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Opening Day of Conference Committee, Use of Surplus Called into Question

On Friday afternoon, members of the conference committee on the FY 2016-2017 budget met for the first time. The meeting was a relatively eventful one, with conferees agreeing to a set of baseline revenue estimates to use in their deliberations and the Chair of the House Finance Committee signaling that chamber’s opposition to a key element of the Senate’s budget plan, namely, the use of $34 million in anticipated FY 2015 surplus to bring the next budget into balance.

Under the revenue estimates accepted by the conferees, General and Education Fund Revenue for FY 2016-2017 would total $4.609 billion, an amount that is identical to the updated projection approved the House Ways and Means Committee earlier this week. (Read an earlier Common Cents blog post providing the details of that projection.) More to the point, the revenue estimates accepted by the conferees are $11.6 million less than the sum on which the Senate’s version of the FY16-17 budget is premised. Consequently, barring a permanent change in tax policy to generate additional revenue – a prospect the conferees have already seemed to have ruled out – conferees will have to reduce General and Education Fund expenditures $11.6 million below those approved by the Senate.

Should the House’s view on the use of FY 2015 surplus funds prevail, conferees would need to lower expenditures even further. That is, in crafting its version of the FY16-17 budget, the Senate relied on the transfer of $34 million (out of an anticipated $45 million) in surplus funds from FY15 into FY 2016-2017 to bring revenues into balance with expenditures. Representative Neal Kurk, the Chairman of the House Finance Committee, in his opening remarks before the conference committee, indicated that the House was concerned about that approach and would prefer that such funds not be carried forward.

While the use of $34 million in FY15 surplus would allow New Hampshire to support critical services for the elderly, the homeless, and the developmentally disabled, it does not represent sound long-term fiscal policy. Indeed, Representative Kurk’s remarks should call new attention to the shaky fiscal ground on which both the House’s and the Senate’s versions of the budget would leave the Granite State. For example, in addition to the use of FY15 surplus funds, the Senate counts upon a $2.5 million transfer from the education credentialing fund, a $1.2 million transfer in consumer protection funds, and $2 million from the sale of the former state prison in Laconia. (Though, to be fair, the House budget uses a similar diversion from the education credentialing fund, while all three versions of the budget rely upon the sale of the Lakes Region facility.) More importantly, the Senate’s version of the budget includes a set of back-loaded business tax cuts, the cost of which will increase in each of the next several budget cycles. Those tax cuts would reduce revenue by $23 million during the FY16-17 biennium, by $66 million during FY 2018-2019, and by $94 million during FY 2020-2021. Therefore, if the Senate’s version of the budget were enacted into law, it would leave a gap to fill in the FY 2018-2019 budget of at least $80 million. In short, conferees may be completing their work on the FY 2016-2017 budget, but they may be creating an even more daunting task for their successors.

 

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The Budget Trailer Bill Hits The Road

22 Feb 2017

tree with coins

On February 21, the Office of Legislative Budget Assistant published the public version of House Bill 2, also called the “Trailer Bill.” In this proposed legislation, Governor Sununu outlined the policy changes that enable some of the proposed modifications to State government indicated in the primary budget document, House Bill 1, released on February 9 to coincide with the Governor’s budget address. House Bill 2 will now be scrutinized by the Legislature and move through the process alongside House Bill 1, which allocates the funding to specific line items.