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Another View, with Andrew Cline: Tax cuts did not short change DCYF

October 11. 2018 8:01PM

Andrew Cline 

A really interesting accusation has popped up in the race for governor. It goes like this: The current state budget, signed by Gov. Chris Sununu, shortchanged the Division of Children, Youth and Families to free up money for tax cuts to the richest businesses. What makes it interesting is that there’s no way to torture the budget numbers to make it true.

The accusation is phrased in a way that leaves listeners thinking DCYF funding was cut. Exactly the opposite is true.

The current budget (Fiscal Year 2018-19) increased state general fund spending on DCYF by 17.3 percent. That’s the one and only budget Gov. Chris Sununu has signed.

Such a huge increase is highly unusual. In the past decade, no budget has raised DCYF spending by so much so quickly.

A policy brief released last week by the Josiah Bartlett Center for Public Policy shows that DCYF funding has tended to grow or shrink depending on the state’s overall financial position, regardless of which party is in charge.

In the budget, DCYF funding is divided into two categories, child protection and child development. Looking back, we see those categories rising and falling under both Republicans and Democrats.

The 2010-2011 budget was signed by Democratic Gov. John Lynch and written by a Democratic Legislature, with Democratic senator and future Gov. Maggie Hassan taking the lead in the Senate. It cut state funding for child protection by 12 percent from 2009-2010 and for Child Development by less than a percentage point.

The Republican-led Legislature cut state DCYF funding further as part of its broad spending reductions in the 2012-13 budget, which Gov. Lynch let pass without his signature. In the 2014-15 and 2016-17 budgets, state general fund spending for DCYF inched slightly higher as the economy slowly improved.

The huge increase in DCYF funding in the 2018-19 budget reflects a bipartisan agreement in Concord that the division needed more resources to do its job effectively.

Given the widespread recognition of problems at DCYF, a budget that gave the agency its biggest spending increase in at least a decade, funding 16 new positions, might have received broad acclaim. Instead, Democrats have accused Republicans of underfunding the division, framing the issue in a way that would easily lead voters to conclude that funding for the agency had been cut.

This is impossible to square with the numbers in the actual budget. State general fund spending on DCYF was $50.7 million in FY 2017, $57.2 million in FY 2018, and $59.5 million in FY 2019.

Those numbers are why the claims don’t actually say “Sununu cut DCYF spending.” Unable to say that, the suggestion is made that DCYF didn’t get as much as it should have gotten because the budget “gave $100 million in tax breaks to the wealthiest corporations,” as Democratic candidate for governor Molly Kelly wrote in a recent Union Leader column.

The trouble is, that didn’t happen either.

The 2018-19 budget included business tax rate cuts and an increase in a business tax deduction. But the rate cuts applied to all businesses, not just the wealthiest. Any suggestion that the budget cut taxes exclusively for the richest businesses is completely false.

Also, the cuts do not take effect until 2019.

An analysis given to legislators projected that business tax cuts in the 2018-19 budget would lead to revenue losses in future years, and this appears to be the basis of the claim. But that projection a) was just an estimate, b) was for tax cuts that go into effect next year, and c) has been overrun by events.

The projection was based on a static revenue model, meaning it assumed that business tax rate cuts would have no effect on consumer or business behavior. The last three years of business tax cuts in New Hampshire show why this assumption was flawed.

State business tax revenue in FY 2018 alone was $114 million above projections. That $114 million in unexpected new revenue came after previous business tax cuts that many had said would cost the state millions in lost revenue. That didn’t happen either. Instead, from fiscal year 2016, the year the business rate cuts began, through the end of fiscal year 2018, business tax revenues have exceeded projections by $319.5 million.

That windfall has funded a rise in state spending, including the huge increase in the DCYF budget.

It’s disappointing that partisanship has gotten so bad that finally addressing longstanding problems in DCYF gets elected officials attacked rather than praised.

Andrew Cline is president of the Josiah Bartlett Center for Public Policy.

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