What will Legislature do with surplus?
The New Hampshire state Legislature gets back to work this week. How will the state look to legislators who have been in session just one day since finishing up our regular session at the end of June?
A check on state finances is a first step. The state ended the last fiscal year on Jun. 30 with a surplus of $72.2 million. That money reflects the biennial budget approved by the Legislature back in June of 2011. Pundits suggested that the state faced a $600 million or even an $800 million deficit as budget negotiations got underway that year.
In the end, the budget approved in 2011 was a tough one but it did force the state to live within its means. The surplus also suggests that the New Hampshire economy is stronger and ready to grow in the months and years ahead.
The Legislature will decide what to do with the surplus. Many feel the surplus should go to the state’s Revenue Stabilization Reserve Account commonly referred to as our rainy day fund. It is our savings account which is looked at by bond rating agencies as a measure of the state’s fiscal health.
Normally, the practice is for surpluses at the end of a biennium to automatically go to the rainy day fund. But Legislatures in the past have diverted money from surpluses to fund other priorities. Still, the rainy day fund had grown to nearly $90 million in 2009. The next year, in the depth of the recession and with state revenues flagging, Gov. John Lynch and the Legislature took $80 million from the rainy day fund to cover budget shortfalls leaving a balance of just $9.3 million.
The way the budget is written the $72.2 million surplus does not automatically go to the rainy day fund. Legislators will decide how much to set aside. No money has been added to the fund in nearly a decade and it is at its lowest level in 22 years. State House watchers will likely see a vigorous debate between those wanting to spend and those wanting to save.
The question for some: if we do not save when we have an unpredicted and unbudgeted surplus, when will we save? And the governor and Legislature can always take money from the rainy day fund if state revenues should fall dramatically.
On July 1, the state’s new budget biennium started. The results are in for the first six months of the two-year budget period and they are good. The goal was to take in $855 million in the last six months and the state received $872 million, providing $17 million or 2 percent more revenue than predicted.
Over that period, several revenue lines including business taxes (up 1.5 percent), meals and rental taxes (up 4.1 percent), liquor profits (up 5.8 percent) and the real estate tax (up 8.1 percent) brought in more than anticipated. Revenue from lottery profits and the interest and dividend taxes and the communications tax were below goal.
That is a pretty positive report on the last six months. But as usual, there should be concern over the December revenue numbers. Revenue was off by $6.3 million (3.3 percent) with $182.7 million coming in against a goal of $189 million.
In the first five of the six months of the new fiscal year, revenue from the real estate transfer tax exceeded the state plan. But in December, it produced $1.3 million below the goal of $8.9 million, off by nearly 15 percent. One should not take a single month to judge the overall revenue picture of one tax but the RET is a closely watched indicator of the strength of the economy.
The overall financial situation is good but bears watching. And for those looking for new spending in the 2014 legislative session, a non budget session, caution is urged. Our current “surplus” is very small and could be washed away with any economic slowing.
There are several hundred bills to deal with over the next five months. Most will be little noted and handled quietly through the legislative process. There are others, of course, which will draw much attention.
The push will continue for an increase in the gas tax with equal, possibly even greater opposition, from those who feel the Department of Transportation has enough funding now to do their job.
There are bills to expand the use of tax credits to foster economic growth, in one case, to help encourage companies to locate call centers in New Hampshire. The state spends money in two ways: writes a check to pay a bill; or, gives a tax credit thereby not collecting money that would otherwise be due from a group of taxpayers. Either way government pays and those paying taxes carry the burden.
And back again will be legislation to permit casino style gaming in New Hampshire to repeal the death penalty and to determine if and how the state will increase the number of people covered by health insurance paid for by the federal government.
It will be a busy year for legislators in Concord with much debate and many votes ahead.
Bob Odell, a Republican, is the New Hampshire senator representing Antrim, Bennington and Francestown, among other towns.