Lynch’s painful budget proposal

On Feb. 15, Gov. John Lynch delivered a budget message to the Legislature that contained many sobering proposals.

Lynch proposed no new taxes, although he did not propose reducing taxes as would be done under some Republican proposals now before the Legislature. What he did do, however, was present a number of fundamental changes and some startling ones.

Everyone in Concord is trying to avoid “downshifting” expenses from the state to local governments since, in reality, taxing and spending for programs that are not eliminated is a zero-sum game. However, Lynch’s proposals appear to have failed that test to some degree, as many of the responsibilities not funded will become obligations of local government.

Among the notable proposals made in the speech are the following:
• Lynch criticized New Hampshire hospitals for overbuilding and overpaying executives. He indicated that hospitals have comfortable surpluses, and therefore a previously available $20 million in state payments to hospitals would be cut, leaving hospitals to absorb uncompensated care in their own budgets, at least to that extent. Lynch called for a moratorium on new hospital building projects in the state.• The governor proposed a constitutional amendment allowing targeting aid to needy school districts. Republicans propose a different amendment, one calling for total discretion in the Legislature and local governments of school spending without any state mandate. Lynch also advocated flat funding of adequacy aid. Unfortunately for some local school districts, amounts of adequacy aid promised for this biennium are in many cases higher than that which will be received, and if there is any change in the distribution formula, notwithstanding the same total, there will be serious pain at the local level in many cases.Also in terms of education, the present moratorium on state building aid for schools is continued, and there is a pro rata cut in state building aid payments for 2012. The problem with this is that local school districts already have the bond issues in place for existing school projects, and they are required to make the payments, whether or not state aid comes to them to help with those payments. If this is not downshifting, what is it?• Several changes in the retirement system were proposed, including extending the retirement age for public safety personnel and changing the formula for determination of benefits based on the last five instead of three years of service. More startlingly, Lynch proposed elimination of the state’s share of local government pension payments, which would mean that $80 million a year in pension contributions, currently contributed by the state, will have to be borne by local governments if the proposal is adopted. The state created these payments to induce local governments to participate in the retirement system to make it stronger. This appears to be a downshift as well.• Lynch proposed cutting 255 state workers and eliminating 845 positions that currently are unfilled.• He proposed a commission to study the operations of the Community College System of New Hampshire and the University System of New Hampshire to see whether efficiencies can be made by eliminating duplication in those two systems.• Also in connection with the university and community college systems, Lynch proposed funding at 95 percent of current levels, although the way you get to that number is a combination of cuts and elimination of scholarships.• Lynch proposed a number of changes that would shift more youth programs to the Sununu Youth Reform Center in Manchester and close several facilities, shift the Healthy Kids health insurance plan entirely to Health and Human Services, combine other programs and, hopefully, institute managed care in the Medicaid system, all of which are designed to save money while not eliminating aid to New Hampshire’s most vulnerable citizens.In all, Lynch’s budget reduces state spending to levels seen prior to 2008.

A budget message by the Governor is the first step in the budget process. With only one or two exceptions, governors’ budgets have not been adopted by the Legislature as presented, and already there is a lot of talk by the Republican majorities about further reductions.

As everybody works on this process, count on hearing everyone say costs won’t be downshifted, an unlikely assertion, and listen for Democrats to state that taxes are not being raised while Republicans say that Lynch’s budget is full of tax increases.

Wouldn’t it be nice to have a budget process in which our leaders tone down the rhetoric and level with the people?

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.