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Senate Budget Decisions May Limit Revenue Flexibility in Future Years

June 1, 2017 News

FOR IMMEDIATE RELEASE
June 1, 2017

 

Senate Budget Decisions May Limit Revenue Flexibility in Future Years

 

Concord, NH – The New Hampshire Senate passed its version of the state budget on May 31, putting forward an $11.86 billion spending plan for the 2018 and 2019 biennium, which begins July 1. The Senate budget increases funding for a number of critical needs, but also includes policy decisions that may limit available revenue for future budgets.

“In a strong economy, we should invest in areas that will enhance opportunity for all Granite Staters, such as supporting early childhood development, expanding education and training to support current and future workforce needs, and maintaining schools, roads, and other public infrastructure,” said John Shea, executive director of the New Hampshire Fiscal Policy Institute.

“New Hampshire is facing some significant challenges, among them a rapidly aging population and a need to attract young residents to the state,” added Shea. “The state budget should address our current needs and make investments that will produce lasting benefits and lay a solid foundation for the future.”

The budget includes two decisions that may limit options for funding state services in future years.

Proposed business tax changes include further reductions to the Business Enterprise Tax (BET) and Business Profits Tax. The proposal comes as additional business tax cuts, which became law in 2015, are still being phased in. Among the changes, the BET contribution to the General Fund would be gradually reduced starting in 2019 and eliminated entirely by 2021; this change would decrease revenue allocated to the General Fund, which is the fund that provides policymakers with the most flexibility to direct funding, permitting them to meet needs and respond to economic challenges or fiscal crises. In state fiscal year 2015, the last fiscal year without a BET rate change, the BET contributed $71.9 million to the General Fund.

The Senate budget assumes a greater decline in Medicaid enrollment than the Department of Health and Human Services recommends and may lead to a funding shortfall in future budgets. During the current 2017 legislative session, state policymakers were forced to find an additional $33.2 million to fill a shortfall resulting from a similar decision made several years ago.

NHFPI has published initial analyses of the Senate Finance Committee’s proposed budget and the proposed BET changes, as well as a review of the revenue sources that support the state budget. These and related resources are available at the NHFPI website NH State Budget page.

The New Hampshire Fiscal Policy Institute is an independent nonprofit organization dedicated to exploring, developing, and promoting public policies that foster economic opportunity and prosperity for all New Hampshire residents, with an emphasis on low- and moderate-income families and individuals. Learn more at www.nhfpi.org.

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Common Cents Blog

State’s Diverse Tax Base Stabilizes Revenue, But Business Tax Changes May Increase Volatility

29 Jun 2017

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New Hampshire’s state tax revenue is relatively stable, but the State’s largest tax may be among the most volatile types of common taxes, a new analysis from The Pew Charitable Trusts suggests. Between 1997 and 2016, New Hampshire’s tax volatility, as measured through percentage changes from the prior fiscal year, was only higher than five other states, suggesting New Hampshire’s tax revenues do not typically deviate dramatically from year to year relative to other states. However, digging into the diverse revenue streams and drawing on the experiences from other states shows some risk for New Hampshire.