The Newsboy Problem

Back when I was in business school we were given The Newsboy Problem.

In a nutshell, the newsboy can buy papers for 33 cents and sell them for a dollar.  He averages selling 100 papers a day.  So how many papers should he buy?

Life is easy if every day he can sell exactly 100 papers, no more, no less.  But life is rarely easy.  1/3 of the time he sold exactly 100 papers.  1/3 of the time he sold 80 papers.  1/3 of the time he could have sold 120 papers.

If he is cautions and buys 80, he will never have any waste.  If he buys 100, he will sell them for a nice profit 2/3 of the time and occasionally lose some inventory.  If he buys 120, he will have maximum profit on the good days and maximum losses on the slow days.  What's a newsboy to do?

As a former newsboy and current State Rep, I'm again facing the same problem.  Our challenge in Ways and Means is to forecast Revenue for the next two fiscal years starting July 1, 2011.  Revenue comes from multiple sources and we have data going back 10 years.  But driving full speed ahead and just looking out the rear view mirror is not always safe.  So we also had three days of testimony from various experts to try to polish our crystal ball.

The dilemma for me is moral, not mathematical.  Do we vote the number that is most likely, 50/50 chance of up or down?  Do we take a cautious approach to make sure that we don't overspend during uncertain times?  Do we take an aggressive approach and say the recession is over and the economy will improve more than it did last year?

• 50/50 means a 50/50 chance of new tax increases after the budget is passed
• Cautions means cutting back important programs that nobody wants to cut
• Aggressive means risking more overspending, the problem we were elected to solve

The Committee took the 50/50 approach, with the understanding we will update the forecast each and every month.  More work for us, in addition to our normal activities of hearing and voting on proposed tax law changes.  But it's the right thing to do.

As for the newsboy, the long answer is at:

http://en.wikipedia.org/wiki/Newsvendor

The short answer is 107

The Golden Eggs

Remember Aesop's fable about the goose that laid the golden eggs?  The greedy owners killed the goose because they wanted all the gold that must have been inside.  But it was just an ordinary goose.  Then they had nothing.

I had an example of that last week in committee hearings.

One of our jobs in Ways and Means is to determine a realistic revenue projection for the two fiscal years beginning July 1, 2011.  So for the past week we heard testimony from all the agencies that contribute revenue to NH, and looked at their 10 year history.  Thursday we heard from the Lottery Commission, which has contributed over $260M in revenue in past years, but is down to under $240M this year.

One disturbing comment from the Commission was the "very unhappy players" who have just cashed out a jackpot at the lottery offices.  In the past, they would walk away with all smiles.  Now, in addition to Federal withholding (which everyone expects), an additional 10% is taken out by the State of NH on the new "Gamblings Winning" tax.  This 10% never comes back.  Unlike the Federal tax, it is not offsettable by gambling losses, and applies to everyone.  That includes NH residents who hit a jackpot in Connecticut, and Massachusetts residents who bought a NH lottery ticket over the border.  These winners felt like losers.

So now we hear stories of how border towns have had their lottery sales dry up, not to mention the associated sales of gas and convenience store items, and perhaps a short trip as a tourist into our fine state.  A tax that was supposed to raise an additional $4M has actually lost $2M.  And that's just on the lottery side.

Scratch tickets are the most popular lottery item, about 69% of the sales over the last 10 years.  NH has a decent payout on scratch tickets, ranging from 60% on the dollar tickets up to 74% on higher denominations.  Nice golden eggs for everyone.  But two years ago the Legislature imposed this new 10% tax, which is killing the goose.  Those irresponsible legislators were mostly voted out office, but their legacy remains.

My fellow members on Ways and Means were disappointed to hear all this, and one of our members has sponsored House Bill 157 to kill this tax effective July 1, 2011.  The bill has been assigned to our committee, and a public hearing will take place.

It can't happen too soon.

Guns 'N Roses

January 5 was the official start of the 2011-12 legislative session.  Nice flower display at the podium, followed by voting on House rules allowing guns in the Statehouse.

 

Got a call the other day from Nick Pappas of the Nashua Telegraph regarding my timely letter on the topic.  He decided to publish it:

 

Letter to the Editor, Nashua Telegraph, January 5, 2010

 

As a newly elected state representative, I’ve learned that House decorum requires gentlemen to wear jackets and ties.

 

After reading the Dec. 30 headline on Page 2 of The Telegraph, “NH GOP wants to allow guns in Statehouse,” I had images of us coming to work in Bat Masterson outfits with pearl-handled revolvers in our belts and perhaps a cane and derby hat.

But that is not the case. Although the 1889 state constitution fixed our annual paycheck at $100, our personal dress code evolved into modern fashions. Speaker William O’Brien’s proposal would allow all citizens, provided they had a police-issued concealed carry permit, to keep that right while at the Statehouse. No exposed guns.

The proposed rule seems perfectly reasonable to me.

Rep. Bill Ohm

Nashua

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NH GOP leaders want to allow guns in Statehouse

Committee Assignment - Ways and Means

Having weighed in for a meaningful committee assignment, my first choice came through, which is Ways and Means.  What that means is the way the State raises revenue, otherwise called taxes and fees.

 

Remember the Beatles song "Taxman"?  It comments on the tax situation in Britain in the 1960's with lyrics such as "One for you, nineteen for me" and "Does 5% appear to small? Be thankful I don't take it all".  They were not referring to a 5% tax, but a 95% top tax rate.  We need to go the other way, cutting taxes.

 

So New Hampshire needs to get our fiscal act together, and the first House bill, HB-1 will be on the source of revenue for the 2011-13 Fiscal year.  The second House bill, HB-2, will be on how that revenue will be spent.  Ways and Means will do the leg work on HB-1, Finance will recommend the spending priorities for HB-2.  The full House will decide.

 

I've pledged to vote against any and all efforts to increase taxes.  In fact, I want to roll back some of the more outrageous taxes and fees that occurred during the last few years.  It's going to be tough.  I've been receiving invitations to meet with organizations that will not want their budgets cut.  However, the NH budget has increased 24% during the last four years, a time when most other states have cut spending.  Just like our hardworking taxpayers during these tough times, the State will have to cut back as well.

 

Stay tuned...

Mr. Bill Goes to Concord

..But I didn't run into Mr. Sluggo, or Jimmy Stewart.  But I did get sworn at (correction, I mean sworn in) by the Governor.

So now I am officially on the payroll of the State of New Hampshire.  If I work 40 hours a week (likely if I'm assigned to a budget-related committee), I'll get paid a nickel an hour for my services.  The frugal voters of our State consider fare is fair.

In open session (not a caucus) votes were cast for Speaker.  Both parties, all 400 Reps get to vote.  Candidates were the 2006-10 Speaker from the Democrats, Terie Norelli, and Bill O'Brien, the Republican choice.  After a not-so-few words of support from their supporters, Terie graciously withdrew her nomination to make a unanimous vote for Bill.  Similar nominations, exultations, seconds and votes were for the House Clerk, Sergeant-at-Arms.  Both are well-liked public servants who've served many terms.

The Senate was brought in, and we ran the same procedure for Bill Gardner, the longest serving Secretary of State in the country.  Bill keeps our Presidential primary first in the nation.  Extremely well qualified.

In closed session, the Republicans nominated three candidates for their Majority Leader, all considered good candidates.  D.J. Bettencourt won out.  I met D.J. for the first time walking in from the parking garage this morning.  Much like campaigning from the town dump, the path from the garage to the Statehouse is an area we all have to pass, you can't avoid.

The Majority Leader voting today was done by roll call for attendance and paper ballot, very time consuming.  Made us late for the food and beverage sessions afterwards.

I attended the reception sponsored by the Sheehan Phinney Capitol Group, involved with "Government Relations Services".  Gee, I wonder what that means.  Their flyer listed 47 clients, five main sponsors and eight lobbyists.  Free hors d'oeuvres, beer and wine.  I paid for a gin and tonic instead.  A Rep's gotta have some principals, I mean principles.  In truth, after all day of having my ears burned by babbling, I needed something stiffer.  So I had two.

Therefore I strategically avoided "TheLobbyNH.com" reception, which is a journalist organization with a Business and Political website.  Didn't want to make the front page of tomorrow's Nashua Telegraph.  Sometimes Mr. Smith can teach you something.

Freshmen Orientation

Remember what it was like when you were a Freshman?  For us new Representatives, it's high school all over again.

We spent the last three days in Concord getting tours of the Statehouse and Legislative Office Building, meeting the staff, attending training sessions and learning the legislative ropes.  One of the highlights for us was meeting the fourth graders from the Bicentennial Elementary School in Ward 8, and presenting the class a NH flag that had flown over the capital.

The upcoming sessions will likely review over 1,000 bills, and I began checking filings by other Reps on legislation I intend to submit.  I was advised it's usually better to co-sponsor a bill already in progress than creating a similar one of your own.  December 3 is the deadline for filing bills for the upcoming session, ending June 30.

Our caucus elected Bill O'Brien as our Speaker nominee, to be confirmed by the entire House on December 1.  The election was contested, but the losing candidate showed a great deal of grace and class in requesting that the vote for Bill be made unanimous.

We should be receiving our committee assignments from the Speaker during the next 30 days.  That's when the workload really picks up.  Remember those 1,000+ bills?  They all get assigned to committees for resolution, typically OPT (Ought to pass) or ITL (Inexpedient to legislate).

If the OPT bills are voted unanimous by committee, they go on the Consent Calender.  Consent Calender bills are voted (and voted yes) as a group by the full House on Wednesday's as they are considered bi-partisan and non-controversial.  However, any member of the House can pull any bill off the Consent Calender and take it up individually for debate and a vote.

The good news in NH is that every bill comes to a vote.  Legislation can never be bottled up.

My civics lesson for today.

Inauguration Day

There is an old joke floating around NH, goes something like this:

"Every two years, for 10 hours, the State of NH is truly safe.  That's between the time all the previously elected officials are kicked out of office (midnight) and the new ones haven't yet been sworn in"

So at 10 am on Wednesday, December 1, the swearing in ceremony will take place.

I'm sure for most of you, attending third-party graduations and the like are right up there with watching your neighbor's home movies.  But if you are truly bored with nothing better to do that day, you can visit Concord and have your name forever immortalized as a visitor in the proceedings of the NH House.  Let me know and I will add you to the official guest list.

Bill