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Budgeting for a Better Tomorrow Today

Given the amount of time required to reach a final agreement on New Hampshire’s budget this year, you could be excused for wanting to put off thoughts about appropriations, revenue projections, or surplus statements for a little while longer. In reality, though, it’s never too soon to consider ways to refine the process by which the Granite State sets its fiscal priorities, particularly since a pair of reports released earlier this week by the Center on Budget and Policy Priorities (CBPP) suggest that there’s plenty of room for improvement.

CBPP’s first report, Better State Budget Planning Can Help Build Healthier Economies, finds that New Hampshire is among the roughly half of states that fail to follow several key practices in formulating their regular budgets. More specifically, the report recommends that states:

  • Project revenues for three or more years beyond the upcoming fiscal year;
  • Use a “consensus” approach to completing revenue projections, one in which executive branch officials and members of the legislature all agree to a single set of revenue estimates; and,
  • Prepare “current service” budgets – that is, budgets that estimate the cost of maintaining the existing level of programs and services — that extend beyond the budget under consideration.

As CBPP observes, such practices can “increase states’ ability to plan for the future [and boost] the chances they will have the resources to invest in schools and other building blocks of strong economic growth…” New Hampshire, by neglecting these practices, may be eroding the foundation on which long-term prosperity can rest.

In a companion report, Better Cost Estimates, Better Budgets, CBPP examines the practices states follow in drafting and issuing “fiscal notes,” which are assessments of the impact of legislative proposals on state revenues and expenditures. Among the best practices CBPP highlights for ensuring that policymakers and the public have the information they need to weigh changes in law are:

  • Preparing fiscal notes for all relevant legislation;
  • Ensuring that fiscal notes are prepared by a professional, reliable, non-partisan agency;
  • Including the impact of proposed changes in law beyond the next one or two years;
  • Updating fiscal notes throughout the legislative process; and,
  • Posting fiscal notes online.

New Hampshire already does some of these things well. For instance, the Office of the Legislative Budget Assistant, which is charged in law with the preparation of all fiscal notes, enjoys a well-earned reputation among policymakers of both parties for its impartiality. New Hampshire does come up short in other areas, though. Many fiscal notes for changes in tax policy indicate that the effect of such changes are “indeterminable,” while some fiscal notes are not available in a timely manner. As an example, a fiscal note for SB 9, a central element of the final FY 2016-2017 budget agreement, is not currently available via the legislature’s website.

One overarching theme that unites CBPP’s two reports is the importance of longer-term thinking in setting fiscal policy. Indeed, one refrain that was heard repeatedly in response to concerns about the future consequences of business tax cuts was that New Hampshire traditionally does not consider the impact of tax and spending changes beyond the upcoming biennium. Of course, simply because New Hampshire has followed one approach in the past does not mean it necessarily should do the same in the future. New Hampshire could and should institute reforms that foster a more comprehensive accounting of the costs it will encounter in the years ahead and the resources that will be available to meet them. CBPP’s latest reports offer valuable insights into which practices could be improved and how.




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Declining Business Tax and Other Revenues Suggest Caution for State Budget

15 Aug 2019

tree with coins

As policymakers continue to consider State Budget options and choices during the ongoing continuing resolution, understanding State revenue trends remains critical to determining the State’s ability to pay for needed services and the policy choices that affect available resources. With State Fiscal Year 2019 completed and SFY 2020 underway, recent months of revenue collections have provided some additional insight into whether the State might expect more revenue in future years. Questions remain about the future of business tax receipts in particular, which have been very difficult to predict due to recent abnormal behavior following the federal tax overhaul; however, recent data suggest anticipated declines in receipts may limit revenue going forward.