First published in NH Business Review, July 28, 2023
The new State Budget, which took effect July 1, appropriates new funding for road and bridge maintenance operations alongside separate long-term investments through capital budgeting and enhanced federal funding through the federal Infrastructure Investments and Jobs Act.
This budget also highlighted an ongoing imbalance in the way the state funds transportation. The Highway Fund supports road and bridge repairs, and relies on taxes on gasoline and diesel and vehicle registration fees. The Turnpike Fund, which finances only the 89 miles of turnpike in the state, is separately funded by tolling.
In the new budget, the Highway Fund received a one-time $10 million transfer from the General Fund for overall operating support, and is projected to end the biennium with a $12.4 million balance.
The budget also appropriated a one-time boost of $20 million in additional General Fund municipal road and bridge aid outside of the Highway Fund.
While this support for the Highway Fund is a one-time boost, it follows a long line of other “one-time” General Fund transfers.
The previous budget, funding State Fiscal Years (SFY) 2022-2023, had a $50 million appropriation to the Highway Fund from the General Fund; the SFYs 2020-2021 Budget contained $12.4 million in direct and reallocated General Fund contribution to the Highway Fund, and the SFYs 2018-2019 Budget had a $13.9 million General Fund transfer.
Additionally, off-budget General Fund appropriations for state and municipal road and bridge work of $66 million, $30.4 million and $36.8 million were made in SFYs 2022, 2018 and 2017, respectively.
General Fund revenues have grown much faster than Highway Fund revenues in recent years.
The Business Profits Tax, which primarily supports the General Fund, has been substantially boosted by surging national corporate profits since the start of the Covid-19 pandemic.
Increases in Real Estate Transfer Tax and Meals and Rentals Tax revenues have also helped the General Fund.
The Highway Fund’s revenue sources are not percentage tax rates dependent on prices, like those key growing General Fund sources, but instead are fixed at 22.2 cents per gallon of motor fuel combined with set dollars amounts for registrations based on certain vehicle characteristics.
Inflation erodes the ability of these Highway Fund revenue sources to keep up with repairs, as each dollar is worth less each year, and pandemic-related changes in driving habits reduce the need for vehicles or fuel for them.
Without adjustments to these revenue sources, the Highway Fund may continue to rely on the General Fund to balance each biennium, and more aspects of state finances will be reliant on potentially volatile corporate profits.
Phil Sletten is research director of the NH Fiscal Policy Institute. The NHFPI Policy Memo is a partnership of the NH Fiscal Policy Institute and NH Business Review.