1. 1 NH’s State Budget Conversation Steve Norton Executive Director, NH Center for Public Policy Studies February 5, 2009

2. 2 www.nhpolicy.org 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 Ryan Tappin “…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”

3. 3 When Will it End? (Economy.com)

4. 4 The 2010-2011 Budget Process and Biennium Jan 2008 June 30 th, 2010 July 1 st 2009 We are here June 30 th, 2011 2010-2011 Biennium 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. Currently facing a $100 million shortfall for this year ….

5. 5 How Does the State Spend its Money? Functional Expense

6. 6 How Does the State Spend its Money: Program Functions

7. 7 What Funds State Activities? The General Fund in 2008

8. 8 What’s the Future Look Like? 2010-2011? $500 Million General Fund Shortfall Over the Biennium

9. 9 To control spending: have to focus on …. Medicaid (~$450 million in general funds) Corrections (~$350 million in general funds) Local Aid (~700 million) –State Education Contribution ($500m?) –Local Retirement Costs –Catastrophic Aid to towns for special aid –School Building Aid –Meals and Rooms sharing Education Finance Reform –Adequacy defined, but will cost an additional $100 million in spending under current law. Layoffs will happen: 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.

10. 10 Revenue Options? Last Recession 1990? –BET created in 1994 –M&R 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 New Revenues? –Federal bailout –Gambling –Inheritance –Statewide Property tax

11. 11 Both Spending Reductions and Revenue Changes affect Businesses Spending changes impact NH businesses –LRGH impacted by Medicaid reductions –$350 million reduction in local aid results in a 12.5% increase in commercial property tax. Revenue increases can impact NH businesses –Meals and Rooms  Tourism –Business Tax  Location decisions, Jobs Tough choices that will have to be weighed carefully by the legislature.

12. 12 www.nhpolicy.org 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 “…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”