Understanding the State

Operating Budget and

Shortfall

Charlie Arlinghaus,
Josiah Bartlett Center for Public Policy
1
New Hampshire Operating Budget

State Operating
Budget

Other funds:
Tax Revenues: •Highway
Federal Funds •General Fund •Turnpike
•Education Fund •Fish and Game
•“Other Funds”

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

3
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”
4
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?

5
Smokes and Liquor At The Track

A Different Basket of Revenue

100.00%
80.00%
Other
60.00% Tobacco
Liquor
40.00% Beer
Racing
20.00%
0.00%
1967 2010

6
“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

7
Ten-year Average = 3.0%
Regular Taxes 2001-2010 (no SPT, MET)

10
8.3
8
5.7 5.3
6 5.1
3.9
4 2.7 3.1 2.9
2.1
2

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-2

-4

-6

-8

-10 -9.1

8
This Fund and That Fund:
Total $11.5 billion – Biennial Budget

9
9
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%

10
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)

11
Employee costs – all funds
 Wages approx. $700M
 Benefits approx $250M
 Retirement approx $50M

 $1,000M = 17% of annual costs

12
Local Aid is 45% of spending
Transfers to Towns and Schools
(millions 2010-2011)

$2,049.70
$2,000.00

$1,500.00

$1,000.00

$500.00
$178.30

$0.00
Municipal Aid School Aid

13
Spending in Three Parts
Budget Components

5,270,000
State
4,270,000 Government,
2,255,527
3,270,000 Debt and
Retirement,
2,270,000 555,664

Local Aid,
1,270,000
2,459,018
270,000

Components
-730,000

14
Spending Growth 1989-2009

350%

300%
311%
250%

200%

150%
154%
100%

50% 74%
0%

Inflation General Fund GF + ETF

15
How do we Balance?
 Surplus Statement
 Budget minus lapses (net approp.)
 Unrestricted revenue
 Fund balance plus ETF surplus
 Two year total not each

16
Rainy Day Fund
 Revenue Stabilization Reserve
Account
 Surplus in, deficit out
 When does it rain? RSA 9:13-E
 Suspended last 2 budgets

17
How Deep is the Hole

The 2012-2013 Budget Shortfall

18
Mind the Gap
Mind The Gap

5100
5058
5000

4900

4800

Expenditures
4700
Revenues
4600

4500
4473

4400 4419 4369

4300
2006-07 2010-2011

19
Temporary Revenue: $597m
$600
Other One-
time, $90
$500

Borrowing,
$400 $156

$300

Federal
$200
Stimulus,
$351
$100

$0

20
An $820 Million Hole

$800.0
Education Increase,
$141.2
$700.0
Retirement, $83.6
$600.0
Local Aid $62.4

$500.0 Debt, $91.8

Building Aid,
$400.0
$92.5

$300.0
2011
$200.0 Operating
Shortfall,
$100.0
$348.5
$0.0

21
Solving the Problem
 Revenue growth?
 3% annual growth = $154 million

 Only $666 million to go

 12.6% cut?

22
The 4.5% and 5% Solution
 Economic Growth of 4.5%
 Cut Departments by 5%
 4.5% revenue growth = $232 million
 5% except local aid = $113 million
 Only $475 million to go
 475/2255 = 21%

23
Caps and Cuts
 Revenue at 3% average
 Adds $154 million
 Education Aid at 2011
 Saves $141.2 million
 Local Aid at 2011
 Saves $82 million
 Only $443 million to go
 443/2255 = 19.6%

24
Information where?
 Monthly Revenue and Historical:
http://admin.state.nh.us/accounting/reports.asp

 Budget Documents (LBA)

http://www.gencourt.state.nh.us/lba/indexbudget.html

 Treasurer: Bond Statement

http://www.nh.gov/treasury/Divisions/DM/DMdocs.htm

25