As May begins, an easy prediction is that the pulling and tugging in Concord will be intense this month.
The normal pattern is that the second year of the legislative session is a non-budget session. But this year is different because the recession has so dramatically impacted revenue that was planned for when the biennial budget was passed last June.
To fill a more than $200 million shortfall, the Governor has come up with revisions to the budget that are now under consideration in legislature and must be acted upon before we recess for the rest of the year in early June.
The Governor’s budget request has triggered discussion in the House Ways and Means Committee of seven taxes, including a new capital gains tax, reinstatement of an estate or as some would call it, a "death tax," and a new tax on electric generation. Most of the proposed taxes were rejected in budget deliberations last year and two new taxes put into the budget, the campsite and limited liability taxes, are on their way to repeal.
So, there will be much going back and forth in the scramble over revenue sources and the protests of others to save their programs from cuts to funding.
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Last week I wrote about the proposed elimination of funding for the three shelters that care for court ordered out-of-home placement for children. I raised questions about whether or not the state would actually save the $4 million the Governor says the cuts would produce. There are dozens of similar situations all being worked over this week.
The requested budget cuts also are polarizing levels of government. The Governor often points out correctly that 45 percent of the state general fund budget goes to state aid to towns, cities and school districts. He is asking the legislature to approve cuts of $25 million or about 1 percent in this area.
No so fast, Governor, says the New Hampshire Municipal Association, part of the Local Government Center. They point out "almost 80 percent of that so-called state aid is adequate education aid – the amount needed to fund the state’s constitutionally mandated obligation to pay for an adequate education."
The association further points out in its weekly legislative bulletin that the Governor’s newest idea "would lead to an overall decrease of 14 percent" in state aid to school districts and municipalities with nearly all of it coming from the towns and cities."
One could call it cost shifting that will force towns and cities to reduce spending or increase property taxes. Or, one could say this is an early indicator of a change in the financial relationship between state and local government. While state aid to school districts was not touched in the Governor’s proposal, and the current distribution formula remains in place, one can be sure it will get a thorough review in a study this year and legislation next year.
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A key member of the Senate majority leadership gave me a "heads up" on a proposal to help the towns, cities and school districts by going after $70 to $100 million of excess money in the reserve accounts of the Local Government Center and its insurance affiliates, and send back to the communities. Municipalities purchase health, property/liability, workers’ compensation and unemployment insurance from the LGC
The Senator was off to a press conference to announce the plan. My only thought was that this was a little late in the game for such a huge proposal with its legal, political, financial and legislative implications to say nothing of the conflict it creates between municipalities and school districts and their legislators.
The argument from the legislators promoting the idea is that these are taxpayer funds used to buy insurance. If there are surplus funds, the LGC should rebate them back to municipalities and school districts on behalf of taxpayers. The LGC has responded saying the reserves are needed to protect policy holders and, once again, the municipalities and school districts. They also say they use national standards to determine the level of money needed for reserves.
Over the weekend, local community officials were emailing legislators telling them to quash this last minute legislative tactic. One email from the mayor of Dover, Scott Myers, who is a member of the Board of Directors of the LGC wrote: "Towns, cities and school districts do NOT want to have … reserves returned to them in the form of a check as it will simply result in increased rates and higher cost in following years." Later on, Mayor Myers says "don’t fall for it."
One Claremont school official wrote to area legislators "The proposals before you, if passed, would over time lead to rate chaos. It is a short term ‘fix’ for a problem that doesn’t exist."
Over 150 municipalities have come together to sue the state over the cuts made in the current budget to reduce the state’s share of retirement costs for local employees. The Professional Fire Fighters of New Hampshire union is also in court trying to get the LGC insurance affiliates to open up their books. If the legislature goes after the insurance reserves, shortly there will be one more court suit.
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Revenue against budget projections was off seriously in April justifying attention that the Governor’s spending and revenue plan is getting in the legislature. More next week.
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