By GARRY RAYNO, InDepthNH.org
CONCORD — If Senate budget writers were looking for a silver bullet to help undo some of the draconian cuts in the House budget, they did not find one Wednesday.
Department of Revenue Administration Commissioner Lindsey Stepp told the Senate Ways and Means Committee Wednesday she is less confident about revenue projections for the next two years than for any of the 15 years she has worked for the department.
“At this point, the level of uncertainty has taken my confidence to the lowest level,” Stepp said, “not necessarily concerned as we saw such a tremendous growth in taxes after the pandemic, we anticipated a resetting to happen at some point and by all indications it is happening.”
She told the committee businesses are pulling back and adjusting downward what they believe they will owe and that has been reflected in lower payments in April.
The information her department receives is like looking in the rear view mirror, she noted, while some of the trade groups coming later in the day should have more real time information.
She said if you remove the pandemic years with the huge increase in revenues and look at the revenues in fiscal 2019 to fiscal 2025, it is a growth of $200 million, which is a yearly 5 percent increase.
“We are now in a more normal curve,” Stepp said, “revenues are now back to more normal behavior.”
Sen. Cindy Rosenwald, D-Nashua, noted some economists are predicting a recession this year, and wondered when state revenues would be impacted if one happens in 2025.
Stepp said traditionally when there is an economic slow down, New Hampshire does not fall as far as other states, but takes a longer time to recover due the makeup of the tax system.
She told the committee the business taxes are seeing companies resetting to account for lower earnings.
The returns are impacted by supply restraints, tariffs, low unemployment and the federal interest rate changes.
“There is quite a bit of economic uncertainty at this point, and businesses feel that uncertainty and we’ve seen some lower April payments,” Stepp said. “If things settle down, the stock market settles down and businesses become more confident, they will begin to add growth.”
Her estimate for business taxes, which have been running about 15 percent below projections, will produce between $1.06 billion to $1.1 billion this fiscal year and then grow between 2 to 8 percent in each of the next two fiscal years.
Business taxes are the largest tax source of money for the state.
The second largest source of tax revenues is the rooms and meals tax which has been running about 3.6 percent ahead of estimate for this fiscal year and 2.7 percent ahead of last fiscal year.
Stepp predicted the total rooms and meals revenue for this fiscal year would be between $477 million and $478 million with zero to 5 percent growth in fiscal 2026 and 2 percent to 5 percent growth in fiscal 2027.
The President of the NH Lodging and Restaurant Association, Mike Somers told the committee that the revenues are softening as the hospitality industry is feeling the effects of inflation and a slowing economy.
“The industry is in a tough spot right now,” he said. “As a general rule we are still recovering from COVID that so devastated our industry with many still carrying a bundle of debt and (not recovering) lost staff.”
There have been a lot of cancellations and downsizing from leisure travelers after a huge increase right after the pandemic, Somers noted.
He said consumer sentiment is down, prices are high, concerns about tariffs lead to market volatility and noted the economy contracted a bit in the first quarter of the year.
Inflation increased prices, which he said means increased rooms and meals revenue even though the market may be slowing. But he said he expects hotel prices to go down a little bit, which should help, due to competition.
And he said rather than flying to Europe, more people are planning to vacation locally.
But he said Canadian visitations have fallen significantly as they do not care to be the 51st state, referring to President Trump’s repeated statements about making Canada the United State’s 51st State.
Stepp said Canadian visitations are important to the state’s summer tourist seasons and international travelers impact the fall foliage season, and both are down from their usual interest this year.
Somers told the committee restaurants are a leading indicator for the economy and they have seen quite a drop in customers the last six to eight months.
“The next two years will be challenging for the industry with the uncertainty of the impact of tariffs on costs of goods and equipment,” Somers said. “Consumers being more cautious in their spending and a likely downturn in international visitors, it will be challenging with any certainty what lies ahead.”
He said the industry would be excited if business was flat or slightly up. “If the weather is nice and warm and not a ton of rain on the weekends,” Somers said, “it will be a great season.”
He also said World Cup soccer is coming to Massachusetts in 2026, and there should be some spillover to New Hampshire with those events.
Stepp said the tobacco tax has been in a downward trend for some time, and will finish the fiscal year about $24 million or 16 percent below projections and $7 million less than a year ago. She estimated the levy would produce about $183 million to $184 million this year.
She also projected over the next two years it would continue the downward trend by -5 to -3 percent in fiscal 2026 and from -3 percent to flat for the 2027 fiscal year.
“We are seeing a decrease in stamp sales but an increase in other products,” Stepp said, as less people smoke cigarettes and turn to e-cigarettes or loose tobacco products.
She said New Hampshire’s tobacco tax is still less than in surrounding states.
The communications tax on two-way communication is also trending down as more and more people give up their landlines, Stepp said.
She predicts the tax will produce from $29 million to $30 million this fiscal year and will range from negative growth of -3 percent to flat for both 2026 and 2027 fiscal years.
Stepp said the real estate transfer tax would produce between $206 million and $211 million this fiscal year, which is 2.4 percent below estimates, but $17 million more than last year.
She said with high mortgage rates, high prices and a low inventory, she believes the levy will be about -5 percent of this year’s total for 2026 and -5 percent below that year’s total for 2027.
Robert Quinn, executive director of the NH Association of Realtors, said that from March 2019 until March 2025 the inventory of homes on the market in New Hampshire dropped 60 percent.
While that is a significant drop, the inventory of residential properties has been trending down for some time, he noted.
The medium price for a home in New Hampshire is $515,000 and with higher mortgage rates many people just cannot afford to get into the market, Quinn said.
The only thing that will really make a difference, he said, is to build inventory so that more is available so the prices will come down and be more affordable.
The best news the Senate Ways and Means Committee received was from the Lottery Commission whose executive director, Charles McIntyre, said they have increased their revenue projections for 2026 and 2027 by $20 million each year, mostly from returns in historic horse racing machines at charity gaming facilities.
The committee will meet again next Wednesday to begin voting on their revenue figures for the upcoming biennium so the Senate Finance Committee will know how much money they have available.
Garry Rayno may be reached at garry.rayno@yahoo.com.