Distant Dome is co-published by Manchester Ink Link and InDepthNH.org
By GARRY RAYNO,
Last week lawmakers congratulated themselves on putting together a new two-year, $11.7 billion operating budget that did not increase taxes or fees, eliminated the electric consumption tax and reduced business tax rates again.
They proclaimed the budget funds essential services, doubles state money to combat opioid addiction, increases funding for the mental health system and services for the developmentally disabled, and overhauls the Division for Children, Youth and Families to better protect those in its purview.
What they didn’t proclaim is what was left out of the budget. The University System of New Hampshire was level funded from the previous budget guaranteeing New Hampshire students will pay higher tuition to attend any of the system’s colleges and university in a state with the highest student debt in the country.
The Community College System of New Hampshire got a little more money, but not enough to reduce tuition as officials had hoped because it, too, is too expensive for many low-income Granite State students.
The university and community college systems have yet to fully recover from the 2011-2012 biennial budget that slashed funding in half driving up tuition and sending many of the state’s best students to out-of-state colleges.
The budget also failed to include two innovative programs supported by both Republicans and Democrats and costing little state money.
While lawmakers touted the overhaul of DCYF, they did not include the money for a voluntary, two-year pilot counseling program for at-risk families to prevent child abuse.
The program would have cost a little more than $3.3 million to implement and had broad support among victim and child advocates.
Another proposed program under discussion for over a year would have made it easier to move welfare recipients off welfare with federal money earmarked for the Granite State but not spent.
First proposed by Democratic Gov. Maggie Hassan, $11.5 million in Temporary Aid for Needy Families (TANF or welfare) money due New Hampshire but unclaimed, would provide low-skill workers with a time-limited wage subsidy, along with job training and auxiliary services like transportation and child care.
Re-branded by Republicans as Granite Workforce, the program was included in Senate Bill 7 which would reduce eligibility for the federal food stamps program, but that bill was retained by the House.
The program had the backing of business groups as well as social service advocates and members of both parties, but became budget debris instead of an appropriation.
Those are three examples of what is not in this two-year operating plan although the state has more tax money than it needs to balance the recently completed two-year biennial budget and plans to tuck away more than $100 million in the rainy day fund.
The books closed on the 2016-2017 budget June 30 and early unaudited figures show the state has $91.8 million in surplus revenue for the 2017 fiscal year.
Surplus revenue does not necessarily translate into a budget surplus because often more money is spent than outlined in the spending plan.
The budget lawmakers passed last month and Gov. Chris Sununu signed anticipates a $88.5 million surplus which the governor wanted to put into a infrastructure improvement fund for highways, bridges and school facilities, but lawmakers trimmed to $36.8 million for roads and bridges and $2.25 million for school building aid.
Budget writers also had to put aside $33.2 million for a Medicaid shortfall and $18 million to address Concord Steam’s closing. The private company supplied heat for the State House and other state buildings along with other Concord buildings.
These were conscious decisions to fund those in the 2017 fiscal year budget instead of moving the money into the current spending plan and reducing tuition for university and community college system students or to make it easier to get off welfare.
No one achieves everything he or she wants in a budget, there are always differing priorities, but voters back home need to know what those priorities are and what they are not.
This year’s priorities were again reducing business taxes and holding the line on tax or fee increases, overhauling DCYF, and increased funding to fight opioid addiction and upgrading the mental health system.
The largest business organization in the state, the Business and Industry Association, did not make business tax reductions one of its top priorities, instead it was workforce development.
Businesses will not complain about smaller tax bills but they might have wanted to trade that savings for more state help developing a skilled workforce for today’s marketplace.
The parents of developmentally disabled children will welcome the additional funding to reduce the perennial wait list but may be frustrated if the area agencies cannot find enough workers to provide needed services.
And hospitals will wait to see what happens in Washington before celebrating another year of the state’s Medicaid expansion program that has reduced the uninsured in emergency rooms and beds.
While the new state budget may look fine right now, there are many things beyond the control of the legislature’s best budget writers that may turn it upside down before it expires in two years.
Closing the Books
With the last month of the 2017 fiscal year complete, the final state revenue figures were released this week showing New Hampshire with it’s $91.8 million surplus collecting $2.4 billion in taxes.
The majority of the surplus money comes in four areas, business taxes, $73.9 million; real estate transfer tax, $15.8 million, insurance premium tax, $7.3 million, and rooms and meals tax, $5.7 million.
The additional money was needed to offset lower than expected revenues from the communications tax, $10.6 million; tobacco tax, $6.4 million, and interest and dividends tax, $2.1 million.
While business taxes were nearly $74 million ahead of what budget writers projected they would need, they were $2 million lower than a year ago, with the state collecting $639 million in both business profits and business enterprise taxes.
When lawmakers decided two years ago to reduce the rates of the two business taxes “to make the business climate more friendly,” the biggest supporters of the cuts like Sen. Andy Sanborn, R-Bedford, claimed they would be revenue neutral although others like Senate Majority Leader Jeb Bradley, R-Wolfeboro, and House Speaker Shawn Jasper, R-Hudson, were less sure about the claim.
In information provided by the Department of Administrative Services outlining June revenues, the Department of Revenue Administration noted that estimated tax payments in June 2016 were the highest they had been in 10 years or since the great recession. The department noted the 2017 June payments showed a 13 percent decrease, meaning the rate cuts did lower revenue particularly for business enterprise tax returns which were down $3.8 million from 2016 to 2017, while business profits tax revenues were up $1.8 million.
The revenue figures will be revised over the next few months as budget officials determine whether revenue collected in July and August should be credited to the 2017 fiscal year.
For example, tobacco tax revenues are usually a month or more behind in reporting as are rooms and meals tax revenues.
The state revenue landscape is likely to grow in the coming months when the adjustments are made giving the state an even larger revenue surplus.
Decreasing business tax revenues will be interesting to watch in the coming year because the new budget allocates all of the revenue to the education trust fund and none to the general fund as had been the case since its inception.
The tax was developed under the Gov. Steve Merrill administration in response to a lawsuit filed by Cabletron Systems and its CEO former Gov. Craig Benson claiming the business profits tax was unconstitutional because it failed to include businesses like law firms and physician practices in its reach.
The business enterprise tax — a back door value added tax with low rates — was also viewed at the time as a future revenue source in case the state lost the Claremont education lawsuit, which it did.
Lawmakers tripled business enterprise tax rates over time to increase money to pay for adequate education grants to schools.
Now the state is cutting back on the amount of money it pays for adequate education.
Garry Rayno can be reached at firstname.lastname@example.org
Garry Rayno’s Distant Dome runs exclusively on Manchester Ink Link and InDepthNH.org, where Rayno will explore a broader perspective on State House – and state – happenings. Over his three-decade career Rayno has closely covered the NH State House for the New Hampshire Union Leader and Foster’s Daily Democrat, and his coverage spanned the news spectrum, from local planning, school and select boards, to national issues such as electric industry deregulation and Presidential primaries. He is former editor of The Hillsboro Messenger and Assistant Editor of The Argus-Champion. Rayno graduated from the University of New Hampshire with a BA in English Literature and lives with his wife Carolyn in New London.