On state finances, rainy day fund

When House Bill 1624-FN sailed through the Senate on a voice vote on Thursday, one could assume that everyone was in favor of the bill. Not seen were concerns being raised by the Governor and others worried about policy implications of the bill, which deals with modernizing the juvenile justice system to ensure rehabilitation of juveniles and preservation of the rights of juveniles.

The FN designation attached to the bill number indicates that the bill, if passed, will have an impact on government finances. The FN means a fiscal note is attached to the bill, letting legislators know the predicted financial implications of the bill.

After the vote on the Senate floor on HB 1624-FN, the Senate president said the bill was being referred to the Finance Committee. That statement sends the bill to the Senate Finance Committee where, normally, committee members would have a discussion on the fiscal impact of the bill. In the case of HB 1624-FN, because of an amendment being proposed by the Governor’s office, the bill and the proposed amendment will get a public hearing this week.

Another bill, HB 1570, called the “paint stewardship bill,” was voted out of the Senate Energy and Natural Resources Committee with an Ought to Pass recommendation on a 3-2 vote. My vote to move the bill along to the Senate floor, for example, was cast only with the understanding that, if it passes, it will get a close look by the Finance Committee, on which I also serve.

The paint stewardship bill is supported by the New Hampshire Municipal Association, “…because it will save municipalities significant money that is currently spent to dispose of oil-based paint at household hazardous waste days as well as latex paint that adds to the cost of regular solid waste disposal,” according to the association’s weekly legislative bulletin.

There is a cost involved. The paint industry is prepared to put a charge into the cost of paint, to fund the collection process of unused paint, that some say is a tax or fee. Although, in the plan envisioned by the bill’s supporters, the cost will not be charged to the retail customer but embedded in the cost of each can of paint by manufacturers. Some compare it to a user fee “. . . because it puts the cost of the paint disposal on the users who create the need, rather than on taxpayers who may or may not be buying and discarding paint,” NHMA says.

Sponsors and supporters of bills sent to the Finance Committee rightly worry about the death of their bill or changes that may be made by the six-member committee. It can make the legislative process longer and a bit more uncertain, but it has never been suggested that passing bills, especially those with money involved, is easy in Concord.

The Finance Committee could amend the juvenile justice and paint stewardship bills, or recommend they be killed, or passed as is, or with an amendment. Technically, the Finance Committee only looks at the financial issues involved, but the line between policy and finances is often blurred. Taxpayers, and citizens generally, benefit from the Finance Committee’s one last look at bills that could affect the budgets of state, county or local governments.

Bill Dwyer, our new Commissioner of the Treasury, sent out an email to legislative leaders on Tuesday telling us, “As a result of the recent Medicaid Enhancement Tax unconstitutionality ruling, combined with the state’s unfunded pension liability and the low reserve level in the revenue stabilization fund, Standard & Poor’s has changed the outlook on the State of [New Hampshire] general obligation and state-guaranteed bonds from ‘stable’ to ‘negative.’”

That is not good news. The Standard and Poor’s outlook change is not a change in our bond rating, which will be kept or adjusted when the state prepares to issue its next round of bonds.

There are immediate steps the Legislature can take to overcome two of the observations from S&P. First, we can put all of the unbudgeted surplus from fiscal year 2013 that ended on June 30 into the revenue stabilization fund, our “rainy day fund.” The former treasurer, Cathy Provencher, admonished us a couple of months ago to “put every penny” of the surplus into the rainy day fund. That is the Senate’s position.

If the House votes for the same legislation, we would grow the rainy day fund from $9.3 million today to around $25 million. That would be a good down payment on getting us closer to a fiscally healthy $100 million balance in the fund.

Secondly, the Legislature needs to work out a plan for the Medicaid Enhancement Tax, which is a 5.5 percent tax on hospital revenues. If this tax were eliminated through court rulings, it would create a huge hole on the revenue side of the current state budget. A solution needs to be found soon so the House and Senate can pass the necessary legislation for an alternative plan before we leave Concord in early June.

Issues around the Medicaid Enhancement Tax are complicated and are far-reaching, impacting individual hospital finances as well as the state budget. Fixing the situation will not be easy but is essential.

Bob Odell, a Republican, is the New Hampshire senator representing Antrim, Bennington and Francestown, among other towns.

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