Op-Ed: Overview of the House Budget

Monday, April 11, 2011

By Rep. Will Smith

America’s wealth did not occur by accident. It was the result of a system carefully crafted by our Founders, based on the principles of personal and economic freedom, the rule of law and personal property rights, and Judeo/Christian morality.

Jonathan Winthrop, an early Massachusetts governor, described a “virtuous circle” wherein individuals are given the freedom to use their talents to create goods and services beneficial to others, leading to their own prosperity. This prosperity is protected by law against theft by others, so it can be used to improve the well-being of the individual and his/her family. In turn, gratitude for success and a sense of morality leads the individual to lend a helping hand to those less fortunate, encouraging others to succeed. The result is satisfaction to the individual and gratitude by the person helped, who now succeeds by using his or her talents to create goods and services useful by others, and the circle repeats.

This is the secret to America’s exceptionalism. It will produce endless wealth unless broken by government. If government steals our wealth, destroys our freedom and fails to encourage our morality, mankind returns to its normal state of scratching out a living under conditions of economic or political slavery, based on the use of force. This thinking led to the Founders’ focus on “life, liberty and the pursuit of happiness”.

New Hampshire has been close to breaking that virtuous circle. The budget proposed by the House ends the enormous increase in government spending over recent years (24% in the past four years alone), and will put the state back on track.

I believe that the responsibility for health care should start with the family, backed up by community services, followed by local government, and then the safety net provided by state government. The budget provides $3.7 billion for Health and Human Services, a reduction of $376 million, or 9% reduction from the previous budget.

Similarly, education is the primary responsibility of individuals or their parents. Community and private institutions are important enablers, and the state must assure that education, a critical investment in the future, is available to all in our society, which is what is meant by “cherish” in our Constitution. The total spending by the University system of $1.7 billion was reduced by $80 million (a 4% cut). State adequacy aid to education was unchanged.

Studies show that public employee salaries are 6% higher than those of the private sector doing comparable work, but that medical and pension benefits are 36% higher. Benefits add 52% to the cost of an average public sector employee. With the state’s demographics and aging population, this must be addressed to control future budgets. Since benefits are typically “subject to legislative appropriation,” changes to them are legal for the state (and are commonly done by both the federal government and the private sector). However, fairness dictates that employees near or at retirement not be unduly affected and the budget included changes that would create the least ‘pain’ possible, such as a 2 point increase in teachers’ contribution toward their pensions, from 7% to 9%.

The negotiation process between public employers and employees has the flaw that those responsible for paying the cost (i.e., taxpayers) are not at the bargaining table. This has led to benefits being increased at a higher rate than in the private sector. The budget tilts the balance toward the employer by introducing the option for the employer to treat employees as being “at will” during any interval when the contract has expired. This will encourage faster and more balanced negotiations without removing the legal protection for the employee that applies to all in the workplace. Just as in the private sector, public employers are dependent on the effectiveness, capabilities and cooperation of their employees to accomplish the necessary work, and will not jeopardize this accomplishment by taking unreasonable actions.

The state budget for fiscal year 2012-13 is $10.3 billion, a reduction of $742 million (6.8%) from last biennium and 5% lower than the governors’ budget. Unlike the governor’s budget, it does not depend on any increase in taxes and fees, borrowing for operating expense or breaking funding agreements with local governments. It attempts to share these costs as evenly as possible to all parts of our society. While this budget is not perfect, there will be an opportunity to improve it during the next two steps of the process: the Senate and the Committee of Conference before becoming law.

State Rep. Will Smith,
Finance Committee Div. II
New Castle

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