Understanding and Explaining The New Hampshire State Budget Charlie Arlinghaus, Josiah Bartlett Center for Public Policy

New Hampshire Operating Budget

New Hampshire State Budget 24 month budget 2 one year components Balanced Budget law July 1 – June 30 Fiscal Year Capital and Operating separate

Balanced Budget Law RSA 9:8-B Each fund must be balanced Expenditures for biennium balanced by Estimated revenue Money remaining from prior biennium Bonding (debt) prohibited for “operating expenditures”

Education Trust Fund Created in 1998 Response to Claremont case Transparency re: tax increases Not a real trust fund Transfers to and from General fund Statewide Property Tax Separate or Combined?

General and Education Revenues Combined to Balance as if one fund Diverse basket – 10 sources 81% FY 2010 - $1,980M (2343-363) Business combined $611M – 31% Meals and Rooms; Tobacco; Liquor; Int/Div; RETT; Insurance; Communications, Lottery Medicaid “enhancement”

“Unrestricted revenue”: $1,853M (not including state property tax) Business Taxes - $504 – 27% Meals and Rooms - $232 – 12.5% Tobacco - $244 – 13% Liquor - $120 – 6.5% I & D - $84.5– 4.5% Real Estate Transfer – $84.5 – 4.5% Insurance – $87 – 4.5% Communications - $80 – 4.3% Lottery - $66 – 3.5% Medicaid Enhancement - $118 – 6% Other: Court fees, securities revenue, utility taxes, beer tax, utility state property tax, racing, tobac. settlement

Spending (44%) Education: Trust fund ($958m) plus Just the general fund – 6 Categories General Government - $324M – 21% Justice $227M – 15% Resources $41M – 3% Transportation $1M – 0.1% (highway, turnpike funds) Health and Social $765M - 49% Education $201 – 13% (plus education fund)

Spending (100%) The Six Categories (All Funds) General Government - $555M – 10% Justice $691M – 12% Resources $344M – 8% Transportation $566M – 10% Health and Social $2087M - 36% Education $1502 – 26%

This Fund and That Fund Total $11.5 billion – 2 years General Fund - $3.2B* – 30% (was 31%) Federal Funds - $3.7 -32% (was 29%) Education Fund - $1.9B – 17% (was 17) Other “Other Funds” - $1.9B – 17% (15) Highway Fund - $627M – 5.4% (5.4) Turnpike Fund - $155M – 1.5% (1.5) Fish and Game - $27M – 0.2% (0.2)

Employee costs 12,000 classified @ 45,800 Wages approx. $600M Benefits approx $250M Retirement approx $50M $900M = 15% of annual costs

Local Aid? 2009 – Education 1.017B 2010 – Education 1.026B 2009 – Municipal $125M 2010 – Municipal $93M Combined is 45% of GF/ETF Spending

Spending Trends How to Measure – 2 yr? Biennial? Over Twenty years: General Fund – 4.5% annual Biennial increase ave. 8.7% GF + ETF 10 yr ave. – 2.55% Inflation 20 yr – 2.6% 1989 adjusted – 1,025,000

Spending Growth 1989-2009

23% equals $2.2 Billion Recent Growth – Two Biennia 01: 819M-1102M (+283) (+34%) 02: 845-1374M (+529) (+62%) 03: 440-658M (+218) (+22%) 04: 1085-1148M (+63) (+6%) 05: 3391-4263M (+872) (+26%) 06: 2758-3006M (+248) (+9%) Total: 9338-11549 (+2211)(+23%)

How do we Balance? Surplus Statement Budget minus lapses (net approp.) Unrestricted revenue Fund balance plus ETF surplus Two year total not each

Rainy Day Fund Revenue Stabilization Reserve Account Surplus in, deficit out When does it rain? RSA 9:13-E Suspended last 2 budgets

The New Legislature, 2011 October 1, 2010/ November 1 Tentative Budget - DAS Governor’s Address – February 15 6 weeks: House, Senate, Conference Starting point: $600-900M?

“The Deficit” General and Education Funds 2010-2011: $887M “One-time” FY2011 fast forward: $691M $176.8 x 2=$353.7 Plus $337.4 temporary $691 Million Assume zero tax, zero spend (or+10.4)

Mind the Gap

Capital Budget and Debt Operating v. Capital $239 M General Fund v. General Obligation Self-supporting Debt Issued offset by Debt retired Growth $644M to $823M (28% - 4 yr) Differing Opinions

The $6.5 Billion Debt Mountain Pensions: 3.55B +? OPEB: $2.47 Billion Other Health: $496 million Judicial: $15.8 million 20 years ago – zero*

Treasurer: Bond Statement Information where? Monthly Revenue and Historical: http://admin.state.nh.us/accounting/reports.asp Budget Document (LBA) http://www.gencourt.state.nh.us/lba/indexbudget.html Treasurer: Bond Statement http://www.nh.gov/treasury/Divisions/DM/DMdocs.htm