This week Standard & Poor’s downgraded New Hampshire’s bond outlook from “stable” to “negative.” The reaction from the political class was predictable: Fingers were pointed, accusations were hurled, no plan of action was presented.
The downgrade was triggered by a Superior Court ruling a few weeks ago that held the Medicaid enhancement tax unconstitutional as currently applied. That ruling blew a roughly $400 million hole in the state budget. But that is not the only problem Standard & Poor’s mentioned. The state’s pension fund is only 57 percent funded, and its rainy day fund contains only pocket change by state government standards. This combination of factors has put New Hampshire’s AA bond rating at risk.
Both parties accused the other of causing the problem, but in reality the blame is shared. Though the Democrats irresponsibly increased state borrowing and spending while refusing to put enough into the rainy day fund, Republicans pushed the questionable MET scheme and were complicit in suspending the state law that required surpluses to be saved.
Rather than point fingers, legislators and the governor need to craft a plan to fill the MET hole and sock away more money. They can start by saving every dime of the current surplus, part of which Democrats want to spend even after S&P’s warning.