As the upcoming Committee of Conference, one of the last stages of the budget process, creeps closer, the House Ways and Means Committee convened Tuesday to amend their baseline revenue estimates, which were initially adopted by the full House of Representatives in the form of HR 12 in February. The long and short of it: the House’s new estimates are now very similar to what the Senate passed on June 4 and would be closer if not for its less hopeful outlook on economic growth going forward.
Given that the House Ways and Means Committee now has four additional months of data at its disposal and that collections, on the whole, have been moderately better than expected, the Committee’s FY 2015 estimate is much different. Back in February, House Ways and Means thought that total General and Education Fund revenues would be around $2.211 billion. The Committee projects revenues to be $2.255 billion, which amounts to an additional $44 million. This latest projection is approximately $11 million higher than both the Governor and Senate’s forecasts last month. This is likely due to the fact that May’s revenue collections were not available to either the Governor or Senate. Those figures surprised noticeably to the upside, driven by more positive business tax collections.
Despite its rosier FY 2015 revenue figures, the House’s outlook for the upcoming biennium remains more subdued than either the Governor or Senate. While the House now expects to end the current fiscal year with $11 million more than the Governor and Senate, it estimates total General and Education Fund revenue for FY 2016-FY2017 will be $4.609 billion, $11.5 million less than the Senate and $25.5 million below the Governor. This is a product of the House Ways and Means Committee’s more modest projections for economic growth over the next two years. Specifically, the Committee is less optimistic on revenue streams that are generally thought to be influenced by economic conditions, such as business taxes, the meals and rooms tax, and the real estate transfer tax.
For example, House Ways and Means forecasts that in FY 2016, meals and rooms collections will grow by 5 percent, whereas the Senate (6 percent) and Governor (6.5 percent) are more sanguine. Relative to the last few fiscal years, the 5 percent projection might be a little too dour; for context, meals and rooms collections grew by 5.4 percent in FY 2014 and are up 7.1 percent in FY 2015 through May. The New Hampshire economy, according to indicators such as employment and wages, appears stable as FY 2016 approaches and gas prices are a good deal lower compared to previous summers. Therefore, while possible, the chances of a measurable slowdown in the growth of meals and room collections appear slight.
Moreover, the Committee’s 2.6 percent growth projection for the real estate transfer tax in FY 2016 might be too pessimistic. Collections grew by 8 percent in FY 2014 and are growing by about 8 percent in FY 2015, after accounting for a single, large transaction that transpired in November. The Department of Revenue Administration has noted that this transaction was anomalous and should not be included in revenue forecasts.
If the House’s outlook for the next two years was more in line with either the Governor or Senate, the differences mentioned above for the upcoming biennium would be starker. If it employed the Senate’s FY 2016-FY2017 growth assumptions, House Ways and Means’ estimates for the upcoming biennium would be roughly $33 million higher. If the House followed the Governor’s assumptions, the total figure for FY 2016-FY2017 would be $48 million more than the amount decided upon on Tuesday.