Dwindling state aid ups the pressure on towns
CONCORD — The economic recession and dwindling state aid are causing New Hampshire taxpayers to fund a larger portion of their municipal and school budgets through local property taxes, according to a study released this week.
“Everybody’s in the same boat,” said Charlotte Schweiss, chairwomen of the Hudson Budget Committee. The town has used general fund savings to offset the state cuts. “We’re not getting what we’re owed as far as state-mandated programs.”
The Financing New Hampshire Cities and Towns report, released Monday by the N.H. Center for Public Policy Studies, found that in 2010, local property taxes made up on average 60 percent of city, town and school spending.
By comparison, in 2001, property taxes collected at the city and town level accounted for 56 percent of spending. Around New Hampshire, decreasing state aid has left budget planners struggling to contain costs.
“It’s becoming problematic. … Towns are doing everything they can to cut back expenditures,” said Dennis Delay, an economist with the public policy center that helped author the study.
The study also found that while local property taxes are being relied on more for municipal spending, some towns are relying on it far more than others. While Milford funded 55 percent of its 2010 budget through property taxes, Hollis property taxes made up 82 percent of the town’s budget spending.
Early in the 2000s, it wasn’t state cuts that led to the greater dependency on property taxes. Rather, high property values left cities, towns and school districts flush with money to fund additional programs and services, Delay said.
“There were some pretty significant increases in spending which, frankly, were pretty easy to fund as long as property values were rising,” he said Monday.
Recently, the economic recession has slowed revenues coming in from the state government, leaving municipal and school officials to make up the difference themselves.
In 2010, state officials eliminated the $25 million shared revenue program, which divided money among New Hampshire cities and towns. In 2011, funding was cut to the state retirement program, first down from 30 percent to 25 percent, and then eliminated.
This left local budget planners to replace hundreds of thousands of dollars in lost revenue. While these actions fell outside the timeline of the public policy center’s study, it could be an indicator that the reliance on local property taxes may become even more lopsided.Some local cities and towns have managed to survive in the face of the increased costs. In Nashua, local property taxes made up 64 percent of the budget spending in 2010 — down from 69 percent in 2001, according to the study. Other towns, like Hudson, have used other revenue sources, such as increased motor-vehicle registrations, to offset some of the losses to state aid, officials said.
“I don’t think state funding has been the biggest factor (influencing our spending),” said Shawn Jasper, chairman of the Hudson Board of Selectmen, who is also deputy majority leader in the state House of Representatives.
Still, other towns have been forced to look to layoffs and service cuts to offset the losses and maintain a stable tax rate.
In the Litchfield School District, for instance, administrators eliminated more than 20 positions last year, according to business administrator Steve Martin. In Merrimack, officials have cut more than 20 school positions, as well as two firefighters, among other spots, to maintain a stable tax rate.
“It’s affected the schools, the fire department, the police department, everywhere,” said Paul Micali, the town’s finance director. “It’s been really hard.”
Except in Winchester where it's spend, spend, spend and there's never a cut in any service or personnel. In fact the school and town continue to add more employees and add more spending warrants every year.
Moving forward, some economists are hopeful that, as the recession comes to an end, state officials will restore portions of the state funding.
“I really believe the worst is probably over for the state,” said Delay, of the public policy center.
Others are less optimistic, fearing that state officials won’t restore prior funding levels, leaving city, town and school officials to fend for themselves.
“My personal feeling, quite frankly, is you’re going to continue to see both the state and the federal government try to cut funding as much as possible,” said Martin, of the Litchfield School District. “They both just have too much money that they need to spend and not enough revenue to offset it.”