Monday, August 25, 2008

Town And State Budgets Getting Tight

The upcoming budget season for towns and cities here in the Granite State is going to be a tough one. It will be no less difficult for the state, with the governor calling for department heads to draw up two budgets: one tight, and the other tighter.

The word is out across New Hampshire: money is tight and it's going to get worse. Town officials know their residents are having a tough time of it, with much higher fuel and food prices. The last thing the people need is to worry about paying higher property taxes or fees. It comes down to a choice of cutting budgets or raising taxes, and towns are looking very hard to hold the line on spending.

But even town officials are feeling the effects of higher oil prices, with the cost of heating fuel, gasoline, diesel, and asphalt going up. Even if the overall town budgets do not increase, the towns will need to change priorities, shifting funds from other programs and departments in order to cover the increased energy costs. Some towns will defer maintenance on roads or other infrastructure for a year, hoping energy prices will fall or that the economy will recover sufficiently to take the strain off of the individual taxpayer's budgets.

One challenge both the state and the towns will have to meet is declining revenues. Revenues from building permits and vehicle registrations have fallen off as the economy has tightened, meaning even more work needed for the budgeting process.

At the state level, revenue projections from the last bloated budget were woefully optimistic, with the revenue shortfall expected to be $200 million by the end of the biennium. (The State of New Hampshire runs under a two-year budget.) With the drop in revenues from the same decrease in vehicle registrations, as well as fuel taxes, cigarette taxes, and a host of other user fees and business taxes, the state must tighten its belt, too. The governor ordered some spending cuts to reduce that shortfall, but more cuts will be needed to erase the rest of the deficit even if those cuts are made for the upcoming two-year budget. At this point raising taxes would be a non-starter, particularly if state legislators want to be re-elected this November.

Some hard choices will need to be made.

At the state level, rolling back the outrageous 17.5% budget increase of the present budget would be a good start. Much of the state revenue shortfall can be blamed on the oversized budget and the unrealistic revenue estimates used to justify the increases. (The revenue projections for 2007-2008 were unrealistic even without the big boost in energy prices and softening economy, so the blame cannot be laid entirely on those two issues.)

At the town and city level, the choices will be harder. The effects of budget cuts and tax increases are felt and seen in very shortly after they take effect. When budgets are cut oft times they lead to lay offs of town employees, reduction in overtime, reduction of office hours, cutbacks in extracurricular activities at the schools, loss of tutors and teaching assistants, and so on. Tax increases, particularly during troublesome economic times, leads to loss of homes by taxpayers unable to pay their property taxes. Businesses will defer paying their property taxes in order to offset increase costs and decreasing income in other areas. This leaves the towns in the lurch because revenues fall off even more. It's a Catch-22, with everyone in town caught in between. The town budgeting process will have to balance the two needs, perhaps erring on the side of caution and making painful cuts to town spending. But it's something everyone can understand, something most of us have had to do with our own budgets when money is tight. Non-essentials, the want-to-haves, are put aside to meet needs. And so it must go with town spending.

It's going to be interesting times around here for the next few months.

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