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At BIA forum Arlinghaus predicts there will be a major push for expanded gambling in NH

State House Bureau

November 29. 2012 11:04PM

CONCORD - With slow revenue growth, state budget experts from the right and the left agree lawmakers have a daunting task ahead in crafting a new two-year spending plan this spring.

"Without changes, you have the funds - more or less - to do about what you do today," said Charlie Arlinghaus, president of the Josiah Bartlett Center for Public Policy. "If you want to do anything different, you have to come up with new money or some other cuts."

Jeff McLynch, executive director of the New Hampshire Fiscal Policy Institute, and Arlinghaus discussed their visions of the next biennial state budget in a public policy forum put on by the Business and Industry Association on Thursday.

Earlier this week, state agencies and institutions asked for an additional $321 million in spending funded by state tax dollars for the next two fiscal years, a 26 percent increase.

The total request - including federal and other funding - is an additional $11.9 billion in spending or 19 percent.

Governor-elect Maggie Hassan said the departments' requests are unrealistic given the state's fragile economy and slow growing revenue stream and said they are going to have to start from a much lower base.

Both Arlinghaus and McLynch noted her concern. Between anemic revenue growth and permanent tax cuts enacted during the last two years, budget writers will have little new money to reverse cuts to higher education and hospitals that care for the state's poorest residents, both agreed.

However, they disagreed how lawmakers might find additional money to support greater spending.

Calling himself an agnostic on the issue, Arlinghaus predicted lawmakers will turn to expanded gambling for additional money because they do not "have the stomach across the board to raise taxes."

"We will see the most serious effort to pass gambling we have seen in the last 50 years," Arlinghaus said. "There is no other way to pay for what they want to do."

Hassan favors one highly regulated, high-end casino in the state's southern tier near the Massachusetts border. Gov. John Lynch remains unconvinced casino gambling would not harm the state's quality of life.

Traditionally, the Senate has favored expanded gambling over the years, but the House has continually balked, including this past session when Republicans held a three-to-one advantage and the backing of key House leaders.

McLynch noted the "enormous challenge lying ahead" in filling the gap between a projected $110 million increase in revenues and an additional $370 million in department budget requests.

But he says the state does have "an opportunity" for additional federal revenue through the Affordable Care Act's Medicaid expansion program for all state residents at 138 percent of poverty or below.

Under the act, the federal government pays 100 percent of the costs for the projected 60,000 new Medicaid recipients for the first four years and then 90 percent beginning in 2020 and beyond.

The federal money would total about $2.5 billion for the rest of the decade, McLynch noted, while the state would have to pay an additional $69 million.

Other cost savings under the ACA are projected to be between $85 million to $170 million, he noted.

"There are no easy decisions this session," McLynch said, "but we do have some opportunities."

The two agree the cigarette tax will increase 10 cents a pack beginning July 1, 2013, and they agree there is little likelihood the University System of New Hampshire and the Community College System of New Hampshire will see their state funding restored to pre-2011 levels or the state's largest hospitals will see their uncompensated care money returned.

"There is simply no money for that," Arlinghaus said.

Although the two agreed there is no chance lawmakers will pass an income tax, they disagreed about what effect such a tax would have on the state's economy.

Arlinghaus said an income tax would "destroy the state's economy," but McLynch disagreed, saying many states have income taxes with robust economies.

"I would not use the word destroy," he said, and earlier noted a change in the state's tax structure could include lowering the business enterprise and business profits taxes.

They also disagree about the effects of the fiscal cliff if by the end of the year federal lawmakers fail to agree on a plan that reinstates at least some of the Bush-era tax cuts and prevents across the board cuts to federal spending programs including defense.

McLynch said the effects would not be immediate and could increase state estate and legacy revenues. But he noted the state is considered a little more vulnerable than other states.

Arlinghaus predicted failing to address the issues would plunge the national economy into recession and would have a major impact on the state's largest manufacturer, BAE Systems in Nashua, a defense contractor.

And, he predicted, the federal government going forward will not be able to provide services and funds to the states as it has in the past.

"It will be difficult for us to look at Washington as a sugar daddy anymore," Arlinghaus said.

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