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Building a State Budget for an Uncertain Economy

Published Tuesday Feb 28, 2023

Author Phil Sletten


Over the next five months, NH’s policymakers will be working to build the state’s next two-year budget to fund critical public services.  

If the economy slows, there are several key risks to state revenues. Simultaneously, economic supports will become even more important to supporting the well-being of NH residents and to boost the economy overall. 

Recession Not a Guarantee

While the risk of a recession is uncomfortably high, the economy still has some substantial strengths.  

In 2021, the number of NH residents employed nearly matched that of the 2019 pre-pandemic peak. While employment would have likely been higher without the COVID-19 pandemic, this rebound has been rapid. Median household income in NH grew robustly between 2019 and 2021, even after adjusting for inflation.  

Additionally, residents may have more cash in reserve to face higher inflation and economic uncertainty. Households accumulated savings from both pandemic-related aid and by reducing their spending, particularly on services such as eating out or seeing movies and shows, during the first year of the pandemic. Using pre-pandemic trends, the U.S. Federal Reserve estimates  households overall have more savings than they would have had without the pandemic, totaling $1.7 trillion more in savings nationally in mid-2022. 

Still, those savings are not distributed equitably among households nationwide. The top quarter of income earners held excess savings of $825 billion, nearly half the total, while the bottom quarter only had $92 billion.  

In early November 2022, about a third of NH adults surveyed by the U.S. Census Bureau indicated it was somewhat or very difficult to pay for usual household expenses. National credit card debt has also risen sharply in 2022, and recently published data from the Urban Institute estimated about a quarter of NH households do not have $2,000 in emergency savings available.  

Supporting Families

Several iterations of independent research from the U.S. Congressional Budget Office and Moody’s Analytics all indicate that the most effective forms of economic stimulus are those targeted at people with low incomes. Households with lower incomes are more likely to spend money quickly than households with higher incomes, meaning the well-being of individuals and families with low incomes can substantially affect the economy. 

Food assistance through the Supplemental Nutrition Assistance Program (SNAP) has a particularly stimulative economic impact, with Moody’s estimating a $1.61 boost to the economy for every dollar invested in SNAP in 2021. 

Moody’s also projected that expansions to unemployment compensation, energy assistance for households with low incomes and both the Earned Income Tax Credit and the Child Tax Credit would provide substantial returns on investment during 2021, adding more than a dollar in economic growth for every dollar spent. 

In contrast, Moody’s estimated that tax reductions for dividends, capital gains, corporate income and business net operating losses would generate less than $0.40 in economic activity for every federal dollar used. 

As projected, assistance programs stimulated the economy in 2021. Food insecurity during the last three years declined significantly in NH, despite the pandemic’s massive impacts on employment.  

Nationally, the child poverty rate, as calculated by the Supplemental Poverty Measure, was nearly cut in half in 2021 relative to 2020, which followed another decrease from 2019. 

Planning for Uncertainty

Weak points in the current economy could put some state revenues at risk. The state’s largest tax revenue source, the Business Profits Tax, is particularly reliant on the corporate income of large, multistate entities. Corporate profits nationally soared during the pandemic, helping boost NH’s revenues, but those profits may plummet in a recession. 

Policymakers have also repeatedly reduced the Business Profits Tax rate in recent years, lowering the relative amount of funding available for public services. 

Additionally, a weaker economy would likely mean a greater need for state services. Medicaid, housing assistance and other programs can be critical when people lose their jobs but still need to pay monthly bills and care for their children.

Phil Sletten is the research director at the NH Fiscal Policy Institute, an independent, nonprofit, nonpartisan public policy research organization based in Concord. Learn more at

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