Charles Arlinghaus: Gov. Hassan has to cut spending right now
The state budget law allows the governor to issue an executive order with the approval of the legislative Fiscal Committee in the event of a revenue shortfall and likely deficit. Doing this is not unusual. Every governor in the last 30 years has been required to do it.
New Hampshire's two-year budget will end in deficit if no action is taken. While revenue is coming in ahead of budget in general, there is a problem with the Medicaid Enhancement Tax (MET). The MET will likely end the year $36 million behind schedule. After accounting for a 2012 surplus, revenue ahead of projection in other categories, some spending savings, other savings that didn't materialize, etc., the problem is a little smaller, but the state still faces a $25 million deficit.
The MET was inaugurated as a sort of pass-through, pretend tax to dragoon more Medicaid money out of Washington. Hospitals paid the tax, the feds matched it as Medicaid spending, and hospitals received all of it back the same day as a grant that just happened to match what they paid.
Some changes were made because of Medicaid rules, but then in the last budget the pretend tax was turned into a real tax. Hospitals didn't get the money back. This created an incentive for them to actually care about how much they paid and to structure their finances - in the same manner as any other taxpayer might do - to minimize their liability and conduct business in a way to help their bottom line not the state's bottom line.
This is perfectly rational and predictable behavior. But it left the state with less revenue.
Fortunately, state law provides a solution. The governor can and should immediately issue an executive order curtailing $25 million worth of spending (about 2 percent of the annual general fund budget). Making adjustments to spending in the final six months of the two-year budget cycle is something every governor has to do. If she does not, then by state law those cuts must be part of the budget she proposes on Feb. 15.
Whatever she chooses, we have long known that the Medicaid enhancement revenues were unreliable. When Gov. Craig Benson vetoed the budget 10 years ago, one complaint in his veto message was that the state needed to reduce reliance on the MET for stability. Many people who disagreed with the veto itself agreed with his warning.
The state budget has problems when revenues are unreliable or vary a great deal. The MET is a problem especially now that hospitals can and should treat it as a normal tax. In addition, the federal government, which keeps threatening to repeal the loophole that allows it, is under great financial pressure.
Ideally, that revenue should be used not for general operating expenses, but for one-time, non-recurring expenses. The state should wean itself, or at least its general operating expense budget, off the MET over the next four years.
It also should serve as a warning for other revenue enhancements being considered. One-time or otherwise unreliable revenue sources should not be spent on annual expenses like salaries or ongoing programs.
Lawsuit settlements are a good example. If the state settles a lawsuit for tens of millions of dollars, that money cannot in good fiscal conscience be devoted to expenses that continue indefinitely. Fix a bridge or pave a road, perhaps, but don't use it to hire a permanent employee you can't afford when the windfall runs out.
We had a huge deficit, and therefore budget crisis, two years ago because we borrowed to spend or spent money we hoped to get but didn't. (In 2010, we budgeted and spent $60 million from "sale of state assets." Three years later, we're still at zero in that account.) We have a smaller problem now because of an unreliable revenue source. Let's avoid both mistakes.
READER COMMENTS: 0
- Comedian Joan Rivers dead at age 81 says daughter - 0
- U.S. says Islamic State video of journalist's killing is authentic - 0
- No paper on Monday; check UnionLeader.com for updated, breaking news - 0
- Concord attorney Leahy dies - 0
- Robin Williams’ ashes are scattered in San Francisco Bay - 0
- Syracuse, Iowa crowned top party schools - 0
- Parking fines cause disputes, raise revenues - 1
- Jon Cavaiani dies at 70; desperate stand in '71 led to Medal of Honor - 0
- Meriam Ibrahim, family welcomed as long journey ends in Manchester - 2
READER COMMENTS: 0
- Husband of Salem babysitter sentenced to additional time in second sex abuse case - 0
- Keene police working to identify rioters, notify other colleges of students’ participation - 3
- Man arrested as police investigate shots fired in Manchester - 0
- Alibaba Market robbed; scratch tickets taken from Crosstown Variety on Manchester's West Side - 0
- Hearing postponed for fire official facing harrassment charges in Londonderry - 0
- Bedford woman injured when tree falls on her - 0
- Nashua man accused of choking woman - 0
- High School Football Power Poll: Some shufflling below the top four - 0
- Nigeria declared Ebola-free by WHO after containing virus - 4
Keene State College students clean up after mayhem, say weekend riots were not their fault
Keene Pumpkin Festival has uncertain future
Monitoring social media
On Obamacare: Shaheen doesn't get it
On Obamacare: Shaheen doesn't get it
What rising tide? Kuster vs. Kennedy
Keene police working to identify rioters, notify other colleges of students' participation
A series of sharp exchanges at 2nd CD debate