We heard the Governorís budget speech last Tuesday. It was a stirring speech. But the devil is in the details. The Governorís budget attempts to close a $900 million hole by reducing the state spending 5.4% in the first year and then increasing the spending 4.1% in the second year. How does that fill the hole?
The Governor emphasized that he reached his goal without "new taxes or tax increases." That statement applies only to "state" taxes. The Governor's proposed budget is constructed with huge reductions in state aid to municipalities and schools. There is considerable "downshifting" to the cities and towns of New Hampshire.
What is downshifting? Downshifting is transferring costs from the state budget to the local municipalities or schools. When the state eliminates grants, subsidies, or programs that affect towns and schools, the costs then shift to the local taxpayer Ė if the towns or school districts want those programs or services to continue.
NH House leadership alleges that the budgetís spending cuts simply downshift costs to the cities and towns. New Hampshire municipalities are already struggling with a nearly $100 million downshift from the previous Democratic administrationís current budget that ends on June 30. Now, thanks to the proposed budget from the Governor, they will look at an additional downshift of $154 million if the Governorís budget is accepted.
I received a call from a constituent who is quite familiar with the local budgets of the towns and the school district. He said that listening to the Governor and jotting rough figures on the back of an envelope, he calculated that the downshift to the Kearsarge School District was in the neighborhood of $1.7 Ė $1.9 million. Thatís a pretty ritzy neighborhood.
However, the new House Speaker, Rep. Bill OíBrien, has said, "The New Hampshire House of Representatives is committed to delivering a fiscally responsible budget without new taxes and fees" and without "shifting costs to the backs of New Hampshire homeowners." He ordered the House to reverse the budgeting process used in the past and to calculate revenue first and then build a spending plan within that revenue, just as we do with our home budgets.
The Ways and Means committee produced a revenue estimate early in February that is $450 million less than the Governorís and said it was "a line in the sand". They will not raise the numbers. If eventual revenues exceed that estimate, the excess will be used to replenish the Rainy Day Fund and to lower taxes. "There will be no additional spending from any excess revenue" said Ways and Mean Chairman Steve Stepanek. The Finance Committee, which is responsible for spending, must now work within that constraint.
The Republican promise in the elections was to balance the budget without new taxes. The lowering of taxes must of necessity come after the budget is balanced.
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