Distant Dome: Lawmakers May Need to Face the Budget Music

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Garry Rayno is InDepthNH.org's State House Bureau Chief. He is pictured in the press room at the State House in Concord.

BY GARRY RAYNO, Distant Dome

Before legislators leave Concord for home in June, they may have to make some uncomfortable budget decisions.

Or they may ignore the quagmire of picking winners and losers with an election looming and leave the mess to the next legislature to clean up.

But there is no denying the days of easy budget decisions and pleasing all of the people almost all of the time, are over for a while.

For the last two biennial budgets, federal pandemic and infrastructure money jet-fueled profits for large corporations and pushed other tax streams into overflow handing New Hampshire and most other states large revenue surpluses.

But the glory days are coming to a quick end if the March revenue numbers are any indication.

April will be a key month for business taxes — the largest source of state revenue — with most corporations and businesses having to file their first quarterly tax anticipation payment with the Department of Revenue Administration.

But for March tax receipts were down significantly and refunds were extensive compared to a year ago.

Not a good combination, but similar to what other states have been facing for a while like Massachusetts which is facing a major operating deficit on a budget lawmakers in the Commonwealth passed about nine months ago.

New Hampshire still has a year-to-date revenue surplus of $104 million for the combined general and education trust funds, but that is not close to the half-a-billion-dollar surplus in each of the last two fiscal years.

And with the trend headed into the negative direction, that could be a problem before the 2024 fiscal year ends June 30.

And if you look at the budget plans for this year, most of the surplus revenue is projected to be in the Education Trust Fund, which is restricted to education spending, not the general fund which pays for the rest of state government.

The downward trend in revenue could be handled this fiscal year without too many problems, but that is not the only fiscal problem facing the state.

The largest potential spending issue is education funding in light of the two state lawsuits pending before the state Supreme Court on appeal that could add about $500 million to the state’s obligation.

More immediately, House Bill 1583 to bump up the per-pupil adequacy grants from $4,100 to $4,404 for the next fiscal year costing about $63 million will be voted on by the House Thursday.

Another bill, House Bill 1656 would add an additional $13 million to the state’s obligation for special education costs beginning next year is also before the House.

And the Education Freedom Account program will likely increase the salary cap for eligibility for next year, either going from 350 percent of the federal poverty guidelines to the 500 percent that has passed the House, or the 400 percent the Senate passed.

The program currently serves 4,770 students according to January figures costing about $25 million or more.

Increasing the cap could raise the cost to about $45 million to $50 million on the higher income cap with about 70 percent paying tuition subsidies for students currently in private or religious schools, or homeschooling.

Like the state adequacy grants to school districts, as well as other education costs, the EFA program draws its money from the Education Trust Fund. 

The fund currently has about a $200 million surplus, but that could be drawn down rather rapidly with the higher EFA costs and increasing the per-pupil adequacy aid if the supreme court upholds the two existing superior court decisions.

While Republican lawmakers want to expand eligibility, the Legislative Budget Assistant’s Office has been unable to obtain the program’s data to do a statutorily required performance audit to determine if it is following the law and department rules.

Commissioner Frank Edelblut, a program proponent, told the performance audit committee last month his agency does not own the data, that it belongs to the program’s administrator, Children’s Scholarship Fund NH which holds the contract with the state.

He did not give the scholarship fund permission to release the data to the LBA, instead implied the auditors were “on a fishing expedition.”

Along with education funding, House lawmakers Thursday will be voting on a bill to “fix” a change made in the New Hampshire Retirement System 10 years ago that proponents say shortchanged public employees who had yet to be vested in the system, which is 10 years of service.

Group II members, police and fire, claim the change that limited what they could receive as a benefit, hurts retention and makes it more difficult to recruit people for those critical public safety positions.

House Bill 1647 would have the state contribute $53.6 million to the retirement system to take care of the problem.

A year ago, the House balked at adding the money needed to fix the problem and instead gave the retirement system $50 million to pay down its unfunded liability. 

The Senate took the money out of its budget and created a commission to study the system and what could be done to fix the problem and propose future changes.

If approved by the House Thursday, the bill would go to the Senate where it may not find a different reception than last year.

Lawmakers also want to change the criteria for the Youth Development Center victim abuse fund to draw more of those impacted to go through the settlement program rather than the courts. There are about a potential 1,000 lawsuits as more than 300 victims claiming abuse at the hands of state employees at the center have gone through or are currently in the settlement process.

Senate Bill 591 would change the benefits for the abuse and include $60 million in additional money to cover the costs.

The fund administrator asked for an additional $75 million and others believe about $100 million more is needed to supplement the original $100 million appropriated to cover the settlements.

The bill is now in the House but has yet to have a public hearing.

While all of these expenses would begin in the 2025 fiscal year, lawmakers this term could begin trying to trim the costs  with the likelihood of less revenue than projected for the 2025 fiscal year that ends June 30, 2025.

According to the latest report from Administrative Services, the state revenues are $130 million more than a year ago.

The money in play from just the four areas above is much more than that and the trend is not in the right direction to cover all those costs in the next 15 months.

Or they could just ignore the problem and let the next governor and legislature deal with the fallout in the next biennial budget they will need to approve by July 1, 2025.

Garry Rayno may be reached at garry.rayno@yahoo.com.

Distant Dome by veteran journalist Garry Rayno explores a broader perspective on the State House and state happenings for InDepthNH.org. Over his three-decade career, Rayno covered the NH State House for the New Hampshire Union Leader and Foster’s Daily Democrat. During his career, his coverage spanned the news spectrum, from local planning, school and select boards, to national issues such as electric industry deregulation and Presidential primaries. Rayno lives with his wife Carolyn in New London.

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