The Only Budget Options are Borrowing, Taxing, and Cutting
by Charles M. Arlinghaus
From the Print Edition of the Union Leader
The current election campaign for state offices has focused on the extraordinarily difficult fiscal situation the state finds itself in. Balancing the state budget without another federal bailout seems nearly impossible at first glance. This year, no one will come to our rescue and allow us to put off difficult decisions so we have three basic choices: raise taxes, cut spending, or borrow the money.
Over the last two budget cycles, New Hampshire’s tax revenue’s have been flat. In the 2006-2007 biennium, tax and fee revenues for the general and education funds were $4.47 billion while the current 2010-2011 budget is projected to be $4.45 billion. Despite that tiny drop, spending increased at historically average rates growing from $4.4 billion to $5.1 billion.
[1] That gap and the projected deficit are the same problem. My current estimate of the starting gap between spending levels and revenue levels is $691 million. The gap still exists because instead of solving the problem and bringing taxes and spending into line with each other, we borrowed $156 million, used a $351 million federal bailout, and other one-time revenues like sale of state property for $90 million.
Can we just grow our way out of the deficit? As everyone understands, economic growth helps our financial picture. If general revenues, aside from the ones that are fixed payments, were no longer flat but grew at a historically reasonable rate of 3% per year we would shrink the deficit by $166 million. Similarly, spending growth of the same 3% per year (a bit less than the growth over the last four years) would add $232 million to the shortfall.
My estimate of $691 million in the hole assumes no spending or revenue growth. So if we did have reasonable economic growth, even if we held spending to zero increase for two straight years, a feat achieved only once in the entire post World War 2 history of the state (Steve Merrill’s second term), the remaining hole would still be $525 million.
Please read more at New Hampshire Watchdog
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Charlie Arlinghaus is President of the Josiah Bartlett Center for Public Policy, New Hampshire’s free market think tank.