Capital Comments: Financial Troubles and Uncertainty Still Ahead

By Senator Bob Odell

The January edition of State Legislatures features a story titled “Weathering the Storm” and it is not about snow, wind or low winter temperatures.  No, the article is about the weathering the recession.

As the Speaker of the House, Terie Norelli (Portsmouth), and the Senate President, Sylvia Larsen (Concord), gavel the House and Senate into the first meeting of the 2010 session at 1:00 p.m. on Wednesday, weathering the economic storm in New Hampshire will be on the minds of many legislators.  This is not a budget year as the state’s two year budget was passed back in June.  But, there are still many financial issues that face House and Senate members.

It is important to note, of course, that New Hampshire is far from being in the desperate straits of other states.  While the national unemployment rate is over 10 percent, the New Hampshire rate is around 7 percent.  Even that level has put a hole in the state’s unemployment insurance fund that has driven employer rates up.

New York State went into the New Year with its main bank account in a deficit for the first time in history. It is a deficit of $174 million not counting another $1 billion of unpaid bills.  The New York Times quoted Thomas DiNapoli, the state comptroller, “New York State is officially living paycheck to paycheck.”

In California, an appellate court ruled last week that the Governor lacked authority to impose state employee furloughs that would save the state $3 billion.  And Michigan, likely the hardest hit of all states, the Senate Majority Leader is quoted in State Legislatures as saying “It has been a perfect storm here.  We led the nation into a recession and we are deeply entrenched in one of greatest economic crises the state has ever seen.”

The situation is much better in New Hampshire but there are still troubles and uncertainty ahead.

Here are some financial issues that will face the legislature over the next five months:

Court suits:  the Supreme Court has before it an appeal relative to more than $100 million the state in the current budget takes from the Joint Underwriting Association.  Whatever one sees as the merits of the case, the fact is if the court rules against the state, we have major hole in the current budget.

Keeping the courts open:  in the scale of state finances, a little over $100,000 may not seem important.  But, if the legislature fails to appropriate that money to keep the Claremont District Court as well as courts in Colebrook and Milford going, those courts will likely close.

Serving those in need:  the Commissioner of the Department of Health and Humans Services, Nick Toumpas, has testified to a current operating deficit of more than $30 million.  That means he has projected costs that exceed his appropriation by $30 million dollars.

Is that $30 million just a financial reference?  Not if you provide mental health services.  In October, citing a shortfall of $4.6 million in just Medicaid funding, the DHHS’ Bureau of Behavioral Health put a cap on the amount of time each day that caseworkers can spend with adults with serious mental illness.  That will save the state money but will lower reimbursements to mental health agencies including West Central Behavioral Health and likely create a longer waiting list for those in need of services.  All this as the number of people seeking mental health services is rising dramatically.

Repeal new and expanded taxes:  bills have been introduced to repeal parts of the budget that included adding campgrounds under the rooms and meals tax and having the interest and dividends tax apply to some limited liability corporations.  These are two tax increases added to the budget during a late night budget session in June.  The new taxes never had a public hearing and budget conferees took the word of the Commissioner of the Department of Revenue on the amount of money they would raise.  The trouble with repealing these taxes is that you create a gap in the revenue plan and need to fill it with other money.   Where will that money come from?

School funding, again: the legislature passed a new school funding formula in 2008 that takes care of the state’s annual grant to local schools for the current school year and the school year beginning next fall.  Two critical elements in the formula expire in June of 2011.  There is a “hold harmless” provision to keep any school district from getting less money than they were getting before and a “collar” to insure that no school district would get more than 15 percent of what they had been getting before.  Without these two provisions, the formula that increased the state’s grants by over $100 million would go even higher.

Because the state used federal stimulus money to pay for the increased grants to schools, the state has not faced up to the challenge of paying for these expenditures.  The legislature needs to revisit the formula this spring to deal with the expiration of the collar and hold harmless provisions as well as discuss how to pay for the new costs.  To wait until next year, a budget year, would push us right up to the end of session deadline to deal with it.

We can agree that other states are in worse financial shape.  But New Hampshire still must weather plenty of tax and spending challenges this year.

NH State Senator Bob Odell (District 8) is chairman of Ways and Means, a member of the Energy, Environment and Economic Development Committee, and the Finance Committee. Senate District 8 comprises: Acworth, Alstead, Charlestown, Claremont, Gilsum, Goshen, Langdon, Lempster, Marlow, New London, Newbury, Newport, Roxbury, Stoddard, Sullivan, Sunapee, Sutton, Unity, Walpole, Washington and Westmoreland.

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