September 4, 2008
NH Center for Public Policy Studies
Brief Description
It will come as no surprise to those experienced with the state budget that New Hampshire is facing a potential budget deficit in the next – 2010 and 2011 – biennium. In the 1990’s, the state’s independent auditor declared that the state had a structural deficit – a situation in which natural growth in expenditures exceeded natural growth in state revenues. As a result of this ‘biennial budget problem’, every two years the legislature must carefully address spending growth and, in most biennia, find new revenue to balance the budget.
The upcoming biennium may be different, and in important respects, more problematic than in the past. As a result of a changing revenue picture, states across the country are adjusting both revenue and spending plans to account for the economic dislocation associated with the current economic downturn. New Hampshire is doing likewise.
The Center’s analysis is unique in New Hampshire, because we examine not only the potential shortfall in state revenues, (which could be as much as $286 million in the next biennium), but also that State’s growth in demand for state services and potential increases in the state’s financial participation in local education costs. These trends will require the Governor and the Legislature to make changes in the state budget totaling between $372 and $495 million dollars over the next three years, beyond current state law.
The Center’s analysis is not meant to predict what will happen in the future. Instead, it provides policymakers with an estimate of the scale of changes that will have to be implemented to balance the budget in the next biennium in the absence of a strong economic recovery.
Spending reductions will obviously be an important part of the conversation. And while issues such as controls in administrative costs will be a component of that discussion, the state will have to look to more significant changes in spending, perhaps taking the lead from other states pursuing the privatization of state activities. Spending reductions alone, however, will not be sufficient to resolve the budgetary problems. Any budgetary conversation will also, therefore, have to include discussions about revenues – further capitalization of the state’s activities, increases in tax rates, and the introduction of gambling or a legacy tax, as examples.
Read full report here: Next Budget Conversion
Also, from WCAX:
ONCORD, N.H. (AP) – A think tank says New Hampshire could be dealing with up to a $495 million budget hole in three years depending on the economy and steps lawmakers take to address the problem.
The New Hampshire Center for Public Policy Studies says in a report the deficit could be as little as $156 million or as much $495 million.
Steve Norton, the center’s executive director, says the study compared historic spending trends and how the state recovered from the 2001 recession.
Norton says New Hampshire’s natural spending growth is higher than the normal growth in its revenues. He says that means lawmakers have to continually make adjustments even when the economy is healthy to keep the budget balanced.