At town meetings, voters confront local budgets strained by lost state revenue
When voters across New Hampshire head to the polls today or attend town and school district meetings this month, they’ll grapple with local budgets that have been strained in recent years by the loss of revenue from the state government.
The state suspended its revenue-sharing program in 2009, and that money doesn’t look likely to come back any time soon. The state’s subsidy for local teacher, firefighter and police officer pension costs was eliminated two years ago. Catastrophic aid and building aid programs for local school districts have been cut or suspended in recent years, as have state grants that help pay for wastewater treatment plants and other infrastructure projects.
In 2007, the state sent an average of $106 per person to municipal governments. In 2011, that figure was $88 per person, according to the New Hampshire Center for Public Policy Studies.
Local budgets, especially at the municipal level, are relying more on property taxes and less on revenue from the state government – and there’s no reason to expect that dynamic to change much in the near future.
“Short of either a real robust turnaround in the economy or an across-the-aisle agreement on new revenue, there doesn’t appear to be enough money” to fully restore state aid programs, said Daniel Barrick, the center’s deputy director. “The idea that we’re about to go back to prerecession levels of state aid is probably not realistic at this point.”
Cuts and consequences
Town meeting season, when most local governments set their annual budgets by popular vote, is under way. Towns and school districts that use the SB 2 form of annual meeting will vote on their budgets today, and traditional town meetings begin in earnest tonight, though some have already been held.
Five or more years ago, those local budgets drew on any number of state programs for revenue: the local portion of the rooms-and-meals tax, pension subsidies, various block grants and targeted aid programs. Today, some of those spigots have been shut off, and others are less generous.
∎ Revenue sharing was suspended in 2009 for two years, and that suspension was renewed for another two years in 2011. Gov. Maggie Hassan’s proposed state budget for the next biennium would suspend it yet again.
∎ Local governments are supposed to receive 40 percent of the revenue collected by the state’s rooms-and-meals tax, but the total amount sent to local governments has been frozen since fiscal 2009.
∎ The state used to cover 35 percent of the employer cost of pension payments by towns, cities and school districts for teachers, firefighters and police officers. That subsidy was reduced in 2009 and eliminated two years later.
∎ Grants to assist with pollution control, landfill closures and other environmental problems have shrunk, as has so-called “catastrophic aid” for special education expenses and building aid for local school facilities.
Not everything has been cut. The largest single state aid program, adequacy grants to local schools, has been essentially flat since 2009. More than $1 billion still flows to local governments from the state every year in the form of education aid, highway grants and more.
Downshifting is hardly a new process, noted Bow Town Manager David Stack.
“This has been happening slowly but surely not just for the last year or two, but for the last 10 or 15 years,” he said.
But in the last state budget, passed in 2011, some $110.9 million less was earmarked for local aid than had been spent in the previous biennium, a reduction of 4.7 percent, according to the legislative budget assistant’s office.
The New Hampshire Center for Public Policy Studies in December issued its latest report on how cities and towns in New Hampshire pay their bills. The recession’s impact was clear: per-capita state aid to municipal governments fell 4.5 percent between 2007 and 2011, from $106 per person to $88 per person. (Per-capita state aid to local schools was flat, at $436 a year, over the same period.)
The center found per-capita municipal spending was essentially flat over the same four years.
“I think what’s really going on is two things at the same time,” said Dennis Delay, the center’s economist. “There’s upward pressure on property tax rates because of decreased state support, and at the same time, in terms of overall spending, the cities, towns and school districts have tried to hold the line as best they can.”
The recession and housing crisis increased political pressure to hold down local tax rates. And at annual town meetings, such pressure can be direct and effective.
“You do the best you can, and nobody likes to raise taxes,” said Laura Buono, Hillsboro’s town administrator, who until last year held the same job in Warner. “The downshifting certainly presents us with additional challenges on top of the recession, on top of fuel prices. . . . In my experience, we’ve been doing our best to reduce the budget and not raise taxes, but sometimes you can’t avoid it.”
In Pembroke, three full-time government positions have been eliminated since 2009, and a full-time job in the clerk’s office has been reduced to part time, according to Town Administrator David Jodoin.
“Last few years, it’s all come down to making cuts in the budget,” he said.
Jodoin added, “It’s great that the state can balance their budget, but it’s being balanced on the local taxpayers. . . . It gets harder and harder each year.”
Some relief coming?
School districts, cities and towns are also feeling the effects of an increase, effective July 1, in employer contribution rates set by the New Hampshire Retirement System, the state’s public-employee pension system. Those rates were increased to help address the fund’s multibillion-dollar unfunded liability, and have caused benefit costs to spike in many places, including Pembroke.
“Everything else has stayed pretty much in line,” Jodoin said. “It’s been a big hit in a lot of communities, especially on the school district side.”
Hassan, a Democrat, said Feb. 14 that her proposed two-year state budget “begins restoring funding for our local communities,” though it doesn’t bring back revenue sharing or the pension-cost subsidy. She would send more rooms-and-meals revenue to local communities, increase some infrastructure grant programs and keep education adequacy grants steady. Her budget also increases catastrophic aid to schools and, in the second year of the biennium, fully funds the building aid formula.
But the Legislature may cut the funding that was included in Hassan’s budget proposal – her budget relies on $80 million in revenue from a casino license, and the House has traditionally been hostile to proposals for expanded gambling. The Democratic-controlled House is now working on its version of the state budget, and will hand it off to the Republican-controlled Senate in April.
In Boscawen, more money for wastewater-treatment infrastructure would be welcomed. The town finished the first two phases of a sewer project using a combination of federal, state and local funding, but the rest is on hold for now, said Town Administrator Michael Wright.
“Every time we have tried to look at going forward with phases three and four of our infrastructure, we cannot get enough money together, because the state share – which is, like, 10 percent – is not there,” Wright said. “And that’s too much money for us to cover.”
(Ben Leubsdorf can be reached at 369-3307 or
email@example.com or on Twitter @BenLeubsdorf.)