Deficit spending, the RGGI way

If the people running New Hampshire’s RGGI program were running a business in the private sector, they’d either be fired, under criminal investigation or both. Of course, they’re not. And in the world of government, they haven’t done anything wrong.They’ve simply spent tomorrow’s money today, creating a $600,000 deficit that needs to be paid off using next year’s RGGI revenue.In 2008, the New Hampshire Legislature signed us up for the Regional Greenhouse Gas Initiative, a compact of 10 Northeastern states to cap the amount of carbon dioxide coming out of fossil-fuel power plants and auction off the right to emit the gas as a way to raise revenue.Prices in the carbon market crashed to the preset floor more than two years ago and haven’t rebounded. The secondary market is practically nonexistent, taking the trade out of cap-and-trade.And for the last year, demand for the carbon allowances has dropped so much that most of the available allowances were left unsold on the auction block.In New Hampshire, the Public Utilities Commission was tasked with handing out the RGGI revenue. In total, New Hampshire has spent $35.3 million in RGGI revenue. Unfortunately, the state has only received $34.7 million so far.With RGGI prices high in 2008, New Hampshire took in $18 million from the program’s first five auctions. And the PUC spent it, handing out four sets of awards for municipal energy efficiency programs, private sector energy upgrades and some consulting contracts. Prices dropped in 2009, bringing in just over $10 million for New Hampshire. But the PUC handed out $13.4 million in grants, along with the Legislature’s $3.1 million transfer.According to Jack Ruderman, director of the PUC’s Sustainable Energy Division, the program grants aren’t paid out in a lump sum, and this year’s $6 million in RGGI revenue has been almost enough to meet the state’s commitments made in 2009 and 2010.Wisely, the PUC didn’t hand out any RGGI money in 2011, since it’s been scrambling to use this year’s revenue to meet last year’s commitments. We’re still more than $600,000 short. Luckily, state government isn’t like the real world. We can use revenue from the 2012 RGGI auction to finish paying off the grants handed out in 2010.We’ve always prided ourselves that New Hampshire government lives within its means, even if some of us want to augment those means with higher taxes. We don’t engage in deficit spending like those rascals in Washington. Except that we do, and we’re getting better at it.We’ve spent RGGI money that we’ve haven’t collected yet. It certainly isn’t the only state program generating red ink. According to a briefing my boss Charlie Arlinghaus gave to the Legislature in December, we’ve increased state debt by 43 percent over the last four years. The General Obligation Debt that we’re passing on to future taxpayer is closing in on a billion dollars.We should also remember the $4 billion liability hanging over the New Hampshire Retirement System.RGGI is just a tiny corner of New Hampshire government, but we somehow managed to spend more in the program’s first two years than it could raise in three. As New Hampshire moves into RGGI’s second three-year window, we should take a more cautious look at what to expect from the program.Grant Bosse is lead investigator for the Josiah Bartlett Center for Public Policy, a free-market think tank based in Concord.