State House Memo: Sound budgeting produced a surplus – let’s not change course
The morning after Christmas brought some good news for New Hampshire taxpayers. The state’s two-year budget cycle that ended this June produced a surplus of $72.2 million. This wasn’t a gift, though. It was hard-earned through years of tough, responsible choices. And it could tempt the Legislature to leave the path of fiscal responsibility that produced such a surplus in the first place.
When I was first elected to the state Senate in 2010, New Hampshire faced a projected budget deficit of $800 million because of out-of-control spending. At a time when our economy was stalling and unemployment was rising, the previous Legislature increased spending by more than 24 percent. Lawmakers financed this growth through one-time stimulus spending, bonding state operating expenses, over-estimating revenue and instituting over 100 new taxes and fees placed on the backs of the state’s taxpayers and businesses.
Republicans agreed that New Hampshire needed to get its fiscal house in order and crafted a budget that was balanced while keeping four core principles in mind: live within our means; help those who need it most; reform the way government does business; and budget cautiously and build a surplus. For just the second time since World War II, we spent less money than the year before.
Our current budget, approved unanimously in the Senate, overwhelmingly in the House, and signed by the governor, continues on the path of fiscal responsibility. It anticipated a surplus of at least $56 million, which Republicans and Democrats agreed to transfer into the Fiscal Year 2014 General Fund, offsetting any need to raise taxes.
But business tax revenue came in $15 million higher than we projected, so the question before us now is whether we spend every dollar of the state surplus, or whether we begin to rebuild our Rainy Day Fund.
Under our budget laws, any surplus we generate is transferred into the Revenue Stabilization Reserve Account, better known as the Rainy Day Fund. First established by Gov. John Sununu in 1987, the Rainy Day Fund grew to nearly $90 million by 2009. It would have been even larger if the Legislature hadn’t repeatedly voted to suspend the law by spending budget surpluses rather than saving them.
In 2010, Gov. John Lynch and Democrats in the Legislature used nearly $80 million from the Rainy Day Fund to cover their deficit, leaving just $9.3 million as our state’s reserve. The current surplus gives us a chance to restore its health.
Because of the way the budget was written, that surplus will not automatically go into the Rainy Day Fund as the law normally anticipates. It will remain available in the state’s General Fund until the Legislature decides what to do.
Gov. Maggie Hassan wants to put some of the extra surplus into the Rainy Day Fund, but spend some of it on expanding government services. She hasn’t said how much she wants to spend and how much she would set aside. Senate Republicans would prefer to follow the spirit of our Rainy Day Fund Law, and set aside that extra $15 million. We haven’t set any money aside for nearly a decade, and the Rainy Day Fund is now at its lowest point in 22 years.
This is not a partisan issue. This is about sound budget management. If we don’t save our surpluses when we have them, we won’t have anything set aside for when we face an unexpected deficit. Liberal budget watchdogs like the Center for Budget and Policy Priorities and conservatives like New Hampshire’s own Josiah Bartlett Center agree on the value of states maintaining a healthy Rainy Day Fund in order to be prepared for unexpected economic hardship.
The alternative is for the Legislature to raise taxes just when the state’s economy is weakest. Additionally, bond rating agencies look at how we manage the Rainy Day Fund when determining our bond rating. Better bond ratings mean we can pay lower interest rates, and save taxpayers money.
We know that leaving $15 million lying around will be too tempting for the Legislature. If we don’t transfer it to the Rainy Day Fund, we’ll spend it, and leave ourselves $15 million short going into the next budget.
Republicans and Democrats should make a New Year’s resolution to stick to the responsible budget path we charted in June. Building the Rainy Day Fund is the fiscally responsible thing to do.
(Republican Sen. Jeanie Forrester of Meredith chairs the Senate Finance Committee.)