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The State Budget 20102011 Presentation to the NH Senate 172009

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Presentation to the NH Senate 1/7/2009 ' ... Early 1990's recession was much worse in New Hampshire than in the US. ... New Hampshire State Revenue Options: ... – PowerPoint PPT presentation

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Title: The State Budget 20102011 Presentation to the NH Senate 172009


1
The State Budget 2010-2011 Presentation to the
NH Senate 1/7/2009
Steve Norton Director, NHCPPS
…to raise new ideas and improve policy debates
through quality information and analysis on
issues shaping New Hampshires future.
2
All of our reports are available on the
web www.nhpolicy.org
Board of Directors Donna Sytek, Chair John B.
Andrews John D. Crosier William H. Dunlap Shelia
T. Francoeur Chuck Morse Todd Selig Stuart
Smith James Tibbetts Brian Walsh Kimon S.
Zachos Martin Gross Staff Steve Norton Dennis
Delay Ryan Tappin
New Hampshire Center for Public Policy Studies
…to raise new ideas and improve policy debates
through quality information and analysis on
issues shaping New Hampshires future.
3
2009
4
The Good News?
5
What is the State Budget?
6
NHs Budget
  • Biennial Budget 24 Months
  • 2 fiscal years per budget
  • Fiscal year runs from July 1 June 30th

7
Focus is Generally on the General and Education
Trust Funds
Includes funds for education trust
8
First, some history
9
The General Fund in 2008 (est)
10
NHCPPS Model Showing a 300m Revenue Shortfall
Will the state have to revise revenue estimates
down?
11
The 2008-2009 Biennium
You are here
July 1st 2007
July 1st 2008
June 30th, 2009
January
With an unresolved GF deficit Of 125-150 Million
12
Whats Next for 2009?
  • Budget has been squeezed with relatively
    limited impact to program areas.
  • Next round of budget cuts will depend on April
    business taxes and federal government decisions
    r.e. bailing out states.
  • Next round of budget changes unlikely to avoid
    significant program impact.
  • Rainy day funds are available, but it is likely
    to rain harder in the next biennium.
  • Significant constraints in 2009 mean that
    traditional approaches to constraining
    expenditures at the margin are not available for
    2010-2011.

13
The State Budget Context for 2010-2011
  • Economic Dislocation
  • Primary Budget Drivers
  • Medicaid
  • Retirement System
  • Corrections
  • State Participation in Local Education
  • Uncertainty
  • Very little information on business revenues to
    project future.
  • How low will we go?

14
When Will it End? (Economy.com)
15
Consumers arent (and maybe wont) spend
disposable income
16
A 1990-1991 style recession, without tax changes,
equals no State Revenue growth for five years
17
Economic Change and Revenue? 2010-2011?
500 Million Biennium Shortfall
18
Drivers Unlikely to Slow
19
NH Initial Claims are on the rise again.
Source NH Dept of Employment Security
20
More inmates means more prison capacity
Source NH Dept of Corrections and Census Bureau
21
NH Retirement System Hit Hard by Stock Market
Losses
Source NHRS CAFR
22
The 2010-2011 Budget Process
  • November Agency Budget Hearings scheduled for
    November 20, 21 and 24
  • December Senate House organized on December
    3rd legislative leadership makes committee
    assignments Governor begins to craft budget
  • Late January Governors budget is being
    finalized
  • February Governor presents budget to the
    Legislature on February 15th later in the month,
    House Finance Committee begins deliberating
  • March House Finance Committee takes action
  • Negotiations until June 30th …. ?

23
The 2010-2011 Budget Process and Biennium
You are here
2010-2011 Biennium
Jan 2008
July 1st 2009
June 30th, 2011
June 30th, 2010
Decisions for 2010 and 2011 will be made in the
next 6 months and policy changes will have to be
implemented now, not later to meet budget
obligations.
24
Agency Maintenance Requests (Have Come In)
  • Maintenance Requests ask What do you have to
    spend to maintain existing services?
  • Agencies Answered 12.5 increase from 2009 to
    2010.

25
Deficits
26
Spending
27
State Appropriated 5.2 Billion in 2007 (all
funds)
4
28
(No Transcript)
29
Levels of budget compulsion and discretion
Most
  • Federal constitution
  • (e.g., elections for federal offices)
  • State constitution
  • (e.g., indigent defense, Secretary of State,
    adequate education)
  • Federal law or regulation mandate on all
  • (e.g., special education)
  • Federal law or regulation - quid pro quo
  • (e.g., Medicaid, child care, vocational
    rehabilitation)
  • Court order against the State
  • (e.g., state prison system, community
    developmental services, juvenile services)
  • State law mandating the activity
  • (e.g., vital records, parole board hearings, dam
    inspections)
  • Revenue-producing and deficit-neutral activities
  • (e.g., DRA auditors, child support enforcement,
    liquor stores)
  • State or federal law authorizing activity
  • (e.g., school building aid, hunter education
    program)
  • Agency regulation authorizing activity
  • (e.g., complaint investigations at the Veterans
    Home)
  • Historic practice without specific authority in
    law or regulation

Least
30
Changing Spending Process (e.g. Methods)
  • Many different methods for changing spending
  • Shift Financial Burden to property tax by
    eliminating programs supporting local government
    finances, offsetting shift with a state-funded
    property tax circuit breaker for low income.
  • Reduce administrative costs
  • Eliminate Government Activities no longer
    reasonable in this climate
  • State Library
  • Nursery
  • Last In, First Out
  • 10 Across the Board Reduction
  • Eliminate whole programs that could be later
    reinstated
  • Large scale reform of programs (longer-term)

31
To control spending have to focus on ….
  • Primary drivers
  • Medicaid
  • Corrections
  • Local Revenue Sharing including Catastrophic
    Aid, Building Aid and Meals and Rooms sharing
  • Education Finance
  • Adequacy defined, but will cost an additional
    100 million in spending under current law.
  • Employees as major driver of corrections, state
    hospital (and salaries and benefits?)
  • Public system transformational changes may take
    too much time to impact 2010-2011.

32
A 10 Reduction in Major expenditure areas
raises 111 million in GF
33
Examples Line Item GF Reductions
34
Transformational Policy Opportunities
  • Medicaid Care Management Significantly Broaden
    management of care (utilization)
  • Retirement
  • Tiered system (new vs. old employees)
  • Contribution amounts
  • Corrections
  • Re-entry
  • Home-confinement
  • County vs. State management of the system
  • Reimplementation of good time

35
What are the Revenue Options Now?
36
How did the State respond to the 1990 recession?
  • Early 1990s recession was much worse in New
    Hampshire than in the US.
  • Changes to state taxes were significant
  • BET created in 1994
  • MR increased from 7 to 8 in 1990
  • RETT 30 'temporary surcharge' in 1990
  • Communications Tax revamped in 1991
  • Utility Tax revamped in 1992
  • Tobacco Tax increased in 1990 and again in 1991
    (17 cents to 21 cents to 25 cents)
  • Medicaid Enhancement Revenue from 50m in 1991 to
    250m in 1994

37
New Hampshire State Revenue Options
  • Increase Ad Valorem Tax Rates
  • Index per Unit Taxes to Inflation
  • Increase the Tobacco Tax
  • Federal Bail-Out including Medicaid Enhancement
    Revenue or FMAP increase
  • New State Revenue Sources
  • Estate Legacy
  • Amusement Tax
  • Luxury Tax
  • Gambling
  • Capital Gains

38
5 Increase in Ad Valorem Taxes (2008 Revenues)
All data in Millions of 2008
Dollars Business Profits Tax 19.1 Business
Enterprise Tax 11.5 Meals and Rooms
Tax 10.7 Interest and Dividends
Tax 6.7 Real Estate Transfer
Tax 5.8 Communication Service Tax 4.0
57.8 Million
39
Extra 2008 Revenue If Per Unit Taxes Had Been
Indexed to Inflation for Five Years
All data in Millions of 2008 Dollars Court
Fines and Fees 4.6 Board and
Care 3.0 Beer Tax 1.9 Electric
Consumption Tax 1.0 Dog Horse
Racing 0.5 Gas Road Toll
Tax 20.9 MV Registrations 11.4
40
NH Cigarette Tax Increase of 25 cents.
Increase in the Tobacco Tax on Cigarettes at
Current Annual Sales Cents per Pack
Increase 0.25 38m
41
New (and Renewed) Revenue
All data in Millions of 2008 Dollars Estate
Legacy tax at 8 24.0 Amusement Tax at
5 32.0 Luxury Tax (Example 10 on Luxury
Homes, 500K) 60.0 Gambling (Video Slot
Machines) in New Hampshire
100-200 Capital Gains Tax at 5 0?
42
Existing Revenue Enhancements and 10 Spending
Cuts are Likely Not Enough
43
Existing Revenue, Spending Cuts, Federal Bailout
and New Revenues Likely Required
44
There is no crystal ball. But ….
  • Maintenance requests submitted in November
    suggest a huge deficit (over 1 billion).
  • If revenues are flat (no declines!) and the
    Governors request for a 97 (of 09) and 100
    (of 09) ? An estimated 231 million problem
    remains.
  • Demand for services will increase (given economic
    conditions).
  • As in previous recessions, additional revenue
    (federal and state) and spending constraints will
    be necessary.
  • Using the budget process to implement policy
    change will delay savings significantly,
    potentially out beyond 2010. Policy change needs
    to occur sooner rather than later.

45
All of our reports are available on the
web www.nhpolicy.org
New Hampshire Center for Public Policy Studies
Board of Directors Donna Sytek, Chair John B.
Andrews John D. Crosier William H. Dunlap Shelia
T. Francoeur Chuck Morse Todd Selig Stuart
Smith James Tibbetts Brian Walsh Kimon S.
Zachos Martin Gross Staff Steve Norton Dennis
Delay Ryan Tappin
…to raise new ideas and improve policy debates
through quality information and analysis on
issues shaping New Hampshires future.
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