November 9, 2008
Seacoast Online
CONCORD, N.H. – Voters have given New Hampshire Democrats the chance to prove they aren’t the “taxers and spenders” Republicans claim them to be, but avoiding the label will be very painful.
That’s because Democrats — put in charge of state government for a consecutive term — face the sobering chore of cutting hundreds of millions of dollars in state spending over the next 32 months to avoid raising taxes.
“The Legislature has only been controlled by Democrats once in 100 years so we don’t have a record of taxing and spending,” said Senate Finance Chairman Lou D’Allesandro, a Manchester Democrat.
“We have an opportunity. We can say these Republicans who’ve controlled this place forever always blame the Democrats, but the Democrats had no way to deliver. Now we have a way to deliver and we better do it.”
It will be tough. The state’s financial picture is ugly and getting uglier as the national recession drives down the state tax receipts needed to support services while driving up demand for those services.
So far, Gov. John Lynch and fellow Democrats have made about $100 million in budget adjustments through a combination of new revenue measures and cuts. On Nov. 21, Lynch will ask lawmakers to make roughly $160 million in additional adjustments — about 10 percent — to spending funded by general taxes.
Lynch also has asked agency heads to prepare a “no growth” budget for the two years that start July 1.
Agencies had asked for an additional $457 million just to continue existing programs over the period. Another $100 million is needed to fund the new school aid formula. No one knows if state revenues will grow to partially cover the new spending, but typically the state sees some growth even in downturns.
In an interview with The Associated Press, Lynch called the original agency requests “unrealistic.”
“I don’t want to underestimate the extent of the financial challenge that we face,” said Lynch. “It is very, very significant and it will require some very tough decisions. It will require us as a state to not do things we may think would be important to do under another economic environment or to defer some things. But we’re going to have to make some tough choices among priorities going forward.”
Right now, Lynch said he is not looking at options other states are considering, such as selling state property to raise money and leasing it from the buyer or selling the state’s annual share of the tobacco industry’s settlement with states in a process called securitization. Nor, he said, is he looking at new taxes or layoffs.
Instead, he wants agencies to look for ways to restructure their operations to save money.
He has asked agencies to prepare budgets for 2010 that spend 97 percent of their 2009 budget and for 2011 that spends 100 percent of their 2009 budget.
If agencies comply, the budget gap shrinks dramatically, but it won’t happen without pain since rising energy and other fixed costs must be funded at the expense of other things.
Health and Human Services Commissioner Nicholas Toumpas knows his agency — which spends roughly half the budget — will be asked to save the most money.
“We have to redefine what our priorities are, who we are going to be able to serve, how we will serve them and then do it,” he said.
That means looking at everything — including the absolute minimum in entitlements that must be provided to comply with state and federal law, he said. He is hoping discussions with the stakeholders who provide the services will produce ideas on how to stretch resources — public and private — to meet the needs.
“If it just turns into one group going off to lobby their legislators that they’re more important than everyone else, then it’s zero sum gained. Their gain is someone else’s loss,” he said.
Lynch has asked Toumpas to find $31 million in savings in his budget for the balance of the year. That is on top of a like amount in cuts the agency has already made and perhaps $10 million it must absorb to cope with higher demand for services. All totaled, that could wind up being 10 percent of its budget during a year when demand for services is rising.
“The numbers of people coming into our organization seeking assistance is way beyond what we projected and way, way beyond what we projected in our budget,” he said. “Our business is cyclical. As the economy goes down, our business goes up.”
Toumpas isn’t expecting Democrats to enact new taxes nor is he waiting for the new administration in Washington to help states. He is setting his priorities now.
“At a certain point, I can do more with less,” he said. “We’ve been trying to do that over a number of years. You can only squeeze so much before you have to say fundamentally we have to scale back with what we do or find other models. We’re at that point. This issue is at that point right now.”
Republicans blame Lynch and Democrats for approving a fat budget that didn’t foresee the economic downturn.
“It’s going to be interesting,” said acting House Republican Leader David Hess. “The Democrats have got their hands full. They got themselves into this mess and they’re going to have to get themselves out.”
House Finance Chairwoman Marjorie Smith is hoping Republicans on her committee will pitch in with their expertise to help solve the problem. If they don’t, Democrats will, she pledges.
“I don’t see anything to be gained by playing gotcha politics,” she said. “There is too much work to be done.”
Smith says if agencies don’t heed Lynch and Democrats’ need for frugality, they will lose control of their budgets.
“If they’re not willing to do that in this time, then those of us in the Legislature will have to do that,” she said.
And programs not mandated by law will top the list for re-evaluation, she said.
Toumpas knows his agency will be in lawmakers’ sights.
“We have to go where the money is,” affirmed Smith.
But Smith said essential services must be protected.
“This is the very reason we have government in the first place,” she said.
“If we don’t do a good job, we’ll be voted out,” said D’Allesandro. “We have a great opportunity. We’ve been given a great opportunity. We say we can make things work. Well, let’s prove it.”
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I guess expanding the budget by 17.5% was not really a very good start, was it?