3rd-grader would have known the better approach: balance the budget by reducing state spending to the expected level of state revenue.
But the Democrats rejected that logic. They were unwilling to make the difficult choices facing them. And they feared losing electoral support from the special interest groups that supported their 17 percent budget increase.
They failed us all. Unwilling to cut the budget and/or raise taxes enough to close the deficit, they arranged to borrow the difference.
That they say this is prudent only reinforces the hubris that comes with freely spending someone else’s money. After all, business, they argue, bonds capital expenditures, and school building aid is a capital expenditure. Never mind that the school districts have already issued bonds to pay for the construction of the school buildings. Never mind that the state’s school building aid goes to pay part of the debt service on those bonds. Never mind that there is no state-owned asset to secure the new bonds, which is why the state has paid school building aid from its operating revenues for decades.
Yet the state has the money to cover the deficit. It’s in the so-called “Rainy Day Fund.” So why not use it and avoid borrowing? Apparently, Governor Lynch prefers borrowing to paying cash, fearing bond-rating agencies might downgrade our credit rating if we were to reduce our cash reserves.
Only in modern America could borrowing in these circumstances be viewed as the more prudent approach. It may appease the Wall Street folks who created and profited from subprime mortgages, collateralized debt obligations and other frolics in the financial fields. It would be no surprise if their credit ratings were not as good as New Hampshire’s.
When it became clear that revenues wouldn’t meet forecasts, Democrats were unwilling to cut spending enough or raise revenue enough to solve the problem. They took the wrong way out.
In New Hampshire, we used to pay our own way. We apparently don’t anymore.
Rep. Neal Kurk is a Republican from Weare.