Cook On Concord: Lynch budget plan shows his priorities

When Gov. John Lynch delivered his budget address to the New Hampshire Legislature Feb. 15, he presented more than just numbers. The budget says a lot about his policies, priorities and vision for New Hampshire.

Lynch proposed raising the tobacco tax 28 cents to $1.08 a pack — a move predicted to raise $92 million over the biennium. This was immediately criticized by merchants on the borders, claiming that their competitive advantage over neighboring states would be lessened, smokers would be less willing to drive to New Hampshire and the result would be fewer cigarette sales and, perhaps more importantly, fewer sales of other items smokers buy when they are in New Hampshire stores to buy cigarettes. Also part of the debate is whether there is an effect on the number of smokers when the price increases, but demand appears to be inelastic, smoking being an addiction!

Vehicle registration would fees go up $6, raising $9.6 million a year. A new scratch ticket game with a maximum $30 face value would raise more than $4 million, and a moose hunting permit auction, with 50 permits going to the highest bidders, was predicted to raise $250,000.

This last proposal drew support or criticism based on territory, those from the north woods claiming it discriminated against New Hampshire hunters while those from the southern tier thought it was a clever way to raise revenue. The moose were not heard from!

The interesting thing about the revenue devices was that they were not dramatic. No increase in business taxes, no sales tax, no income tax, no gambling and no rise in the property tax were proposed by the governor. Since he claimed his budget was balanced, based on revenue from a projected increase of five percent per year, several legislators breathed a sigh of relief, claiming the pressure was off. However, other spending proposals and pressure for new programs proposed in legislative bills yet to be heard might make that relief short lived.

On the spending side, the governor proposed $95 million in benefit costs for state workers, $38 million in retirement contributions, $19 million for retiree health benefits, $17 million in state funds for Community Technical College System improvements, and $12 million for the Land and Community Heritage Investment Program, which is a favorite of Lynch’s, but was not as popular in the Republican-controlled Senate as it may prove to be under a Democratic majority.

The governor also proposed $10 million to begin work expanding the state prison in Berlin, $500,000 to boost tourism advertising, $400,000 for a workforce housing pilot program, a $400,000 loan fund to provide homeless families with rental security deposits, $4 million for tutoring and one-on-one help for students at risk of dropping out, an expenditure that funds the governor’s promise to provide resources to go along with his request to raise the high school dropout age to 18, and $5.7 million to reduce the waiting list for services to developmentally disabled adults.

On education spending, the governor neither proposed a new formula nor followed funding under the present statute, which has been found unconstitutional by the Supreme Court. Rather, he proposed an across-the-board 5 percent increase in the amount of state aid to each community. This will be one of the most examined proposals, each representative and senator looking at the effect of it on communities and school districts in his or her district, whether more or less than the formula in present statute would provide. Whether this provision survives in the Legislature or in an examination by the court is one of the great questions of the session.

In his budget work, the governor trimmed $291 million from the total $560 million in increases that state department heads requested for 2008-2009. He partly did this by eliminating 321 vacant positions carried on agency books for more than six months. How much of a push department heads will make for restoration of their requests will be an interesting indication of executive branch discipline.

The budget first goes to the House, where it will face the scrutiny of the Finance Committee under the chairmanship of Rep. Marjorie Smith of Durham. She has promised to review every line in the budget and to take extensive testimony. The committee is divided into three divisions which tackle different parts of the budget and recommend the final version to be passed by the House.

The budget then goes to the Senate, where it is under the review of Senate Finance Chair Lou D’Allesandro of Manchester — who, interestingly, either chairs or is vice-chair of all Senate committees that have to do with finance and taxation and has the title of “vice President for finance” of the Senate, a new designation.

Whether all of Governor Lynch’s proposals survive and how many changes are made will say much about the operation of the Democratically controlled state government and his leadership.

Whether the Republican-suggested strategy of both defining “adequate education” and coming up with a funding mechanism for it will win the day and how the Supreme Court will view the process proposed will say a lot about the success of this budget in addressing both substantive and procedural needs of the state.

This story is not over.

Brad Cook is a partner in the Manchester law firm of Sheehan Phinney Bass + Green and heads its government relations and estate planning groups.

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