2019 Budget Part 1

You are going to hear a lot of wild accusations and hyperbole regarding the budget over the next weeks. Let me offer some calmer truth. There is only one difference between the state budget and the household budget that you all manage every day. When you run out of money, you have to borrow, sell things, or give up something as you change your lifestyle. The government never runs out of your money. We can always take more to cover our spending. We pass tax laws, and you pay them or face penalties.

The normal budget process as you all know, is to figure out how much you have and then how much you can afford to spend. The state budget is supposed to work the same way. Here’s the problem, in a real world scenario. Let’s say you are just scraping by, but your car needs to be replaced. That’s major. Let’s add two other factors. Your employer just announced that there is going to be overtime for the foreseeable future and your tax refund is coming. You have a choice.

Option 1 – You figure that your overtime will cover a car payment. You go the dealer and use your tax refund as a down payment. You sign a 6 year finance contract. Your overtime will cover the car payment.
Option 2 – you save your overtime payments, plan to sell your car in 5 months, and start shopping for something you can purchase outright with the OT savings and your refund.

Problem with Option 1 – One year goes by. Your employer announces that the overtime is over. Now, you can no longer afford the payments because you didn’t forecast your revenue correctly. You are going to have to sell the car, or it will be repossessed. You end up taking a loss on the car and buying one not nearly as good with what is left of your next tax refund. If you were the government, you could keep the car by passing a law that your employer has to pay more. But you aren’t the government, and it shouldn’t work that way anyway.

This is why I voted against the budget.

I prefer option 2 better when I am spending your money. The over $400 million in new spending isn’t covered by revenue we can count on. If we pass the budget, we are absolutely committed to the spending, which means we’ll be coming back to you for money to cover the shortfall. The process was not very smooth compared to prior budgets. Normally, we rely on the Ways and Means Committee to estimate revenues, so we know what we can spend. As an example, Ways and Means estimated around $94 million from a brand new capital gains tax. That amount was not sufficient to cover one spending measure, so Finance got the estimate upped to $150 million. We should have numbers based on data, not wishes. Doing it this way can lead to devastating deficits like we experienced in 2010. I remember talking to one Representative who was heavily involved in the budget process in 2011 after a bruising press conference about the cuts that had to be made. He looked at me and said “but we spent all the money that there was”. The budget we just voted on spent all that, and a few hundred million that doesn’t exist yet. I am hopeful that when the Senate receives the budget, they will revert to revenue estimates that we can count on, but I could not vote for a budget based on wishes.


About Rep. Steven Smith

Steven Smith is a member of the New Hampshire House of Representatives, serving his 7th term. Rep. Smith currently represents Charlestown, Newport, and Unity. Rep. Smith is the Deputy Speaker of the NH House.
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