In passing the 2011 budget, the Legislature made tough decisions and difficult cuts to stabilize NH finances while also laying the groundwork for economic recovery.

Judging the 2011 budget must be made in the context of the previous two budgets which increased spending 23% from $9.36 billion to $11.5 billion. In those prior budgets, when tax revenue underperformed, Legislators resorted to unprecedented borrowing for operating expenses and Stimulus funds to close growing deficits. That gap from prior budgets was at least $800 million when current legislators began formulating the 2011 budget. Difficult choices could not be avoided!

Those of us tasked with producing a balanced budget also recognized that New Hampshire taxpayers, working families, and small business owners were still reeling from nearly 100 new or increased taxes and fees passed in the previous four years. Those new levies included the job killing LLC business owner income tax and the camping tax that proved to be so odious they were repealed. Given the negative impact that higher taxes would have on job growth and hardworking Granite Staters, higher taxes were an obvious non-starter.
Two of the more difficult decisions involved funding for hospitals and the University System. Due to the fact they are both large expenditure items, cuts in these line items could not be avoided if the budget was to be balanced. Very few legislators wanted to make these cuts, but unfortunately they were necessary.

Due to their not-for-profit status hospitals pay no business taxes and very little property taxes. Over the years these hospitals have absorbed numerous private physician practices that had previously paid taxes, but now don’t, because they are under the hospital umbrella. Meanwhile, some of these not-for-profit hospitals act like large businesses by engaging in expensive advertising wars fighting for market share. Nevertheless, a provision in the budget allows some future funding for hospitals should revenue become available.

While virtually all state departments received less funding, the Senate retained funding for the mental-health system and for families that have disabled children.

Other budget cuts that generated much discussion were in the Department of Transportation and were made necessary by the expiration of the $30 (and in many instances higher) surcharge on motor vehicle registrations. The surcharge was enacted in the 2009 budget and promised to be a temporary measure. New Hampshire residents complained about this surcharge as much as any of the nearly 100 taxes or fee increased in the previous four years — rightly viewing it as a “fee” to get to work.

Allowing it to expire as promised does have consequences in the Transportation budget however. Initially the Department proposed snow plowing cuts on secondary roads. Several legislators led by Sen. Chuck Morse and Rep. Gene Chandler objected and the newly appointed Transportation Commissioner announced an alternative plan that will ensure the same level of plowing as in past winters. Instead, reductions will be made in maintenance, mowing, road sweeping, tree trimming, and pavement markings in 2012 and the Department will work with the Legislature to meet budget constraints.

In my view, we must prioritize necessary maintenance over most new construction with the exception of projects such as Route 93 expansion, the Little Bay Bridge or Conway bypass that have state-wide traffic significance. There also must be recognition that maintaining our roads and highways costs money.

Because of realistic and conservative projections, revenue is somewhat ahead of expectations — welcome news indeed. Business taxes, the most important revenue source, are 12% above predicted. The rooms and meals tax, the communications tax, and the real estate transfer tax are all slightly ahead. It is a hopeful sign of possible light at the end of the recession tunnel, when business, real estate, and tourism revenue are improving.

A key priority, especially for the Senate, has been enacting legislation that improves the business climate for job creation. We passed bipartisan legislation (SB 125) that dramatically curtails the ability of the Department of Revenue to foist a de-facto income tax on the salary a business owner pays him or herself. We passed legislation (SB-86) that restricts the Department of Labor from imposing large fines on business owners for rather minor paperwork violations without first warning the business. We expanded net operating loss provisions to encourage start-up businesses and job creation by wrapping SB-126 into the next budget. Also included in the budget, SB-154 made changes to development rules near rivers and lakes that will encourage a depressed home building industry by easing requirements while still protecting the environment.

Furthermore, the Senate sought to relieve future pressure for tax increases through a number of government reform efforts. A new education funding formula sponsored by Senators Jim Rausch and Nancy Stiles ended donor downs and prevented unsustainable future cost increases while ensuring the cities and towns received the same level of funding in these difficult times. SB-147 reforms Medicaid, the largest cost center in our budget, saving significant present and future costs while maintaining quality services for those in need. And finally pension reform will save property taxpayers from skyrocketing costs.

This Senate legislation – much of which I was the primary sponsor of — will pave the way for more cost effective, efficient government and a demonstrably improved business climate. New Hampshire’s unemployment rate — while still too high — has dropped from 5.7% in November 2010 to 5.3% today. However, the fact that nearly 40,000 of our friends and neighbors remain out of work gives added urgency to these measures.

There are also budget storm clouds on the horizon. The federal government seeks to recoup $35 million of excess Medicaid payments made to New Hampshire several years ago. This calls for continued careful budgeting and living within our means. Governor Lynch was able to save $26 million from the previous budget through carefully managing each department’s expenditures.

A budget provision supported by Governor Lynch as well as Senate and House budget writers would curtail welfare eligibility saving $8million per year. Though almost most legislators agree with this change, a drafting mistake was made and the language was not reflected in the final budget.

Realizing this, the Senate met in early September to pass fix-it legislation before more money was spent. Unfortunately, the House waited for a month to address the issue which cost nearly a million dollars. The House then added a non-germane amendment that will foolishly cost another two million dollars.

The State needs to continue to practice frugality to protect hard pressed New Hampshire taxpayers and to help our economy weather the national recession.
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Jeb Bradley is a State Senator serving District 3

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Last February Governor John Lynch presented his budget and made a detailed budget address. Now weeks later after the legislature has adopted much of his proposals, lawsuits have been filed and words are flying.

In his budget address, Lynch explained why he was cutting $250 million in uncompensated care to hospitals. In fact a recent editorial in the Manchester Union Leader said that Lynch “gave a long explanation of why it was a great idea to reduce the operating budgets of New Hampshire’s hospitals,” and indeed a review of his speech shows that this is true.

Much of the uncompensated care money that is no longer going to urban hospitals after the Lynch proposal has instead gone to offset a significant drop in enhanced federal Medicaid funds that stopped with the end of the stimulus. Without a doubt one issue with programs such as the Obama Stimulus Funds is that they are a one-time payment, but needs often continue. With the loss of those dollars, Lynch looked for other revenue to continue to help New Hampshire’s neediest residents.

Waiting until the last possible day to present his budget, Lynch during his February 15th budget address talked at length about the need to cut a lot of money from the Health and Human Services budget, but explained that he been unable to find cuts that would not hurt the neediest New Hampshire residents until he latched onto the idea of cutting uncompensated care.

“So we chose a third option. We are redirecting $20 million in uncompensated care payments the state now makes to hospitals to help maintain Medicaid optional services,” said Governor Lynch. At the time those in his party applauded while others waited for the next sentence.

In Lynch’s opinion hospitals provide essential medical care, “but from a financial perspective, the hospitals can afford this change.” Now that the budget has been passed, it is clear that Lynch did not have the backing of the hospitals for this nor are they willing to lose their revenue without a fight and so the lawsuit has been filed.

“Hospitals get millions of dollars in tax breaks for being nonprofits. But according to their latest public filings, the top 200 executives of our 24 nonprofit hospitals made a collective $60 million,” said Lynch. Published facts will show that this is true. Lynch then went on to state, “Collectively, New Hampshire’s nonprofit hospitals generated cash over their expenses of more than $200 million.”

Although hospitals run open public restaurants as well as offering medical care, they are also exempt from the Rooms and Meals tax paid by any other eatery. Lynch felt that hospitals could participate with revenue sharing. He contended, “Instead of using that excess cash to reduce health care costs, hospitals spend it on advertising, trying to attract market share from each other; on buying physician and laboratory practices across the state, and then increasing overhead charges to patients.”

At the time Lynch made it clear that he felt hospitals had $200 million in excess revenues they didn’t need, and were spending another $500 million on unjustified new construction because he also proposed a moratorium on additional hospital construction. When Lynch’s budget went to the legislature, they agreed with much of the Lynch proposal on uncompensated care, but did not reduce $51 million in uncompensated care payments to rural critical care hospitals where there is little competition of medical care.

Six months ago NH confronted a gaping $800 million projected budget gap. Despite a languishing economy, the previous two budgets had increased spending 23% from $9.36 billion to $11.5 billion. Prior budgets had relied on inflated revenue estimates that never materialized, borrowing for operating expenses, and one time federal stimulus dollars. Alarmingly, despite nearly 100 tax and fee increases, an $800 million gap loomed. Voters said enough last November.

The 2011 Legislature established two goals: NH would not raise taxes that would harm economic recovery and NH government would live within its means — just as working families and small business owners have been forced to do in the current economic climate. Budget writers knew great caution was necessary in predicting future revenue and certainly the last six months have proven the wisdom of that caution as revenue has not met expectations. They also knew continued borrowing for operating expenses was unsustainable. Lastly, budget writers knew that with a $14 trillion dollar federal debt and trillion dollar deficits stretching as far as the eye can see — federal largess was neither possible nor warranted.
Extraordinary tough choices had to be made and priorities established, which meant programs – many worthy — were cut. Governor Lynch initially proposed significant reductions to hospitals for uncompensated care, cuts to programs that serve troubled youth, catastrophic aid for schools districts’ special education costs, Healthy Children, and to the Post Secondary Education Commission, as well as cuts to virtually every state agency except prisons. The Governor also proposed complete elimination of the 35% state assistance for cities and towns’ retirement costs which would have the effect of increasing property taxes by $85 million annually.

Governor Lynch also presumed that revenue growth would be a relatively healthy 3.5%. Unfortunately as winter turned into spring, revenue in the current budget was $42 million less than projected. Legislative budget writers had to make further spending reductions than those proposed by the Governor. NH has learned the hard way: spending that depends upon revenue that may never materialize is foolhardy.

When the budget reached the Senate, the chair of the Finance Committee, Chuck Morse, effectively established priorities. Senator Morse added funds back in to the budget for mental health programs, the developmentally disabled, Service Link, troubled youth, adoption initiatives, and catastrophic aid for special education. Morse proposed key reforms including allowing up to 600 inmates to be incarcerated at private prisons to create savings to pay for some of these adjustments. The Governor’s proposed elimination of retirement assistance to cities and towns was mitigated by pension reform legislation – benefitting hard pressed property taxpayers.

Given the significantly under-performing revenue, funding could not be restored for the University System or to hospitals. Some people have asked why then was the tobacco tax lowered and why were net-operating-loss provisions expanded. Supporters of the tobacco tax decrease believe there will be no net revenue loss as an increase in cross border sales will occur that will help small businesses. If there is a revenue loss, then the budget calls for the tax decrease to be removed in two years. The net-operating-loss provisions will only take effect in the next budget. These provisions allow business to better carry forward losses against future profits. This will improve New Hampshire’s business climate and has been an important priority for chambers of commerce across the state.

In total, spending has been reduced to $10.2 billion — an 11% cut. Taxes have not been raised, borrowing for operating expenses has been eliminated, no federal bailouts have been assumed, and rosy revenue projections have been rejected. This budget does what small businesses, working families, and taxpayers have been doing for some time: making tough choices to live within their means.

While much has been written about the budget’s bottom line and the impact on particular programs, less discussed are the reforms that will enable state government to deliver services far more effectively and efficiently.

Medicaid – the largest cost item in our budget – will be delivered through managed care as a result of legislation I sponsored and Governor Lynch recently signed. Managed care will save millions without sacrificing quality. A new education funding formula maintains funding levels, holds communities harmless, eliminates donor towns, while mitigating large spending hikes in Concord. Bipartisan legislation I sponsored will curtail the practice of revenue auditors assessing what in essence is an income tax on the salaries small business owners pay themselves – a key reform to enhance NH’s competitiveness. I also sponsored bipartisan Shoreland Protection legislation which protects our shoreland while also simplifying the permitting process and helping homebuilders create jobs. Prison and retirement reforms will also clearly benefit taxpayers.

Voters sent a clear message last November – government had to live within its means and stop reaching ever further into taxpayers’ pockets. This budget makes the tough choices to do exactly that. By doing our job in the Legislature ending the climate of spending hikes, unsustainable borrowing, inflated revenue projections, and ever more tax and fee hikes; the stage is set for further job growth –and when job growth is sustained — revenue will grow.

Tough choices, priorities, necessary reforms that will grow jobs — or as President Kennedy said a rising tide that will lift all boats.
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Jeb Bradley is a NH Senator serving District 3

The Hancock and Peterborough Republican Town Committees to host Speaker of the House William O’Brien on Monday, June 27th, 2011 at 7:00 PM at the Hancock Library.

(Hancock) – Speaker of the House William O’Brien is the honored guest speaker at a joint meeting of the Hancock and Peterborough Republican Town Committees. All are invited to attend on Monday, June 27th at 7:00 PM at the Hancock Library.

Monthly meetings are held at the Hancock Library, Daniels Room. Please note there will be no regular committee meeting during July and August. Dates will be posted in the local papers and on the community bulletin board at www.hancocknh.org.

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Contact Ann Bowes at 525-4021 or a.bowes@yahoo.com for more information.

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NH Senator Peter Bragdon

Background

As of June 30, 2010 the unfunded liability of the New Hampshire Retirement System (NHRS) was $4.7 billion – approximately $3500 per person in NH. On July 1, employers — meaning taxpayers — will pay 13.95% of salary for teacher’s retirement, 25.57% for police officers, and 30.9% for firefighters. In two years those rates will escalate to 29.2% for police and 33.9% for firefighters – rates that are unsustainable in my view. Without SB-3, the entire unfunded burden will be borne exclusively by taxpayers. This will price employees out of jobs, drive up property taxes, make growing and attracting businesses to NH more difficult, and may lead to a downgrading of the state’s bond rating.

Impact of SB-3 on retired public employees — There will be no changes in the pensions of people already retired.

Medical subsidy eligibility — The medical subsidy is a payment to a retired teacher or municipal employee that allows them to stay on their former employer’s health plan. Legislation several years ago froze the 8% growth rate in the medical subsidy. SB-3 continues that freeze, but if a retired employee is eligible for the subsidy payment he or she will continue to receive it without a growth factor. The medical subsidy is now funded by employers.

Impact of SB-3 on COLAs – SB-3 does not change COLA status. Legislation several years ago established a 1.5% COLA in 2010 on the first $30,000 of pensions. SB-3 does not alter that but it also does not authorize additional COLAs.

Gainsharing—“gainsharing” is the practice of diverting revenue from the main pension fund into the Special Account to pay for COLAs and the Medical Subsidy. Gainsharing is one of the primary reasons the NHRS has an unfunded liability of $4.7 billion. Pension systems rely on good earning years to balance poor earnings. Gainsharing diverted $900 million from good earning years leaving the NHRS with no cushion for poor years. No pension system is viable when diversions occur. Legislation enacted several years ago eliminated gainsharing for the foreseeable future and SB-3 ensures gainsharing does not return. COLAs in the future will have to be funded from a different source.

Impact of SB-3 on employees who have worked for 10 or more years and are vested into the NHRS — Contribution rates will increase from 5 to 7% for employees and teachers; public safety employees will increase from 9.3% to 11.3%. Overtime, unused sick and vacation time, end of career payments will still count toward retirement calculations, and current multipliers will be used. Special detail pay will still be included in retirement calculations provided it is not higher than the average of the previous 7 years. Also, effective in July of 2016, no one will be able to retire at a level higher than 100% of their base pay.

Impact of SB-3 on employees who have worked less than 10 years and are not vested — Contribution rates will also increase similarly. Employees will not be able to count unused sick or vacation time or end or career payments toward retirement — though overtime will count. Retirement will be calculated over 5 rather than 3 years. Public safety employees will have to work somewhat longer depending upon years of service. Currently these employees can retire at age 45 with 20 years of service. Under SB-3 an employee with 8 or 9 years of service can retire at 46 with 21 total years. For someone with 6 or 7 years they will be able to retire at 47 with 22 years. Someone with 4 or 5 years of service could retire at 48 with 23 years. Someone with 1-3 years could retire at 49 with 24 years. For newly hired public safety employees, they will be able to retire at age 50 with 25 years of service with a pension multiplier designed to achieve 50% of base salary after 25 years.

For more information about SB-3 and the NHRS – SB-3 can be found at www.nh.gov and the NHRS at www.nhrs.org

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Jeb Bradley is a NH Senator serving District 3

Noteworthy legislation includes:

Senate Bill (SB)-183 introduced by Senator Jim Rausch and Senator Nancy Stiles reforms the current education funding formula that pits town against town and has growing unsustainable costs. Senators Rausch and Stiles devised a new formula that assures that every community receives the same level of education funding next year, prevents funding decreases to nearly 125 towns, and blocks the return of donor towns. It will also reduce state expenditures by $140 million by level funding the formula. This critical legislation passed the Senate on a bi-partisan voice vote and enjoys the support of Governor Lynch.

I sponsored SB-3 which addresses the New Hampshire Retirement System’s dangerous unfunded liability of $4.7 billion. It will ensure that the pension system is viable for current and future retirees, while lowering skyrocketing rates that cities and towns (taxpayers) must pay for employees, teachers, police and firefighters. Current retirees will not be affected. Employees close to retirement will in most circumstances only experience increased contribution rates. Some younger employees may have to work one to four years longer and be unable to add items such as unused sick and vacation time to pension calculations. While most employees affected by these changes have concerns and many have expressed those concerns to me personally, everyone realizes the current unfunded liability and corresponding increase in property taxes is unsustainable. No one understands this reality better than struggling taxpayers. SB-3 passed the Senate 19-5.

Senator Chuck Morse sponsored CACR-5 (a Constitutional Amendment) to give New Hampshire governors line-item veto power. New Hampshire is one of a handful of states whose governor does not have the ability to veto extraneous spending. The proposal would include a 2/3rd override provision by the Legislature and could only be used to eliminate spending items – not language in legislation. Given that spending increased 24% over the previous four years, the line-item veto would have proven a useful tool. CACR-5 passed the Senate 19-5, must still be adopted by the House and then approved by 67% of voters in November 2012.

Senator Bob Odell sponsored SB-1 which restores parity between public employees and employers in contract negotiations by repealing the so called “evergreen” law. “Evergreen” allowed step pay increases to continue even after the expiration of a contract. This provided a powerful disincentive against employees negotiating new contracts. Cities and towns can still agree on an “evergreen clause” if local voters approve it. SB-1 passed 19-5 in the Senate, 282-70 in the House, and Governor Lynch allowed it to become law without his signature. It should be noted, amidst all the recent controversy about collective bargaining, the focus of SB-1 is very limited and does not undermine public employee’s rights to organize collectively in a union.

Senate President Peter Bragdon sponsored SB-52 which corrects the ill-fated provisions of SB-500 which allowed early release of violent offenders and took away discretion of the Parole Board by limiting parole violations to no more than a 90 day return to prison. Bragdon’s legislation gives the Parole Board the ability to block early release and allows the board far greater latitude to return repeat offenders to prison for more than a 90 day “slap on the wrist.” This legislation ends the minimal administrative supervision for high risk sexual predators that have completed their prison terms and replaces it with active supervision. SB-52 passed the Senate on a bi-partisan voice vote.

I sponsored SB-154 to clarify the Shore Land Protection Act. SB-154 maintains important environmental and water quality protections while also respecting the rights of property owners. It is supported by the NH Lakes Association, the Department of Environmental Services, home builders and property rights advocates. It passed the Senate on a bi-partisan voice vote. If enacted into law SB-154 will simplify the permitting process and give a boost to the depressed construction industry in the Lakes Region.

I also sponsored SB-147 which will implement managed care for Medicaid eligible residents. Managed care has been utilized by many states to lower the cost of Medicaid (the largest cost center in NH government) while maintaining quality services. A private entity such as an insurance company competitively bids to serve the Medicaid population and assumes the financial risk. By creating a medical home for patients and better management of chronic conditions, quality care is maintained while costs are curtailed. Governor Lynch has embraced managed care and estimated $33 million in savings in his budget. Savings over time could be far more significant. SB-147 has passed the Senate on a bi-partisan voice vote.

Lastly, I have sponsored SB-125 which would give business owners protection from intrusive Department of Revenue Administration (DRA) audits which often result in assessing the 8.5% Business Profits Tax on much of the compensation a business owner pays him or herself. These audits have increased in scope and frequency, have become an income tax on business owners, and are undermining the ability of NH to attract and retain successful and job producing small business owners. An amendment was added to delay implementation pending resolution of the budget. SB-125 passed the Senate with a bi-partisan 24-0 vote and will, I expect, be supported vigorously in the House.
While Concord headlines often focus on and highlight legislative controversies, the Senate continues to work diligently on the major challenges facing our state, and often in a bi-partisan manner. That is what New Hampshire voters want and expect. It is our job to keep those promises.
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Jeb Bradley is a NH Senator serving District 3

Over the past four years New Hampshire has seen an unprecedented increase in taxes and fees. Introduced this year was a solution to the problem of midnight tax increases that have so infuriated us and which have robbed the people of input. People have been asking, where is the fiscal reform they voted for? It begins right now with the introduction of CACR 6 (Ulery (R – Hudson) in the House next week.

The Constitutional Amendment simply requires that your elected Representative take the time, expend the energy and vote on the hard questions they were elected to vote upon. When CACR 6 becomes law no longer will Representatives and Senators be able to create a new tax in the dead of night as has happened in the past. It will require a 3/5 majority of the House and the Senate to agree on each new tax upon the people.

When the amendment becomes part of the Constitution then you and I will be able to see each and every new tax in the full light of day. Hearings will be held and the effect of each new increase will be openly and fully discussed. The flexibility to foist a hidden tax under the cover of a backroom deal will be severely restricted. We deserve more and better than the campground tax, a tax that failed in committee, but was thrust upon the people in literally the dead of night.

Already some have come out saying that the change would “limit fiscal flexibility.” Fiscal flexibility indeed! Flexibility to raises taxes is what is meant! If you support a slower growth of government, a smaller, leaner state government and more local control of spending then this amendment is needed.

Yes, this bill will make it difficult, but that is what the legislators are paid the big money to do, actually make hard fiscal decisions. Yes, the amendment will lead to more open government. Yes, the amendment will slow the growth of government. Yes, the amendment will make the state more responsive to the people of New Hampshire.

Call your Representative today and tell them you favor smaller government, open government and an end to midnight tax deals. Tell your Representative to support CACR 6 next week.

Jordan Ulery
Hillsborough-27
NH State Representative
162nd General Court

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