November 25, 2010

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A tip of the cap
Supreme Court Rejects a spending rule

By Jeff Mucciarone
jmucciarone@hippopress.com

The notion of a tax cap, or a spending cap — whichever your prefer — has been much scrutinized in New Hampshire. The recent unanimous state Supreme Court ruling leaves the caps more than scrutinized; it leaves them seemingly unconstitutional.

The caps in place now in seven communities in the state allow aldermen to override the cap by a two-thirds vote. State law requires town and city budgets be passed by a simple majority. Because overriding the cap demands a two-thirds majority, justices ruled caps violated state law. Other communities have reportedly already begun examining their caps in light of the new ruling.

The ruling, however, came down specifically regarding the cap in Manchester, which was approved by voters in November 2009 — that was after having to wait a year as aldermen pushed the vote off to provide plenty of time to educate the public on caps. The cap limits spending increases each year to the consumer price index.

“I don’t think anything in the Supreme Court decision affects any community other than Manchester,” said former Sen. George Lovejoy, the chairman of the New Hampshire Advantage Coalition, which advocates for caps. “I don’t think it affects any other cities and towns.”

Manchester Mayor Ted Gatsas, evidenced by his public comments, doesn’t seem all that restricted by the cap. Of course, he just announced a tax decrease was coming Manchester’s way this year. Still, he has said publicly if he felt there was a need to override the cap, he’d just look to find aldermen who agree with him.

Lovejoy conceded that some think the ruling could have broader impacts. He said the ruling isn’t based on a cap’s constitutionality but rather on its interfering with state law. Lovejoy said he expects state law to be changed soon to “accommodate the will of the people.”

New Senate President Peter Bragdon, R-Milford, said as much last week. The Union Leader quoted him as saying legislators would immediately look to introduce legislation to address caps.

New look to the legislature

The legislature has rejected attempts in recent years to change state law to make it more welcoming to caps. The legislature had a distinctly bluer makeup then.

What about changing caps to require aldermen to override their cap by a simple majority, rather than changing state law? What about, instead of changing state law to allow for the easier passage of caps, cap proponents switch around their cap language so it doesn’t violate state law? Which is the better solution?

“If it was a simple majority, I think that would probably present a less palatable result,” Lovejoy said.

The thinking for cap proponents is that a two-thirds vote provides a greater level of taxpayer protection while still providing city governments the opportunity to override a cap for specific needs.

“It does not take away the powers of the governing body, but what it does do, it calls people’s attention to the fact that governments are working within a spending cap,” Lovejoy said. “And at the same time, if they need to go over it for emergency spending, they can override it by a two-thirds vote.”

It’s interesting to note that in this recent GOP wave election and specifically with all the calls for reducing government spending, not one community in the state had a cap initiative on the ballot.

The other side

Keep Manchester Moving, a nonprofit group that has fought the introduction of caps, spent the last year fighting the Manchester cap’s legality. They got the ruling they wanted. It’s just a question now of how long that ruling is going to matter.

Opponents have long lambasted caps as potentially stunting a community’s growth and taking control away from local communities.

“It takes away local control from city taxpayers, and ties us to a one-size-fits-all budget that has nothing at all to do with our community needs or priorities,” said Josiette White, president of Keep Manchester Moving, in a statement. “It’s a political gimmick at best, and illegal at worst; the unanimous ruling by the New Hampshire Supreme Court today finds it to be both. We are pleased by the decision of the court and are glad to see the tax cap gimmick will be overturned in Manchester and other communities.”

Some communities, like Franklin and Nashua, have long had caps and haven’t imploded. Others, like Manchester and Rochester, recently approved caps. Derry, Dover and Laconia also have caps. A proposed cap in Concord was deemed unconstitutional in a Superior Court ruling last year.

Capping the state?

Would a statewide cap, akin to Proposition 2½ in Massachusetts, perhaps be on the way? Proposition 2½ prevents communities in the Bay State from raising the tax rate more than 2.5 percent each year, unless residents vote to override it.

With large Republican majorities in the legislature, would now be the time for cap proponents to push for a statewide version of the cap, to apply either to state government spending or to each community?

Lovejoy said he would certainly like to see a statewide cap but it’s not something he’s heard is in the works.

“A statewide cap would certainly be a step in the right direction, given the excessive increases in state government spending in the last four years,” Lovejoy said.