Budgeting 101 by Granite State Taxpayers
Although many of us will be focusing on more pleasant matters on February 13, 2013 , it’s also the day when our new Governor delivers her state budget to a joint session of the legislature. From that framework the House has six weeks to make their changes, then the Senate gets their shot and then the final result is put together in a committee of conference.
After thirty years of watching the sausage being made, and in particular the very successful budget crafted two years ago, Granite State Taxpayers has some advice for this year’s legislators.
Start with honest revenue estimates
New Hampshire receives tax revenue from many sources. Some are relatively easy to predict like the statewide property tax, the tobacco settlement funds and the business enterprise tax. Others fluctuate with the health of the economy like the real estate transfer tax and the business profits tax. Quite a bit of revenue is dependent on the whims of the federal government. For example, rules are still being written to implement Obamacare that could have a huge impact on the state budget as early as next year.
Two years ago the legislature decided to be conservative and predicted flat revenues (the Governor thought we’d get $100’s of millions more). That pessimism proved accurate given the lingering Great Recession, and actual revenues have come in within a half percent of their estimates.
In years past we’ve been treated to supplemental budgets and drastic mid-term cuts when rosy revenue estimates didn’t pan out. By projecting conservatively (some would say realistically) the last two years have been characterized by financial calm. It is always easier to deal with the “problem” of too much income than too little.
Don’t raise taxes or borrowing
One sure way to kill the nascent economic recovery is with higher state taxes. New Hampshire’s penny pinching ways are a major reason that we weathered the recession much better than our neighbors and gained population over the last decade. Today’s highly mobile workforce knows how to vote with their feet and can easily depart for more favorable conditions.
If anything, borrowing to cover current budget gaps is even worse than new taxes. Taxes can be cut if the economy improves, but borrowing drains the taxpayers for years. While we are not in the same class as Illinois, California or the federal government, our pension system is short billions of dollars. This is being made up with $300 million extra taxes each year. Imagine how much easier budgeting would be had we emulated the ant and not the grasshopper over the past twenty-five years.
Confine spending to the basics
Government has certain responsibilities: public safety, justice, roads, K-12 education and charity for those who are unable to care for themselves and have nowhere else to turn. Just doing these things well is a big enough task without compounding it with the other things that the private sector, including charities, churches and other non-profits, handle well. Why does the state need to run ski resorts and campgrounds, staff hospitals, teach adults, and lend money? Private organizations will do a better job because they have the benefits of competition to keep them operating at the peak of efficiency, something not generally associated with government.
Government spending is like a weight placed on the shoulders of the productive members of society. With some common sense and prudence in Concord that burden will be lighter, and those producers will create the kind of vibrant, growing economy we all want for New Hampshire.