new hampshire center for public policy studies the new hampshire economy and the state budget...

New Hampshire Center for New Hampshire Center for Public Policy StudiesPublic Policy Studies

The New Hampshire Economyand the

State Budget

Douglas Hall

Prepared for the conference:

The Uncertain Economy and NH’s State BudgetJosiah Bartlett Center for Public Policy

May 21. 2001


Potential Budget Risksin an Economic Downtown

Structural Deficit throughout the economic cycle

Expenditures in Economic Downturn risk of spending 1-3% over budget limited to a handful of entitlement programs

Revenues in Economic Downturn risk of erosion of 5-10% of tax base some taxes more vulnerable


Beer Tax $12.180 $12.090Board and Care Fees $14.454 $11.953Business Profits Tax $110.981 $146.443Business Enterprise Tax $0.000 $94.354Estate & Legacy Tax $24.282 $56.368Insurance Tax $43.084 $59.336Securities Revenue $0.000 $25.513Interest & Dividends Tax $40.731 $65.522Liquor Sales $55.100 $86.015Meals & Rooms Tax $83.803 $149.777Park Revenue $7.259 $0.000Dog & Horse Racing $10.537 $3.487Real Estate Transfer Tax $32.319 $56.779Communications Tax $12.788 $47.794Tobacco Tax $38.169 $68.823Utility Tax $8.194 $9.974Court Fines & Fees $22.609 $22.845Savings Bank Tax $12.618 $0.000Other $33.064 $42.144"Medicaid Enhancement" $0.000 $87.145

Total Real Taxes/Revenues $562.172 $1,046.362

Revenue Source 1990 2000 General Fund Revenue

($ million)


2000Old Source

Old RateNew

SourcesIncreased

RatesBeer Tax $12.180 $12.090 $12.090Board and Care Fees $14.454 $11.953 $11.953Business Profits Tax $110.981 $146.443 $146.443Business Enterprise Tax $0.000 $94.354 $94.354Estate & Legacy Tax $24.282 $56.368 $46.973 $9.395Insurance Tax $43.084 $59.336 $59.336Securities Revenue $0.000 $25.513 $25.513Interest & Dividends Tax $40.731 $65.522 $65.522Liquor Sales $55.100 $86.015 $86.015Meals & Rooms Tax $83.803 $149.777 $131.055 $18.722Park Revenue $7.259 $0.000Dog & Horse Racing $10.537 $3.487 $3.487Real Estate Transfer Tax $32.319 $56.779 $39.745 $17.034Communications Tax $12.788 $47.794 $9.510 $38.284Tobacco Tax $38.169 $68.823 $31.621 $37.202Utility Tax $8.194 $9.974 $9.974Court Fines & Fees $22.609 $22.845 $22.845Savings Bank Tax $12.618 $0.000Other $33.064 $42.144 $42.144"Medicaid Enhancement" $0.000 $87.145 $87.145

Total Real Taxes/Revenues $562.172 $1,046.362 $718.713 $207.012 $120.637

Revenue Source 1990 2000


NH General Fund Revenues (Current $)

$0

$200

$400

$600

$800

$1,000

$1,200

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

State Fiscal Year

Mill

ion

s o

f D

olla

rs

Taxes and rates in place in 1988

Mediscam

New Taxes

Increased rates

$543

$719

$1,046


Growth from 1990 Levels

1.0

1.2

1.4

1.6

1.8

2.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

State Fiscal Year

19

90

= 1

.00

0

General Fund Expenditures

Gross State Product

General Fund Revenues(without Medicaid Enhancement)


NH General Fund Revenue as % of Gross State Product

1.8%

1.9%

2.0%

2.1%

2.2%

2.3%

2.4%

2.5%

2.6%

2.7%

2.8%

2.9%

3.0%

3.1%

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

Year


Growth in Comparison to the GSP, 1990-2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

120%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

State Fiscal Year

Re

lati

ve

to

Gro

ss

Sta

te P

rod

uc

t

Beer Tax Board and Care Fees

Dog & Horse Racing Court Fines & Fees


Growth in Comparison to the GSP, 1990-2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

120%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

State Fiscal Year

Re

lati

ve

to

Gro

ss

Sta

te P

rod

uc

t

Meals & Rooms Tax Tobacco Tax Real Estate Transfer Tax


Percent Growth 1991-2001

12.0%

35.3%

58.7%

46.0%

74.5%

93.9%

8.5%

15.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

General FundAppropriations

General FundRevenue

CPI &Population

PersonalIncome

Gross StateProduct

Pe

rce

nt

Inc

rea

se

Medicaid EnhancementNew TaxesIncreased RatesGrowth

71.6%


1991-2001 Change in General Fund Appropriations

$12.62

$21.32

$16.58

-$5.85

$8.61

-$10

-$5

$0

$5

$10

$15

$20

$25C

on

sta

nt

19

91

$ P

er

Ca

pit

a

RetirementSystem

Contributions

Department of

Corrections

Medicaid Health Care

Provider Payments

Nursing Home and Home

Nursing Services

Rest of the General

Fund Budget


Potential Expenditure Risksin an Economic Downturn

Medicaid Health Care ($90m GF/$90m federal) expansion of eligibility to more families with

children in recent years may have reduced the risk

TANF Welfare ($5m GF/$30m federal) reformed welfare not tested in economic downturn federal participation is a fixed block grant, not a

percent of spending

Unemployment Benefits not a risk to the General Fund but to the assets of

the Trust Fund


Monthly Count of NH Families with Children on Medicaid

0

5,000

10,000

15,000

20,000

25,000

30,000

Apr

-67

Apr

-69

Apr

-71

Apr

-73

Apr

-75

Apr

-77

Apr

-79

Apr

-81

Apr

-83

Apr

-85

Apr

-87

Apr

-89

Apr

-91

Apr

-93

Apr

-95

Apr

-97

Apr

-99

Month

Fam

ilie

s

TANF/AFDC TANF/UP Medicaid Only


Potential Revenue Risksin an Economic Downturn

Business Profits Tax ($170m) highly leveraged tax base risk could be $50-75m

Business Enterprise Tax ($110m) no experience in an economic downturn, but

should be relatively stable

Rooms and Meals ($160m) could turn flat and jeopardize $10m growth

Other Sources generally unrelated to a moderate economic

cycle


General Fund Revenue from BPT & BET

$0

$50

$100

$150

$200

$250

$300

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

State Fiscal Year

Tax

Rev

enu

e ($

mill

ion

)

Business Profits Tax

Business Enterprise Tax

$91.6

$143.3

$146.4

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