Policy Points - Special Edition
New Hampshire Center for Public Policy Studies

August 2008

The Next State Budget Conversation.

Important New Analysis from the Center.

New Hampshire’s Next Budget Conversation: Spending and Revenues in 2010-2011

It will come as no surprise to those experienced with the state budget that New Hampshire is facing a potential budget deficit in the next – 2010 and 2011 – biennium. In the 1990’s, the state’s independent auditor declared that the state had a structural deficit – a situation in which natural growth in expenditures exceeded natural growth in state revenues. As a result of this ‘biennial budget problem’, every two years the legislature must carefully address spending growth and, in most biennia, find new revenue to balance the budget.

The upcoming biennium may be different, and in important respects, more problematic than in the past. As a result of a changing revenue picture, states across the country are adjusting both revenue and spending plans to account for the economic dislocation associated with the current economic downturn. New Hampshire is doing likewise.

The Center's analysis is unique in New Hampshire, because we examine not only the potential shortfall in state revenues, (which could be as much as $286 million in the next biennium), but also that State's growth in demand for state services and potential increases in the state’s financial participation in local education costs. These trends will require the Governor and the Legislature to make changes in the state budget totaling between $372 and $495 million dollars over the next three years, beyond current state law.

The Center's analysis is not meant to predict what will happen in the future. Instead, it provides policymakers with an estimate of the scale of changes that will have to be implemented to balance the budget in the next biennium in the absence of a strong economic recovery.

Spending reductions will obviously be an important part of the conversation. And while issues such as controls in administrative costs will be a component of that discussion, the state will have to look to more significant changes in spending, perhaps taking the lead from other states pursuing the privatization of state activities. Spending reductions alone, however, will not be sufficient to resolve the budgetary problems. Any budgetary conversation will also, therefore, have to include discussions about revenues – further capitalization of the state’s activities, increases in tax rates, and the introduction of gambling or a legacy tax, as examples.

Policy Points informs you about our current research topics, including highlights of the important policy discussions going on in and around the State of New Hampshire. Any links to other websites do not necessarily represent an endorsement of that organization by the New Hampshire Center for Public Policy Studies

To find out more, please visit us at www.nhpolicy.org