From the Print Edition of the Union Leader

Each day that passes there’s more bad news about the budget. New Hampshire used to be the fiscal envy of its neighbors but it has been reduced to a budgetary basket case. We got here by doing the wrong thing every year despite predictable dire consequences. The choices we are forced to make today are the direct result of choices we didn’t make over the last few years.

The budget that recently passed the House and is being considered by the state Senate reduced state spending by 11.3%. This wasn’t a Washingtonian-style “reduction of proposed increases.” No, in this case the state will actually spend 11% less than it spent last budget.

Not understanding how we got here, some politicians and lobbyists have attacked the budget and called on the legislature to raise taxes or do something else to avoid cuts. The governor in recent weeks has asked people to call their senators and tell them to spend more money.

A short history of the fiscal mess should explain how we got here, why we’re in such trouble, and why the governor’s advice is incorrect.

A few short years ago, New Hampshire was in the kind of fiscal condition most states dream of. Craig Benson’s only budget produced an $82 million surplus to replenish the state’s reserves. The following budget, John Lynch’s first budget passed with a Republican legislature (the same situation as today), added another $50 million of surplus to the state’s reserves.

Three budgets ago, spending was balanced and the state had a modest surplus. What happened?

Two things happened: we had a recession as bad as any we’ve had recently and the state budget didn’t adjust. In the two-year budget ending June 30, we will raise just a little bit less than we raised in the 2006-2007 budget – about 1% less. That wouldn’t be a problem if we kept spending in line with revenues.

However, over the last four years, even though revenues were flat, spending was increased by $680 million. The state has a balanced budget requirement to keep us from spending money we don’t have but the legislature did it anyway.

State spending was propped up two ways: borrowing and bailouts. In the most recent budget, the state used $350 million of one-time federal stimulus money not for bridges and roads or some stimulus project but to add to the state’s general fund and allow it to increase state spending. This portion of the stimulus money was designed as a state bailout but we were also told clearly that it was a one-time bailout.

Added to the bailout was $156 million of borrowing to support state spending. While borrowing to pay for operating expenditures is technically prohibited by state law, the legislature is the final judge of how one defines “operating expenditure.”

The use of borrowing and bailouts artificially propped up state spending and merely delayed the legislature’s day of reckoning. For four years, those who had been critical of the all the borrowing and gimmicks warned that they were merely delaying the decision and making it worse for some future legislature.

That future legislature is now and the decisions are difficult but we’ve run out of sand in which to bury our heads.

One reason to bring up the past right now is because we are being forced to consider the same decisions at the end of this fiscal year.

April revenues just released are well below the amount budgeted and have now convinced everyone that a quick response is required to fix the budget. Unfortunately, the governor’s proposed solution is a microcosm of the problems of the last four years.

Cutting the budget with only two months left in a 24 month budget shows the need for cautious budgeting in the beginning. Any changes made today are less targeted and less strategic than planning ahead.

The governor has an obligation under state law to roll back spending when revenues don’t come in and the legislature should encourage him in that effort. However, he also plans a series of accounting gimmicks which the legislature should resist.

For example, skipping one health insurance payment is just delaying that bill for someone else to pay and not bringing actual spending in line with actual revenue. Taking money left in some dedicated funds means those funds aren’t really dedicated and the fee dedicated to a regulatory activity has been set too high.

The recent fiscal history of the state demands caution going forward. Revenue estimates should be careful, not hopeful. Spending decisions should be made strategically in advance, not hurriedly when it’s too late.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free market think tank in Concord, New Hampshire.