State Has Quarter-of-a-Billion Dollars in Rainy Day Fund

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Night view back of the State House


CONCORD — State auditors say the state has a much larger rainy day fund than budget writers anticipated when they wrote the state’s biennial budget last spring.

A change in determining the state’s savings account cap allowed more than $140 million in surplus at the end of the biennium June 30 to flow into the rainy day fund, bringing its total to $257.8 million up from the old cap of $115 million, according to auditors in the state’s Annual Comprehensive Financial Report issued recently.

The Joint Legislative Fiscal Committee will review the report with auditors from KPMG LLP of Boston, and state financial officials Friday morning in Rooms 210-211 of the Legislative Office Building.

Instead of a $6.4 million transfer to the rainy day fund budget writers anticipated at the end of the biennium, $142.3 million was transferred into the fund.

The change in the fund’s cap was a provision in the budget package passed in June and ties the limit to the previous fiscal year’s unrestricted revenues.

The unrestricted revenues for fiscal 2021 were much higher than 2020, augmented by more than a billion dollars of federal pandemic aid and about $324 million more in state general fund and education trust funds than anticipated for fiscal 2021.

The state received $1.25 billion in federal CARES Act money allocated in fiscal year 2021, with $66 million remaining at the end of the fiscal year June 30, and another $550 million in federal American Rescue Plan money with more anticipated during the current fiscal year.

Along with additional state and federal revenues, state agencies lapsed much more money than was stated in the budget, $222 million, an increase of $146.7 million over what budget writers anticipated. 

The larger than anticipated  lapse results largely from a hiring freeze, ban on out-of-state travel and the elimination of new programs under an executive order from Gov. Chris Sununu.

Lapses are money appropriated to state agencies but not spent. The amount is usually a certain percentage of agency budgets as a kind of across-the-board reduction in the budget.

According to the annual report, 48 percent of state revenue came as grants and contributions largely from federal sources, 14 percent from business taxes, 14 percent from charges for services, 3.2 percent personal taxes, 8.3 percent special taxes, 4.8 percent rooms and meals taxes and 4.9 percent general property taxes including the utility property tax.

Health and Human Services accounted for 46.7 percent of state spending, education 21.2 percent, general government 13.5 percent, justice and public protection 9 percent, transportation 6.8 percent, and resource protection and development 2.6 percent.

The unusual year also saw total state spending increased significantly from what was approved for the 2021 fiscal year budget three years ago.

According to the report, the net budget of $5.06 billion increased to $8.28 billion before the fiscal year ended June 30, including several hundred millions of dollars added to the budget during the budget writing process for the current biennium with surplus funds.

Among the additions to the 2021 budget were $162.1 million for such things as $36 million for a forensic psychiatric hospital, $25 million for an affordable housing fund, and $16 million for state environmental grants.

The report notes that not all the money was spent before the end of the biennium, lowering the actual spending by $2.7 billion, while revenues were $1.6 billion lower due to federal funds budgeted but not spent before the end of the fiscal year.

The state’s biggest liability is the state retirement system which has a total liability of $2.6 billion of which the state’s share is $1.23 billion up from just under $1 billion a year ago.

The liability for the retirement system results from a change in accounting practices in 2018 which included pension liability in the state’s overall finances.

The state has taken a number of steps to address the unfunded liability of potentially owing more in retiree pensions than the fund has.

Other liabilities include long-term bonds mostly for transportation projects including nearly $200 million in Transportation Infrastructure Finance and Innovation Act bonds used to complete the I-93 expansion project from Salem to Manchester.

During the course of the 2021 fiscal year, the report notes state contracts with outside vendors totaled $2 billion with $500 million going to small businesses.

The state’s net position grew to $2.5 billion at the end of the fiscal year, up $728 million from the previous year or 42.15 percent.

“While the prior year fiscal 2020 resulted in a combined ending General and Education Trust fund deficit balance of ($54.4) million, rebounding fiscal 2021 revenues results in the State being able to fund $162 million in initiatives beyond the original approved budget,” said Administrative Services Commissioner Charles Arlinghaus in his transmission letter to auditors.

“After the additional appropriations and transfer to the Rainy Day Fund, the undesignated fund balance as of June 30, 2021 was $0 in the general fund and $2.2 million in the Education Trust Fund.” 

Garry Rayno may be reached at

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