By GARRY RAYNO, InDepthNH.org
CONCORD — New state revenue data collected over a 15-year period by The Pew Charitable Trusts indicates New Hampshire has the fourth-worst trend of the 50 states for bouncing back revenue wise after the COVID-19 pandemic.
The state’s second-quarter collections in fiscal year 2025 were 8.3 percent, or $77.3 million below its 15-year trend when adjusted for inflation and seasonality.
Nationally, states were 2.3 percent below the 15-year trend.
Like New Hampshire, the three states with a higher percentage below their 15-year trends – Iowa, Nebraska and Arkansas – implemented significant tax cuts.
New Hampshire has lost more than $1 billion in revenue over the past eight years due to reductions in business taxes, the rooms and meals tax, and eliminating the interest and dividends tax, according to estimates from the NH Fiscal Policy Institute.
Overall, New Hampshire is not alone, as 40 states were underperforming their long-term trajectories as they entered fiscal 2026.
However, overall revenue across the country grew modestly in fiscal 2025, according to the study, but total revenue nationwide remained 2.3 percent below its 15-year trend.
The good news, the report notes, is that in general, state revenues have stabilized after a period of volatility. But nationally and in most states for the second consecutive year, the revenues have settled into a weaker post-pandemic pattern of below-trend growth.
“Preliminary data from the first half of fiscal 2026 reinforces this conclusion,” according to the study’s authors, Justin Theal, a senior officer, and Alexandre Fall, a principal associate, with The Pew Charitable Trusts’ Fiscal 50 project.
“Quarterly collections through the third quarter of 2025 and monthly data through December show that inflation-adjusted tax revenue grew modestly and that the number of states collecting below their long-term trends remained largely unchanged.”
Two of New Hampshire’s neighbors have bucked the trend of underperforming their 15-year growth trend. Vermont saw its revenues increase by 5.8 percent, the third-best in the country, while Maine’s revenue grew 0.3 percent over its 15-year trend.
Massachusetts was down 0.3 percent, while Rhode Island was down 1 percent and Connecticut was down 2.3 percent.
New Hampshire is like many states as it found itself facing one of its most difficult budget-crafting sessions last year. This was the result of declining revenues from budget cuts, disappearing federal pandemic aid and commitments, such as the 12 percent pay increase for state workers after several years without any increases and increases in provider payments throughout the Medicaid system.
“Many states are reporting that their budgets are structurally imbalanced, with insufficient recurring revenue to support recurring expenditures,” the authors note.
They also warn that federal changes could have an impact on future state budgets. Changes to Medicaid and the Supplemental Nutrition Assistance Program, increases in tariffs, shifts in immigration policy and reductions to the federal workforce could further disrupt state budgets, they note.
The study indicates that tax collections for fiscal 2025 vary widely around the country, as some states had significantly higher year-over-year results, like Oregon at 22.1 percent and Vermont at 9.8 percent, and some significantly below, like Nebraska at 12.5 percent and Alaska at 8.6 percent.
New Hampshire was 6 percent below its prior-year collections at $3.12 billion, or $197.7 million less than it collected in fiscal year 2024.
For the 2025 fiscal year, the state had a deficit of $67.3 million and tapped into its rainy day fund to cover the shortfall. The fund’s current balance is $225.2 million.
Revenue Types
Most states depend on personal income taxes, corporate taxes and general sales tax to produce the bulk of the money for state budgets, but New Hampshire does not tax personal income and eliminated its interest and dividends tax in the last biennium. The state also does not have a general sales tax, but has many different sales taxes on products like hotel rooms and meals, beer and tobacco, real estate sales, insurance premiums and utilities.
Nationwide, personal income tax revenues were down 7.2 percent, or $10.7 billion below their 15-year trend. Four New England states bucked that trend, with Maine and Massachusetts at 3.4 percent above the trend, Connecticut at 2.1 percent and Vermont at 1.2 percent.
Corporate taxes were 2.7 percent above the 15-year trend, or $954 million, with 25 states collecting more than their trend, and 21 states below.
New Hampshire has continued to experience declining business tax revenue beginning in the second half of the 2023 fiscal year.
For fiscal 2025, New Hampshire collected $1.1 billion, which is $115.3 million, or 9.5 percent, below what it collected the year before.
For the fiscal 2024 year, business taxes were down $41 million from the previous year, or 3.3 percent.
Currently for the 2026 fiscal year, business taxes are down $8.8 million, or 1.7 percent.
“One key question facing states is whether they can still afford the long-term budgetary commitments they made during the pandemic-era revenue surge, such as tax relief and pay raises for public employees,” the authors noted in the report.
The National Association of State Budget Officers note that for fiscal 2023 and 2024, there were the largest net state tax cuts ever recorded.
At the same time, lawmakers in 40 states approved pay increases from 2 percent to 12 percent for state workers in fiscal 2024.
Further, a range of federal policy changes have also caused the fiscal outlook to become more uncertain, the authors said.
“Tax revenue serves as the primary source of funding for most states,” the authors wrote. “By tracking tax revenue trends, Pew provides policymakers and analysts with insights into the long-term financial health of their states, because revenue directly affects states’ capacity to provide residents with core public services – such as education, health care and infrastructure – and to fund other policy priorities.”
Garry Rayno may be reached at garry.rayno@yahoo.com.