So, does the New Hampshire state budget really have a “structural deficit,” or is that just political spin from Gov. Chris Sununu and the GOP? Budgets involve math, so the answer should be simple, right?
But budgets are written and passed by politicians, so good luck getting a straight answer.
For example, the budget passed by the Democratic-controlled legislature raises the Business Profits Tax from the current 7.7 percent to 7.9 percent, and the Business Enterprise Tax from 0.6 percent to 0.675 percent. To the untrained eye, this would appear to be a tax increase.
However, Sen. Dan Feltes, Chair of Senate Ways & Means, Vice Chair of Senate Finance, and Senate Majority Leader says no. He argues instead that since the current tax rates only took effect in January, returning them to last year’s levels means “the House and Senate stabilized the business tax rates.”
“Governor Sununu’s veto of a balanced budget with no new taxes is not only holding New Hampshire back from making progress on the crises facing our state, it puts the interests of out-of-state corporations ahead of property taxpayers here in the Granite State,” Feltes told NHJournal. [emphasis added]
Simple test: If you got a raise in January, and in July your boss “stabilized” your paycheck back to last year’s salary, would that be a pay cut?
So much contention over a straightforward issue like tax rates. Gov. Sununu says he vetoed the Democrats’ budget over both tax hikes and what he calls a “structural deficit” of around $100 million. Is he right? Does such a deficit exist?
Ask veteran State Sen. Lou D’Allesandro (D-Manchester) about the budget and a projected deficit beginning in 2021, and you’ll get a clear—if lawyerly—answer:
“The budget that we passed was balanced,” D’Allesandro told NHJournal. “It had a surplus, and it put money into the rainy-day fund. And that’s by law what the budget should do.”
Which is true. The budget is balanced for the two years it’s in place. However, it also raises operational spending, particularly on education, to levels higher than the revenue projected to come in.
“It uses one-time revenue to raise the operating budget,” Andrew Cline of the Josiah Bartlett Center, a fiscal watchdog group, told NHJournal. “In fiscal years 2020 and 2021, the budget spends more than it takes in, and that problem is built into the structure of the budget going forward. To balance the budget in 2022 and thereafter, legislators will have to find new revenues or cut spending.”
Critics of the Democrats’ budget compare it to signing a year-long lease based on the money you get from your Christmas bonus. Sure, the January rent is covered. But where’s the income to pay your rent after that?
“People kept arguing with me about our ‘structural deficit,’ so I went online and looked it up, to make sure I was using the right phrase,” GOP Senate Minority Leader Chuck Morse told NHJournal. “I generally prefer a simpler term: ‘Spending more than you take in.’
“I think what’ll happen is when we get to 2022, we’ll certainly be looking for income. How are you going to produce that? An income tax? A capital gains tax? Democrats have already said they support both,” Morse said.
Sen. Feltes rejects this view. “Budgets are built two years at a time, and Governor Sununu vetoed a balanced two-year budget. Speculating about revenue estimates three to four years into the future is not credible, and the only deficits being created are by Governor Sununu now rushing to the Fiscal Committee for different approvals,” Feltes said.
Feltes says the Governor’s opposition to this budget isn’t about math but about politics. In a recent op-ed, he accused the Governor of “leading wild-eyed chants of ‘veto, veto, veto!’” rather than compromise with Democrats.
Interestingly, in that same op-ed, Feltes doesn’t mention the word “deficit” a single time, avoiding the issue entirely. Could that be because Democrats know their spending increases, particularly in education funding, can’t be sustained beyond the current budget?
“If I have one concern with the budget, it’s the education situation,” D’Allesandro admitted to NHJournal. “I would have put less money into education. Why? Because I want sustainability. And I didn’t want to do anything that would corrupt the process that we have in place now because there’s litigation pending.
“I believe we are addressing our legislative responsibility,” D’Allesandro concluded. “But if I’ve got a concern, that’s [education spending] the only one I have.”
And that’s the crux of the “structural deficit” question. “Essentially, the Democrats have put $140 million more in education,” Morse says. “When we come to the next budget, how are they going to sustain that? We spent more on virtually every line item in this budget already. We spend more on education. But they put in a new education formula on top of that increase that’s just not sustainable.”
And “not sustainable” is just another way of saying you’ve got a structural deficit.