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|Budgeting for NH’s Long-Term Prosperity|
|Published Monday, March 20, 2017|
For the first time in 14 years, NH has elected a Republican to the corner office, and combined with Republican-led House and Senate chambers, the state may see different budget priorities and policy proposals. We will not know the specific priorities of the new governor and Legislature until the governor releases his budget proposal, due on Feb. 15. That’s also when lawmakers will begin to hammer out the final budget for fiscal years 2018-2019, which goes into effect July 1, 2017. Given the statements from legislative leaders and the bill topics filed, we can expect pushes for tax cuts on business, interest and dividend income and a constrained spending environment. We can also expect improving the state’s infrastructure, addressing the opioid crisis and strengthening the workforce to be key themes this session.
Although current tax receipts are above projections for this biennium, we will not know the exact revenue until the end of June. Additionally, business tax revenue is dependent in part on economic growth, and the economy may not continue to be this robust during the next biennium. An economic downturn both reduces business tax revenue and increases the strain on government services for people who lose jobs and spend down their savings. Lawmakers should be cautious about relying on a booming economy.
This budget cycle presents new challenges to state revenue and vital programs. New Hampshire will face reduced business tax revenue should the second round of approved tax cuts go into effect. Also, changes in the federal budget may curtail or eliminate funding previously relied upon.
In FY 2017, the bulk of state expenditures went to health and social services ($2.27 billion or 40 percent) and education ($1.42 billion or 25 percent). At the same time, more than 30 percent of NH’s revenue ($1.73 billion) came from federal sources and transfer payments. These federal dollars help fund an array of vital state government activities, including Medicaid, developmental and protective services for children, transportation projects and infectious disease control preparedness. Federal dollars also support the supplemental nutrition assistance program (formerly known as food stamps), home heating fuel assistance and other programs serving struggling families.
Policy experts and media commentators have speculated that federal policy changes may reduce funding for state-level programs. Given NH’s reliance on federal dollars to balance past budgets, such changes could substantially impact the ability of the Granite State to provide vital services.
Boosting the state economy and expanding the workforce will be major themes this session. By some measures, the state economy is doing well, but there are specific causes for concern.
New Hampshire’s job market has been steadily shifting toward service-related industries, creating jobs that traditionally offer lower wages and leave many Granite Staters without sufficient income for housing, transportation, child care, health care, food and other basic necessities.
Economic indicators convey some of these limitations. New Hampshire’s federal poverty rate in 2005 was 7.5 percent and had risen modestly to 8.2 percent in 2015, which is currently the lowest in the nation. However, the percentage of children enrolled in NH schools and eligible for free and reduced price lunches rose from 18.2 percent to 28.1 percent in the same period, according to the NH Department of Education. These statistics serve as a warning sign, as these children—the state’s future workforce—currently live in households experiencing some degree of economic distress.
There are a number of investments that could help boost economic security, such as ensuring access to affordable health care. Strategic investments in the education, health and well-being of NH’s children will help them bridge the opportunity gap and achieve future success, which in turn fuels the economy down the road.
Investing for Future Prosperity
The state budget reflects our values and priorities, and our decisions will affect the lives of all Granite Staters. This is the time to consider the opportunity and impact of investing in our shared future. New Hampshire’s sustained prosperity depends on policymakers’ commitment to maintaining safe and reliable public infrastructure, offering high-quality education, and promoting the health and wellbeing of all of its residents. These investments will require long-term vision and the courage to work in bipartisan partnerships to build a strong economy for present and future generations.
John Shea is executive director of the NH Fiscal Policy Institute, an independent nonprofit public policy organization in Concord. Learn more at nhfpi.org.
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