Should government spending go up?
Is it reasonable or sustainable to increase the biennial state budget by more than 13%. Is the economy growing that fast? Is the population growing that fast? If we add together the growth in population and economic growth are we growing that fast? The answer is Hell No.
Legislature Vs. Governor
So the question becomes why does it make sense to increase state spending at that rate? What we know is that HB1 increases spending by more than $300 million compared to the Governor proposed budget. The House budget, HB1 will spend as much as 7.5% more in General Funds, 13% more in total funds, than the budget passed in 2017. Spending by state government is definitely going up. Guaranteed.
The structural issues
One time revenue is being used to grow government. That means revenue from non-recurring sources is being used to fund ongoing programs. The problem with this is that today when we know that there is money the program addition is fine. But, as soon as the revenue is not there, which is what non-recurring means, we have created a structural deficit for future budgets. The governor’s proposed budget used one-time revenue for one-time projects. The legislature has deleted commonsense from their budget construction.
The House replaced the governor’s voluntary family leave plan. In its infinite wisdom your legislators replaced it with their non-actuarially sound, state-run insurance program, funded by a mandated 0.5% tax on wages, costing workers/businesses $168 million per year with a regulatory escalator in the event the expected shortfall materializes. There is no need for this program… at all. We’ve survived 300 years without it. The urgency to act is what? Not there?
True to form the Democrats do not want to max our the rainy day fund. They would out $20 million less in to the rainy day fund than the governor’s proposed budget. This is significant only if one considers the State’s bond rating. Over the last biennium the state moved steadily toward a stronger financial footing. Revenues went up significantly and bond ratings were improving. Now it’s if we’ve got a buck we should spend $1.15. This is myopic thinking which has led to poor budgeting.
The tax issues
There are tax rate decreases scheduled to take effect. They were stepped and continued in two increments if safeguard targets were met. Success as demonstrated by increasing revenues by decreasing rates has been ended. The Legislature repealed future business tax rate reductions costing our job creators $280 million over the next 4 years. The move says NH is not open for business.
There will be slowed economic growth. Revenues will likely not meet expectations. Businesses are being encouraged to leave NH. You cannot have more for the people of the state if you drive away the economic engine of the state, businesses. Ask Connecticut, they’ve over played this game already.
Just because we did not want to pass up any opportunity to screw up an area where NH has an advantage. The legislature passed a state capital gains tax. The claim it will bring in $150 million per year capital gains tax. That is not going to happen because most capital gains will be paid by retirees who have savings.
You see the legislature in its infinite wisdom concluded that people who have money are not mobile. They think people cannot or will not move for tax reasons. They are wrong. There are already people who maintain homes in more than one location and will switch their domicile to avoid taxes. Their revenue estimates for this new tax are inflated, untested, and unrealistic.
Conclusion:
The problem we have is that when state spending goes up by 13%-14% the money has to come out of the state economy. That means your household budget and mine will take a hit. The more taxes we pay the less we have to spend on college tuition, food, rent, property taxes, transportation and incidentals like healthcare. There’s no free lunch. When government gets a raise the people get less spendable income.
