Home » State Tax Policy » Currently Reading:

April Revenue Collections Welcome News for FY 2016-2017 Budget Deliberations

In putting together New Hampshire’s budget every two years, policymakers pass a number of important milestones, such as the submission of the Governor’s initial spending plan in February and public hearings in both the House and the Senate in the spring. Among the most critical of these milestones is the announcement of revenue collections for the month of April.

The April numbers are important as they provide greater insight into likely revenue totals for the current fiscal year and, by extension, what the state might reasonably expect to take in during the coming biennium. Based on the April figures released May 5, General and Education Fund revenue collections could FY15 Revenues on Pace to Finish Higher than Anticipatedtotal at least $86 million more in FY 2016-2017 than the House of Representatives projected in adopting its version of the budget for the next two years.

April revenue figures indicate that, through the first ten months of FY 2015, General and Education Fund revenue is $29 million or 1.5 percent ahead of projected levels. Such news is welcome, since, in putting together its version of the FY 2016-2017 budget, the House anticipated that FY 2015 revenues will be slightly below those projected levels; the Governor’s version of the budget essentially assumes that, in total, FY 2015 revenues will meet such projections.

Given this year-to-date trend, NHFPI estimates that General and Education Fund revenue will total $2.25 billion at the close of FY 2015, about $32 million more than officially projected levels and $41 million higher than the House anticipated. (See the methodological appendix below for the derivation of this estimate.)

Latest Data Provide Cautious OptimismHigher than previously expected FY 2015 revenues would have significant implications for the coming biennium as well. In fact, should FY 2015 revenues reach this new level of $2.25 billion and then grow by the rates forecast by the House, then FY 2016-2017 General and Education Fund revenue would total $4.588 billion. This, in turn, would be approximately $86 million more than the $4.502 billion figure found in the House’s budget.

To be sure, $86 million would represent a substantial difference from the House’s projections and offer far greater leeway for Senate budget writers. Still, even that difference has its limits. For instance, it would not allow the Senate to undo the House’s decisions to draw $52 million out of the Renewable Energy fund, to restore funding for services for the elderly, the developmentally disabled, and other vulnerable Granite Staters, and to enact the cuts in business taxes the Senate has pursued this year.

Appendix: Estimation Methodology

To arrive at its estimate for FY 2015 General and Education Fund revenues, NHFPI employed two projection methods and averaged their results.

The first method assumes that the current year-to-date trend for each revenue source – whether an increase or a decrease – will continue throughout the remainder of FY 2015. So, for example, according to the Department of Administrative Services (DRA) Monthly Revenue Focus for April, meals and room tax collections through the first ten months of FY 2015 were 6.9 percent higher than what they were through the first ten months of FY 2014. Applying that 6.9 percent difference to total FY 2014 meals and rooms tax collections of $260.6 million yields a FY 2015 estimate of $278.5 million.

The second method calculates, for each individual revenue source and averaged over the last five fiscal years, the percentage that collections for the first ten months of the fiscal year comprise for the full twelve months of the year.

The second method looks back over the last five fiscal years to determine for each individual source of revenue how much the first ten months of collections in a fiscal year comprise of the eventual total. Using the meals and rooms tax to illustrate once more, NHFPI calculated that collections through April for that revenue source have made up, on average over the last five years, about 84.7 percent of what the meals and rooms tax will produce in that entire fiscal year. According to the April data announced May 5, New Hampshire has received $235.1 million in meals and rooms tax revenue through the first ten months of FY 2015. If that $235.1 million represents 84.7 percent of the final amount collected by the tax, then the final amount for FY 2015 will be approximately $277.7 million.

Lastly, for each revenue stream, NHFPI averaged the two results. Thus, for the meals and rooms tax, the average of $278.5 million and $277.7 million is $278.1 million. To gauge these estimates, NHFPI compared the average of the two methods for each revenue source to the estimated range provided to the Senate Ways and Means Committee by DRA in its briefing on April 5. In most cases, NHFPI’s approach yielded results within DRA’s possible range, with two principal exceptions. NHFPI’s methodology yields a total of $553.5 million in FY 2015 for the combination of the business profits tax and business enterprise tax, a sum that is $2.1 million higher than the upper bound of the DRA’s possible range. In addition, NHFPI’s approach puts interest and dividend tax collections at $95.9 million by the end of this fiscal year; the high end of DRA’s possible range is $95.6 million.

Connect with NHFPI

Common Cents Blog

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

29 Jun 2017

tree with coins

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.