Like most New Hampshire Governors before him, Craig Benson won election on a promise to hold the line on taxes. Benson also pledged repeatedly to ?make the state live within its means.? The Governor says he?s delivered a budget that achieves those aims. But the Benson budget, and it?s cuts in funding for administrative boards also brings to light a perennial, if little understood aspect of state revenue collection ? fees.
Governor Benson has always made clear his distaste for taxes. And earlier this month, he reiterated that point. Nick Vailas, Benson?s Heath and Human services commissioner, urged lawmakers to raise New Hampshire?s cigarette tax. The Governor?s response was quick. Benson took Vailas to the woodshed, then took to the media and renewed his vow to veto any new or increased taxes. The Governor compared state government?s appetite for tax increases to an addict fiending at rock bottom.
?We?ve got to stop. It takes a day of reckoning. That day of looking in a mirror during your addition and saying I can?t do this anymore.?
A day later, however, when asked if his prohibition also extended to raising any state fees, the Governor said going cold turkey wasn?t necessary.
?I?d be willing to look at every single one of them and see if they were creating additional values for things. And then sometimes we?ve just fallen behind where our costs are to provide that service and where the public provides those particular services.?
The idea that tax increases are forbidden, but fee increases are worth considering, seems inconsistent?Yet it?s long been an approach embraced by anti-taxers in the corner office and legislature alike. Part of that may be because fees don?t raise all that much money ? somewhere around five percent of general fund revenue. But just because the fees don?t take in a lot, doesn?t mean that state government isn?t riddled with them.
?There is literally about 400 or 500 different fees.?
Doug Hall is executive director of the NH center for public policy studies.
?Ones that we sort of recognize: cocktail lounge liquor fee?.A certified driver record fee to get your drivers record; insurance company application fee. But then there?s the beef fat content sample fee; a refining nuclear material fee; yard stick inspection fee; Jockey agent registration fee?..And then there?s one I really love, the errors corrected fee -- someplace you pay the state to correct its errors, I guess.?
Hall, who, is perhaps the state?s the closest non-governmental budget watcher says he?s never been able to determine either the exact number of state fees or precisely how much money they raise.?..And according to officials at both the department of administrative services??and the legislative budget assistant?. that information has never been tracked with absolute precision. Was has been tracked, however, is that Governor Benson?s proposed budget cuts means fees will increase in relation to the state?s cost to administer them. Democratic state senator Clifton Below says Benson?s budget means some state fees assessed by administrative boards will raise revenue far in excess of what?s allowed under state law. In some cases nearly twice as much. Below says that?s true for boards and commissions throughout state government.
?So that?s where we get into the question of whether we are actually using these fees to collect revenue for the general fund ? not to simply cover the costs of the service the fees are supposed to pay for and a reasonable amount of overhead ? which we?ve determined to be an extra 25 percent, thus the 125 percent rule.?
State law says New Hampshire?s 110 or so state boards and commissions can collect no more than 125 percent of their direct costs for performing their administrative functions. Benson policy advisor Keith Herman, a former member of house leadership, insists the law says something a lot different.
?The legislature can increase fees as much as they want for various boards and programs but they have to be at least enough to cover the 25 percent above their expenses.?
Concord attorney Martin Gross has argued 125 percent rule cases in state courts on behalf of insurance companies. Gross says case law and Supreme Court decisions make clear that fees can be taken only so far.
?The formula that needs to be followed is that one needs to keep watch on cost or regulation, and if one cuts the cost of regulation below the point to where the fee bears any reasonable relation to it, then you have a litigable issue.?
Specifically, the courts have said when fees unreasonably exceed administrative costs?..they become taxes. Because those taxes are not equally levied on all citizens, they are confiscatory, and thus unconstitutional. Gross says the argument over when a fee morphs into a tax has played itself out many times over the last half-century.
?I think what happens over and over again is that new faces show up at the state house and they have wonderful ideas of how the state can increase revenue sources without increasing taxes?..The problems is that these trails have been followed before and there are constitutional limits according to the NH Supreme court.?
Leading legislative budget writers say they know what the courts have said on this score. House finance Chairman Neal Kurk says he?s confident that lawmakers and administrative boards will do what they must to ensure all fees remain constitutional. Kurk adds that he considers any fee-induced problems raised by Benson?s budget proposal, pure happenstance.
?If there is a disparity between what is and ought to be, it is inadvertent, not part of a widespread conspiracy to violate the state constitution. We are very aware of what the court has said on this and are trying to follow its dictate.?
Even so, others on the house finance committee say absent the court?s guidance, confiscatory fees might soon prove the rule rather than the exception. Goffstown Republican Larry Emerton, says eight terms in the house has taught him to expect lawmakers to look to fees when it money is tight and the budget gaps need closing.
?I would say to you that if we didn?t have that decision?..I?ll tell you they?d probably be collecting 500% and balancing the budget on the back of some doctor or midwife or something??
The House finance committee must complete its work on the budget by April 3rd. The full house must send a budget to the senate by April 10th.
