Cook On Concord: Revenue woes hit N.H. and its biggest city

As the Legislature labors on, a cloud hangs over the State House, with almost daily changes in the estimates of revenue shortfalls for this year and next.

Gov. John Lynch estimated recently that there would be a $50 million problem in revenue this year and instructed department heads to do something about it to stave off an expected budget deficit. However, other analysts and later revenue projections make Lynch’s estimate of revenue seem optimistic.

Charles Arlinghaus, president of the Josiah Bartlett Center for Public Policy, issued a report estimating the problem to be $100 million in the current year and another $100 million in the next.

Meanwhile, in the city of Manchester, Mayor Frank Guinta presented his budget proposal for the fiscal year starting July 1. In a startling address, he proposed no tax increase and significant budget cuts, most notably to the school district, which he cut by over $7 million, claiming he was cutting expenditures by the amount of reduced revenue estimated to be coming in.

This “meat-ax” approach startled many and resulted in predictions of layoffs, overcrowding and even the closing of West High School.

Both of these events remind observers of a number of basic truths that may be missed by politicians but should not be when you do not have enough money coming in.

First, you can cut programs and spending. Across-the-board cuts of a certain percentage of spending work only so far. Sometimes, government has to be re-thought, and entire activities eliminated.

Second, you can raise more money. On the one hand, revenue sources can be increased or new revenue sources can be found. Those are generally called “taxes” and “fees.” On the other hand, existing revenue sources can be made to produce more revenue. This is done by increasing economic activity in the areas that produce funds from existing taxes.

What politicians seem to forget, and what everybody else ought to get them to remember, is that the ultimate answer to the issues at hand is increased economic activity, attracting business, making profits — and doing so helps everyone, since when there are more taxpayers, more revenue and the individual contribution by any one business or taxpayer is reduced.

It will be interesting to see how often increased economic activity, development and long-term solutions are discussed during the shortfall discussions in Concord and the budget process in Manchester.

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Meanwhile now that crossover day has passed, the number of bills still alive in the Legislature is decreasing in number.

Some economic development bills are still alive, including House Bill 1282, which amends the pre-engineering technology curriculum in schools, HB 1404, relative to liability insurance for passenger rail service which, if passed, would give a shot in the arm to efforts to bring rail service to New Hampshire, Senate Bill 412, relative to establishing the office of technology development and telecommunications planning and SB 452, relative to transportation planning.

A number of bills on workforce housing are still alive that are similar to each other, and it seems likely that there will be some legislation on that issue coming out of the Legislature this year.

In energy and regulated utilities, there are a number of bills, including the regional greenhouse gas initiative bill, which has passed the House and is in the Senate, HB 1561, establishing an energy conservation and efficiency board, HB 1628, relative to renewable energy generation incentive programs, HB 1631, relative to state purchase of biodiesel fuel, and SB 383, establishing a commission to develop a plan to expand transmission capacity in the North Country.

A number of environmental bills are still alive including setback requirements from wetlands, HB 1594, relative to hazardous material reporting requirements, SB 352, relative to shoreland protection, and SB 403, relative to the commission to study issues relative to groundwater withdrawals.

In the area of fiscal policy, there are a number of bills, including HB 1220, which establishes a commission to study the taxation of alternate fuel and electric power motor vehicles — an interesting bill, since environmental legislation is aimed at reducing pollution, and this appears to inquire about the need to tax the vehicles that use less gas, since they will pay less in gas tax – and HB 1308, relative to the business profits tax deduction for reasonable compensation. nhbr

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