…is still a skunk. In the spirit of full disclosure, for those of you who may not know, here is who the “Local Government Center” really is…
They were formerly known as, the “NH Municipal Association”, a group of government workers who were involved in influencing the phony ‘right to know committee’ which eventually gutted our right to know laws (RSA 91-A) to include secret meetings.
By calling themselves the “Local Government Center” they have tricked some people into thinking they are some sort of authority on how things in local government should work, when really it’s just the biased opinion of people with an axe to grind. So, keep that in mind when you read this article from Fosters.
The conundrum that is created by a tax cap
Over the doors to the Internal Revenue Service are these inscribed the words of Justice Oliver Wendell Holmes: Taxes are the price we pay for a civilized society. Taxes pay for services like police, libraries, fire, parks, health care, waste disposal and education on a scale that individuals cannot afford to provide for themselves. New Hampshire is unique in that most of its people vote directly on the level of local property taxes collected from them at either town, village and school district meetings or the ballot box.
In representative governments — the state legislature, at the county level, and in cities — the people control their taxes by who they elect to represent them. Most voters know the taxing and spending philosophy of their aldermen and city councilors through the vigorous political process that we Granite Staters so love.
Now comes a populist movement enticing voters to place artificial tax and/or spending limits on their city governments through petitioned charter amendments. As tempting as this seems, the following are sound reasons why the proposals, as written, should be amended and, failing that, rejected by the voters:
These cap proposals ignore taxes imposed upon cities and towns by other units of government, e.g., county governments, school districts and the State itself. County property taxes are apportioned among each municipality in the county based on the equalized property value of each municipality. The municipalities with the highest relative equalized values — usually the larger ones— pay the most in county taxes. For cities, the percentage of the county tax that each pays is as follows:
Belknap County – Laconia, 19.8 percent
Cheshire County – Keene, 25.9 percent
Coos County – Berlin, 12.6 percent
Grafton County – Lebanon, 14.4 percent
Hillsborough County – Manchester, 22.5%; Nashua, 20.9 percent
Merrimack County – Concord, 25.8 percent; Franklin, 4 percent
Rockingham County – Portsmouth, 9 percent
Strafford County – Dover, 26.6 percent; Rochester, 21.3 percent; Somersworth, 8.5 percent
Sullivan County – Claremont, 17.1 percent
This amounts to millions in property tax dollars extracted by law from the citizens of cities over which city officials have absolutely no control. They are required by state law to levy, collect and pay over the amount of property taxes, required by the county, in full. This is also true of property taxes required to be raised for school districts. In New Hampshire, four cities still have school district meetings; one city has an independent school district. In these five cities, the city councilors have no control whatsoever over the amount of the school district’s budget. There is no “wriggle room” in the level of taxes and/or spending for county or school purposes. Yet, these two categories of spending comprise, on average, about 80 percent of the taxes collected in New Hampshire.
What are the ramifications of this lack of any direct control? Cities often don’t collect 100 percent of the property taxes they bill each year — especially true in difficult financial times such as those we currently face. Thus, by the normal due date for payment of taxes, usually December 1st, a city may have only collected 83 percent, 92 percent or 97 perceny of its billed taxes for that year. Does that mean it may only pay the county or school district 83 percent, 92 percent or 97 percent of its demand and make up the balance when it actually collects it? No. The law requires that the city pay over 100 percent of the county and school district tax levy. This means that the city must actually operate on less than 83 percent, 92 percent or 97 percent of its budgeted tax revenue.
Counties are charged with providing two expensive social services: nursing home care and jails. The cost of these services has historically grown exponentially as our society has evolved and aged. The demographics of our aging population mean that nursing home populations — and costs— are projected to skyrocket in the next 20 years. In 2007, the state legislature passed a law that transfers 100 percent of the non-federal share onto county property taxpayers beginning in the next fiscal year. The result of this mandate will be to load hundreds of millions of dollars in future costs onto the backs of city and town property taxpayers. Jails are crowded, recidivism is at an all-time high and county property taxpayers must also pay those growing costs.
A tax and/or spending cap that doesn’t provide for discounting the impact of county and independent school district property tax demands will result in traditional municipal services being cut to pay for 100 percent of the service costs imposed by other units of government. A city shouldn’t have to reduce library hours, raise fees for recreational programs, close a fire station or reduce snowplowing simply because there are more people in the county nursing home or jail or the federal government is reducing its share of Medicaid funding or there are new education mandates to be met.
These cap proposals ignore certain external costs imposed upon local governments that are mandatory for it to function. Most notable are costs imposed by the New Hampshire Retirement System (NHRS) law. Local governments have been required to pay in whatever amount the board of trustees decree should be paid in, and this amount changes every two years. State and local governments guarantee the level of benefits regardless of external forces such as poor investment returns. This means that city, town, school and county taxpayers have to pay in even more when the system is in financial trouble as it is at the moment. New laws passed this year will hike local governments’ retirement costs about 15 percent. And study commissions created to look into automatic Cost-of-Living Adjustments and paying for retiree health insurance promise even greater future cost increases.
Another external cost is energy — in all its forms. The cost of fuel to operate local government vehicles, buildings and systems is out of control and, especially, out of the control of local officials.
A final major external cost over which local officials have very little control is the cost of employee benefits, notably health insurance. This is a cost that, even when purchased through cost-effective self-insured risk pools, is expanding at about three times the normal rate of inflation. One might argue that local officials could control health insurance costs by reducing the following: 1.) percentage of premium paid; 2.) scope of coverage; or 3.) workforce itself. But those are disingenuous positions. Most public employees are unionized, which means that reducing the first two costs cited cannot be done unilaterally. They must be negotiated and agreed to by the unions and employees. And, under a new state regulation called the “Evergreen Law,” even when a contract expires, no changes can be made to any aspect of it. Additionally, prior pay raises must continue automatically no matter how long it takes to negotiate a new contract.
A tax and/or spending cap that doesn’t provide for discounting the impact of these uncontrolled, external costs will also result in traditional municipal services being cut to pay the retirement levy, fuel bill or insurance premium. A city shouldn’t have to reduce library hours, raise fees for recreational programs, close a fire station or reduce snowplowing simply because the NHRS has made poor investments or the Iranians have closed the Straight of Hormuz or the local hospital wants to pay its chief executive a million dollars a year.
These cap proposals establish an impractical and politically impossible mechanism for overriding the tax and/or spending cap. The cap language being touted provides for an override of the cap by a two-thirds vote of the aldermen or city council. This gives a minority of the body the ability to stymie any override and force reductions in local services to meet the tax demands of government units and external forces over which the local body has absolutely no control. This is not democracy as we know it in New Hampshire or America.
Evidence of the conundrum this creates can be seen in Dover’s most recent budget cycle. Even some members of the City Council who supported and fought for the spending cap charter amendment balked at the idea that the county’s tax demands would be figured into the budget mix, thereby reducing what the council could spend to meet the demands for the city’s own services. Dover adopted a budget that fell within its cap this year. But in future years, as Strafford County’s population ages, medical/nursing costs go up and the State succeeds in loading 100 percent of its share onto property taxpayers, it will not be so easy. Strafford is Every County and Dover is Every City in the tax/spending cap debate. And the first of our “future years,” by the way, is Fiscal Year 2010 — a budget period which aldermen and city councilors begin preparing for in about six months!
John B. Andrews, Executive Director
“NH Local Government Center” (formerly known as the NH Municipal Association)