Budget passage leaves questions deferred

On June 9, in a special session, the New Hampshire Legislature completed an unusually complex budget-fixing process by passing a $295 million budget-balancing plan worked out by the Democratic leadership and Gov. John Lynch — the last chapter in an unusual book!Normally, budgets or budget-balancing packages are worked out in a committee of conference. This year, however, the Senate included expanded gambling as a revenue-raising device in its package. The House had several new tax measures in its plan.When the conference committee met, the House seemed flexible in removing its distasteful taxes, but the Senate refused to budge on gambling, despite assurances that gambling would not pass the House and a promised veto from Governor Lynch. This resulted in a deadlock and when time deadlines passed, the process ended. This forced Governor Lynch to ask the Executive Council to call a special session.Between the time the councilors called the session, a more rational plan had been devised. Revenue package provisions were put in the budget-balancing bill and a separate gambling bill was introduced in the Senate.The House passed the budget plan while the Senate passed the gambling measure. The Senate then passed the budget plan on a straight party-line vote. The Senate’s gambling package was defeated by 50 votes in the House.Legislators then were able to go home for the summer, but no one felt particularly good about what they had done, for several reasons.First, there is significant doubt about whether the budget-balancing plan actually solves the budget deficit problem, since there are various estimates of its size. If the problem is larger than estimated, additional remedies will be needed, but that will be next year and there is an election in-between, so many of the legislators can take comfort in the fact that it is “somebody else’s problem.” It is not. It is the state of New Hampshire’s problem.Other concerns deal with the many one-time measures that were included to balance the budget. For example, there is $60 million involving the “sale or lease” of state assets. Assuming sufficient assets can be found to sell, and there are buyers for the assets, how can others be found to substitute for them in the next budget? Further, there are a number of bonding arrangements that, in essence, result in funding operating budgets with borrowed money. A state can do that for only so long. There also are over $100 million in what have been called “speculative revenues” in the budget-balancing plan, relying on funds coming from the federal government which have yet to be appropriated there.More fundamentally, the budget is balanced through significant cuts in state spending. While no one would argue with making government more efficient, critics argued that some of the cuts were in fundamental human services and other needed state functions. The judicial system, already facing furlough days, faces more, and there were calls for the governor not to fill any vacant judgeships or other positions. Some critical components of the judicial system have been vacant for a long time (the Hillsborough County Probate Court judgeship and several superior court judgeships are vacant).Recent events surrounding the Liquor Commission and the mortgage company scandal in Meredith have raised the question of inadequate staffing in the Attorney General’s Office or Banking Department, which may have led to lapses in supervision or unavailability of advice that led to some of the problems.Succinctly put, if government is going to promise to provide a level of service and a range of functions, it is deceiving the people if it does not fund those services adequately.Unless there is a massive turnaround in the economy, the next Legislature and governor are going to face a budget situation more dire than this year’s.While the legislature deserves credit for wrapping up its business without making last-minute fundamental structural changes without public consideration, the need continues to have a systematic study of the revenue system in New Hampshire to present options that can be debated publicly and in hearings and not suggested as “last-minute fixes.” Let us hope this continues while the legislature is in recess.Brad Cook is a shareholder in the Manchester law firm of Sheehan Phinney Bass + Green and heads its government relations and estate planning groups. He also serves as secretary of the Business and Industry Association of New Hampshire.