New Hampshire

New Hampshire shares a trait with many actors, artists and musicians. It’s hard to figure out how it’s supporting itself. There is no sales tax and no income tax on earned income. The estate tax has been eliminated. A $50 million cutback in annual funding for Medicaid looms as the feds clamp down on some dubious reimbursement practices the state was using. Meanwhile, according to Doug Hall, co-executive director of the highly respected New Hampshire Center for Public Policy Studies, “some of our revenue sources are flat or even in decline, and the others won’t make up for the loss of the estate tax and the Medicaid money.”

Sounds like a recipe for disaster, right? A surprising number of people in state government don’t think so — they feel there’s no problem that a little more belt-tightening can’t solve. “The economists don’t understand people,” says state Representative Neal Kurk, former chairman of the Joint Fiscal Committee. “The economists think we have a structural deficit and a structural deficit is evil. Most of us believe that a structural deficit is desirable, because every two years you have to deal with it, and it forces us to always review our priorities. So, we don’t ever run into a brick wall.” He backs up his case with last year’s overall numbers: At one point, a $40 million budget shortfall was projected. The state ended up with a $16 million surplus.

Right now, though, New Hampshire appears to be facing a $300 million budgetary gap. And if it ever does head toward a brick wall, few will notice until they’re close enough to count the bricks. Long-term analysis and planning just aren’t part of the state’s ethos. A few positive steps have been taken in the past couple of years, such as creation of a consensus revenue estimating process, which should begin to churn out some useful data pretty soon. Still, efforts to look at future fiscal conditions don’t seem to run much beyond 2006.

Money C Long-Term Outlook Budget Process Structural Balance Contracting/Purchasing Financial Controls/Reporting People C+ Strategic Workforce Planning Hiring Retaining Employees Training and Development Managing Employee Performance Infrastructure C+ Capital Planning Project Monitoring Maintenance Internal Coordination Intergovernmental Coordination Information C- Strategic Direction Budgeting for Performance Managing for Performance Program Evaluation Electronic Government • Population (rank):1,235,786 (41) • Average per capita income (rank):    $34,702 (6) • Total state spending (rank):    $4,822,727,000 (44) • Spending per capita (rank):    $3,786 (39) • Governor: John Lynch (D) • First elected: 11/2004 • Senate: 24 members: 8 D, 16 R • Term Limits: None • House:400 members: 147 D, 253 R • Term Limits: None

Fortunately, New Hampshire does do most of its plain-vanilla financial tasks more than adequately. It has unfunded pension liabilities to deal with, thanks to the stock market drop, but it is constitutionally required to maintain its contributions to the pension fund on the basis of actuarial assumptions. Its debt management is solid, and it appears to have solid internal controls.

When it comes to managing performance with information, there isn’t much good news to report. “We capture a lot of data, reams and reams and reams of data,” says former governor Craig Benson, “but we don’t do anything except file it away.” In 1999, the legislature decided to encourage interested agencies to develop and utilize performance measures. It turned out the agencies didn’t have enough people who knew how to do this, so a bill was later introduced calling on the legislature to put some money into the process or stop trying. The decision was to stop trying. Even had this limited experiment been a success, the state’s conservative budgeting system — which focuses on very specific line items — would have made it very difficult for serious performance budgeting to take place.

New Hampshire is characteristically conservative in what it spends on infrastructure, but its managers insist that’s not a problem. “I don’t see a downside,” says Treasurer Mike Ablowich. “I don’t see anyone coming forward saying there’s all these capital needs that are going unsatisfied.”

The deeper problem is that the state doesn’t have good information about the condition of the assets it’s already built. “We know the condition of our pavements,” says Carol Murray, commissioner of the Department of Transportation. “But that only tells you one part of it. If you have poor quality underneath it, that’s going to deteriorate faster. And I have a director of operations who tells me every day that the system is deteriorating out there.”

For additional data and analysis, go to: http://results.gpponline.org/newhampshire

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