Arlinghaus And McLynch Discuss Upcoming Budget

NHPR

Reported by contributor Brian Wallstin.

Gov.-elect Maggie Hassan and New Hampshire lawmakers are beginning to outline their priorities for the 2013-2015 biennial budget, led by a new Democratic majority in the state House.  This week, two experts told a gathering of business leaders in Concord that restoring even some of the cuts made in 2011 will be difficult.

“Obviously the legislature has some key challenges ahead of it,” said Jeff McLynch, executive director of the New Hampshire Fiscal Policy Institute. “There will be no easy decisions to make this session.”

McLynch joined Charlie Arlinghaus, president of the Josiah Bartlett Center for Public Policy, at a forum, hosted by the New Hampshire Business and Industry Association, called, “What We Want vs. What We Can Afford: Crafting New Hampshire’s Next State Budget.”

Before a lunch-time crowd of about 80 people at the Grappone Conference Center, McLynch and Arlinghaus approached the role of government from different perspectives.

Not enough revenue to restore major cuts

However, they agreed the state’s projected revenue will not be enough to satisfy demands to restore, for example, funding for higher education or hospital care — areas that shouldered the largest burden of the 10 percent cut in state spending in 2011.

Tax revenue down

McLynch, whose organization supports policies that help low and moderate income families, pointed out that tax revenues to the state have decreased for three years running. And he added that “most of the key revenue sources” will remain at pre-2008 levels for the foreseeable future.

The state’s biggest economic “opportunity,” McLynch said, was the expansion of Medicaid under the Patient Protection and Affordable Care Act. Under the law, known as Obamacare, Medicaid expansion would insure as many as about 60,000 additional New Hampshire residents. It would cost the state about $110 million, McLynch said, but expansion would also draw an estimated $2.5 billion in federal funding for health care into the state’s economy.

Citing a recent study by the Lewin Group, a health care consulting firm, McLynch said expansion would also reduce uncompensated hospital care, saving the state as much as $170 million a year.

Tax increases unlikely

Arlinghaus, head of the Josiah Bartlett Center, a free-market think tank, acknowledged that the 2011 cuts to close an $800 million budget deficit were “basically the subject of the last election.” But, he added, there is little chance that lawmakers will agree to tax increases to help make good on political promises made during the campaign.

That pretty much assures the status quo, he said.

“The revenue we are going to get, if no tax rates change, will fund more or less what we do today,’ Arlinghaus said. “That’s where we are, and that’s what we have the money for.”

Restore cigarette tax

Arlinghaus and McLynch agreed that restoring a 10-cent per pack cut to the cigarette tax enacted in June 2011 would help. McLynch estimated it would increase revenue by about $23 million. But Arlinghaus said the new tax revenue would eventually fail to keep pace with the losses caused by the steady decrease in the number of people who smoke.

“It’s not going to yield that much money unless we raise it a buck or two bucks a pack,” he said.

Arlinghaus said one budgetary solution sure to be proposed is gambling. But gambling revenue is a “very mercurial source of revenue,” Arlinghaus said, dependent on competition from neighboring states, like Massachusetts, and other economic conditions. McLynch agreed, noting a recent paper by the New Hampshire Center for Public Policy Studies that suggested the budgetary benefits were far from certain.

But the two disagreed with the possible effects of a sales or other so-called broad-based tax. Arlinghaus said an income tax would destroy the state’s economy, while a sales tax would “only destroy New Hampshire’s retail economy.”

But McLynch said that while there is little political will to make big tax-policy changes in New Hampshire, the evidence of negative effects are far from conclusive.

“I don’t know that ‘destroy’ is a word I would use in regard to adopting a broad-based tax of any kind,” he said. “If you look at states that have broad-based taxes, they may fare better or worse than New Hampshire depending on what measure you use or what tax you use.”