The State Budget

This term, despite the severe funding constraints and the need to work with a Republican-controlled Senate, we fixed many problems created during 2011-12.  We increased funding and created better structures for mental health, LCHIP, the women’s prison, substance abuse programming, and basic functioning of our tax agency (which had lost 47% of their staff in 2011, cutting hard into revenues).  We attracted more health insurers and all the hospitals to NH’s Exchange, beginning in 2015.  We restored basic developmental disability, mental health, and children-in-need-of-services funding.  We expanded Medicaid to the 50,000 caught in an Affordable Care Act loophole opened by the US Supreme Court.  We resolved the hospital tax lawsuit, providing relief both to embattled hospitals and the state budget.  We resolved a mental health lawsuit, and kept faith with lawsuits we had resolved in prior terms.   But there is a severe limit to what we can do without increased revenues.

As the state budget in real terms has shrunk, we have shifted costs down to counties, schools and towns, and the property tax rises both due to inflationary pressures and to downshifting. The property tax is two-thirds of what NH citizens pay in state and local taxation.  Unlike many other states, NH’s property tax amount raised is absolute: You pay the same dollars no matter what the rate is, and those dollars depend on the value of your house relative to the total assessed value of your town, school district and county, on the budget voted in by each of these bodies, and on state, federal and other grants and payments.  Any increase in these state and federal grants and payments will reduce your property tax – but any decrease in them will make your property tax grow.  Any reduction in direct state or federal services which the town or school or county is also obligated to provide, or that the voters decide must be provided, means your property tax goes up.  And if we shift a service from state to town that costs more to provide at local level, the costs of the whole system go up.  That is what has been happening, for decades, in our state.

And other things go up – health insurance costs, transportation costs, costs of crime, drug addiction and mental health, costs of losing our young people to states with cheaper colleges, cheaper living and more vibrant communities, costs of not pursuing energy efficiency as quickly as we could, costs of decayed state parks and other state-funded or assisted tourism attractions.

NH’s revenues grow at one third the rate of regular inflation.  Republicans apparently don’t believe in inflation.  When they say they flat-line the state budget, what they are doing is to reduce the services we can pay for.  In this past fiscal year, we had money for 78% as much service as in 2003, services like public safety, public health, public education and training, and public assistance.  We legislators have made up for some of this lost buying power by developing more efficient ways to provide these services.  Democrats, even in the minority, have done most of the hard work it takes to create real efficiency.  The Republicans basically have just cost-shifted the lost services down to local governments or to businesses and families.

We don’t yet know all the damage the laws passed last term did to our revenues, but we do know our budget is impossibly tight.  We cannot grow out of our trap by cutting taxes on businesses, although if we can stabilize our revenue structure it might be possible later.  Tax cuts cannot attract new business to our state, because before lower taxes, they want good employee education and training, roads, safety and access to the courts, and quality of life.  If we cut their taxes in our budget situation, we’re cutting all of their more important priorities.  Tax economists and business recruiters tell us it takes a decade after cutting high taxes to attract enough business to make up the revenue loss – and only if we don’t cut the services businesses and their executives use during that decade.

NH is already ranked the 7th lowest in total state and local tax burden per capita, and 8th highest in positive business tax climate (the conservative Tax Foundation) – even though the property tax makes up almost half of the taxes our businesses pay (the business-run Council on State Taxation).

Click here for NH Taxes 101

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