26 June 2008
Thursday, Jun. 26, 2008
STATE BUDGET deficits and needed spending cuts have transferred power to the elite Legislative Fiscal Committee, a sort of super Legislature where 10 privileged members exercise power on behalf of the other 414 senators and representatives.
One of the most prestigious positions in state government is to serve on the joint House-Senate "Legislative Fiscal Committee." It was established to oversee the legislative budget office, but with a broad portfolio to investigate any matter related to any part of the finances of the state -- essentially everything government does.
Its primary duty is to receive funds. It is authorized, without any vote or amendment to the budget, to accept any non-state funds such as federal grants or private donations for any program. Accepting a grant doesn't affect state revenue or expenditures, but Rep. Marjorie Smith this year quite sensibly tried to include as many anticipated grants in the official budget document as possible rather than leave them to the fiscal committee.
A more controversial role is the one currently being exercised by the committee. The fiscal committee must approve any spending cuts the governor makes to the budget. In this role, it assumes some of the executive branch role at the same time it acts on behalf of the other 97 percent of the Legislature.
The two-year budget passed last year would be in serious deficit without action. Revenues are expected to be much higher than last year but significantly below the estimates used to balance the budget. The shortfall is expected to be close to $200 million.
When revenues are less than expected, spending cuts quickly follow. The current budget increased spending to $3.189 billion from $2.713 billion the previous biennium. The increase of 17.56 percent amounts to about $476.5 million. Therefore the cuts needed are about 6 percent of the total budget, much less than half of the increase.
The governor, as chief executive officer of the state, has proposed two rounds of spending cuts totaling about $80 million. In the course of evaluating what he chose to cut, some observers have quarreled with his choices.
In the normal budget process, the Legislature as a whole has the greater role in setting spending priorities for the state. After the governor sends a proposal, legislators spend months setting their own priorities and passing the budget to the governor. The Legislature has known for more than six months that the budget would face a serious deficit requiring spending cuts. Senate minority leader Ted Gatsas proposed that the Legislature debate priorities by preparing a supplemental budget so that the entire Legislature could evaluate and debate each cut.
The Legislature chose not to do so and limited its consideration to a few small tax changes. By limiting its irregular special session and choosing not to debate spending priorities, the Legislature as a whole removed itself from the process of fixing the budget. The 400 representatives and 24 senators instead turned over active participation to the 10 people on the fiscal committee. Even then, the committee's role is passive in approving or disapproving of actions the chief executive takes.
At this point, the governor has been ceded almost all authority. He has not been directed to cut by a specific amount, told areas to cut or protect, to raise taxes or not to raise taxes. Legislative leadership merely looked at him and said, "We choose not to act. Come up with something you think is best."
So how's he going to fix it? About $80 billion comes from spending cuts. The final number won't reduce spending by the whole amount because cuts invariably reduce the amount of money the budget projected to "lapse," or not be spent anyway. I might not agree with every priority decision he made in cutting the budget, but since spending needs to be reduced by more than twice that much, it is at least a start.
Another $60 million will come from borrowing money for operating expenses -- "bonding" school construction aid. Putting spending on the state's credit card merely delays the pain until next year, but it does temporarily close part of the gap.
Another $10 million will come from requiring the Pease Development authority to pay back money it borrowed. This is a sensible idea anyway, but it won't be available next year. Other tax increases (tobacco, gambling) and a reduced discount on wine sold to retailers probably won't reduce the deficit by more than $10 million, possibly much less.
If the economy improves and all the reductions come in, we might limp through 2009. But most of the problems of this budget will just be pushed onto the 2009 budget. And that nightmare can't be pushed onto the fiscal committee.
Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.