New Hampshire: The Real Facts

Kevin Landrigan
Nashua Telegraph
Published: Sunday, June 15, 2008

Explaining the $20m savings that never was

You may recall that at the strong call of Gov. John Lynch, the state Legislature convened a special session June 4 to ram through a balanced budget bill.

This was mainly to resurrect a Lynch plan to save $80 million by bonding school construction grants rather than paying for them in cash.

Well, the truth is this legal bonding scheme can only really save $60 million at most. More likely than not, it's going to be employed to save no more than $40 million.

This requires a lot of explaining.

The "oops'' only became known the day after lawmakers had done the deed. State Treasurer Catherine Provencher uncovered it and quickly reported the facts to the upper echelon.

Federal financial regulations don't allow borrowing against any government asset unless it's authorized 60 days before the cash would actually be spent.

This D-Day was June 11, when the final state grants for local school building work were to go out to cities and towns.

That's why Democratic legislative leaders and Lynch decided to hold the unique special session June 4, the same day lawmakers came back to finish their regular business.

They could be back for a single session this summer or fall to take up any Lynch vetoes, but that's a story for another day.

When asked by legislative leaders, Provencher said saving the entire $80 million was doable and would still keep the state well within the proper ratios for state debt load.

After lawmakers approved the quickie bill on the budget (Special Session HB 1-A), Provencher learned that half of the school aid money had gone out months earlier.

This left $20 million, and not $40 million, in available bonding for the budget year that ends June 30. The $40 million in savings by bonding grants sent out in 2009 is unaffected by this finding.

The slip on when the school aid grants had gone out, however, means any bonding of those earlier $20 million in grant payments would be taxable and not tax-exempt – ouch.

Provencher immediately informed Lynch, Administrative Services Commissioner Linda Hodgdon, legislative leaders from both parties, legislative budget staff and the heads of the Senate and House finance committees.

What was most surprising, and is indicative of Provencher's strong standing with lawmakers, was that Republican leaders passed up any chance to publicly try to embarrass Lynch by playing up the miscue after the fact last week.

This is Provencher's first budget cycle as treasury chief, and there were lawmakers and budget staff in the loop with years of knowledge about the building aid program who didn't catch the mistake or call her on it before the special session went down.

Senate Republican Leader Ted Gatsas of Manchester was one of the first to raise the question. He recalled that when he was a Manchester alderman, the state's largest city had already received some of its own hefty building aid.

At the end of the day, this was always Lynch's idea. One would assume these messy details would have been picked up in the corner office before leading House Democratic lawmakers had to drop their earlier opposition to bonding and publicly embrace it.

'Worst-case' scenarios

Here's why even the $20 million available in this current fiscal year is unlikely to get used after all.

Top Democratic leaders were given the latest "worst-case'' scenario for finishing the budget year late last week. They learned that when it all shakes out, the state budget could be about $3 million shy of the plan lawmakers had when Lynch signed the budget in June 2007.

Now, that plan assumed the state would end the year $18.4 million in the black June 30.

Translation: We're now looking at a smaller number, but still a surplus of about $15 million when the books close.

The bonding only occurs under the special session law if the budget is in deficit and needs the dough.

There's a mega-caveat on even this worst-case look at things. It presumes the state winds up $65 million short of its target for state revenues.

Through 11 months this fiscal year, the state is off $49.6 million. June is a big month for business taxes, and it's reasonable to conclude the month's shortfall could well be $15 million or less.

If that proves too rosy, however, every $1 million that fails to come in eats right off the top of that projected $15 million surplus.