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Charles Arlinghaus: When the government expires at midnight

June 11. 2013 4:49PM

Just before dawn in the early morning of Friday, July 1, the New Hampshire House and Senate recessed with no budget and no legal authority for the government to operate. Closing up shop at 5 a.m., budget negotiators retreated to Howard Johnson's for a quick breakfast after a sleepless night of fruitless negotiation. This was 1977 and the budget crisis would last for four months.

Headlines on July 1 declared "Government Has No Authority To Operate" and "State Now Operating Without A Budget." Newspapers carried pictures of senators sleeping on couches in the chamber (the House has no comparable luxury). There were stories of senators spraying each other with mosquito repellent as the bugs swarmed through windows opened to let out the oppressive heat, and a lobbyist's description of the whole thing as "this bizarre Persian marketplace."

In anticipation of the almost certain impasse, the state treasurer had issued the July 1 paycheck on June 30, just before the previous two-year spending authorization expired at midnight. For the next 12 days, the House and Senate couldn't even agree on a continuing resolution to temporarily authorize the government to operate.

Attorney General David Souter (yes, that David Souter) clarified that the state could not issue paychecks without some sort of temporary spending measure. The state employees threatened a two-day sick out.

After a further warning from the governor and treasurer that the state's bond rating would be downgraded (meaning higher interest rates on borrowed money) and that neither employees nor recipients of state programs could legally be paid, a temporary budget (continuing resolution) was passed, but it authorized spending only through the 19th.

The Senate and House took turns rejecting each other's proposed solutions and demanding the other body give way until they realized neither could force the other's hand. A second temporary budget passed a week later authorized spending for three months while a deal was worked out.

The final deal was hardly a happy one. Gov. Mel Thomson let it become law without his signature, saying "the budget presented to me is the worst ever devised by a New Hampshire legislative body." Nor did he think it crafted with good will, describing the budget as "rifled throughout with mean, vindictive and dangerous political ploys."

Thomson was most at loggerheads with Speaker George Roberts, whose opinion of Thomson mirrored Thomson's of the budget. Referring to the governor's criticism of a specific provision, Roberts suggested the governor hadn't bothered to read the budget, adding "if he did read it then he is either a liar or does not understand the budget."

And you thought the rhetoric was bad today.

This isn't 1977, but it is one of the years when a budget impasse is possible. The size of the difference is not necessarily what creates an impasse. In 1977, the recycled two-year budget spent $417 million in general funds. When finally adopted, the total was just $13 million less, at $404 million. This year's budget will be six-and-a-half times as large, at $2.6 billion.

Budget impasses are not all that unusual. In the last 65 years, budget impasses have led to continuing resolutions at least six times — about once a decade. The last time was 10 years ago, so perhaps we're due for another iteration.

At the Josiah Bartlett Center, we researched what happens when the state budget expires at midnight on June 30 without a new budget adopted. The results are remarkably consistent and suggest the brinksmanship of 1977 never should have happened.

The state cannot spend money without authorization, so a temporary measure called a continuing resolution must be adopted and generally is without controversy.

Continuing resolutions are remarkably consistent. The state has routinely adopted a resolution at 1/12th of the previous budget for a one-month resolution. The resolution also typically carries forward all the legal enabling language from the previous budget. Some adjustment may be made for things like employee automatic step increases and other automatic adjustments which are part of state law and don't need reauthorization.

Taxes are not part of the resolution, as the authority to collect taxes does not expire.

As contentious as competing press conferences and press releases are today, the rhetoric is not nearly as pronounced. Furthermore, with precedents well established, we know what happens, when it has to happen, and the consequences if it doesn't.

If the House and Senate reach an impasse, a one-month continuing resolution set at levels of the expiring fiscal year will be adopted, probably on June 28. If we cross that line, the final budget will likely include nothing that both sides didn't already include in each of their budget drafts.

I hope it doesn't come to that. There's no longer a Howard Johnson's both sides can go to for a nice 5 a.m. breakfast.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

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