Pandemic Haunts State Revenues

Unaudited state revenue for the recently completed 2020 fiscal year is $142.5 million below what was budgeted.

Business taxes and rooms and meals taxes took the biggest hit from the economic slowdown brought on by the coronavirus pandemic.

The revenue report for June from the Department of Administrative Services is based on cash received and will be adjusted later this month to reflect more accurate numbers. The numbers will also be audited as part of the state’s comprehensive audit, which is released in December.

If the numbers do not change significantly, the shortfall would be less than 6 percent of the total general and education fund revenue of $2.626 billion, which would trigger an increase in business taxes under the budget laws passed during the last session.

Gov. Chris Sununu and House Republicans pushed to change the law this session, which ended June 30, but Democrats said no immediate adjustment was needed and lawmakers should wait until 2021 to address the issue.

The revenue shortfall would need to be $157.6 million to trigger the rate increase, according to information from Administrative Services.

Under the preliminary report, business taxes were $116 million below projections of $795 million for the fiscal year, or about 15 percent, while rooms and meals taxes were $43 million below projections of $368.5 million.

Also, below plan were interest and dividends tax returns and securities revenues. For the fiscal year, interest and dividends were $8 million below projections and securities revenues were $3.4 million less than anticipated.

The losses were offset by tobacco, insurance premiums, and lottery revenues that were $26.5 million higher than anticipated.

Liquor and beer revenue, as well as the real estate transfer and communications taxes, and court fines and fees were slightly below projections.

For June, the last month of the fiscal year, revenues were $42 million below plan, with business and rooms and meals taxes the most impacted by the coronavirus.

The business enterprise and profits taxes were $35.2 million below estimates and the rooms and meals tax revenues were $13.7 million below estimates.

The shortfall for business taxes would have been larger but an executive order from the governor delayed payment for some businesses due to the coronavirus pandemic.

The interest and dividends tax was $10.4 million above plan for the month, mostly due to a similar paying delay from the April deadline due to the pandemic.

Most other levies for June were slightly below projections.

Total revenues for the 2020 fiscal year were $186 million less than they were for fiscal 2019, with business taxes, $162 million less and rooms and meals returns $22.7 million less.

Most restaurants and lodging establishments were closed under Sununu’s stay-at-home order, and few air travelers reduced the use of rental cars, which is included in the rooms and meals levy.

All non-essential businesses were closed under the order, reducing profits and business activity that led to the shortfall.

The House Ways and Means Committee estimated the revenue shortfall would be from $125 million to $199 million for the 2020 fiscal year and from $230 million to $395 million for the fiscal year 2021.

Recently, Sununu said his office believes the shortfall would be $182 million for the fiscal year 2020 and $355 million for 2021.

Sununu and others hope Congress will approve additional pandemic funding with money for states, counties, and municipalities to help cover revenue shortfalls from the pandemic.

The U.S. Senate and House have yet to act on any stimulus and relief plan to provide help for the revenue shortfalls. The state received $1.25 billion in federal CARES Act funding but the money cannot be used to cover revenue shortfalls for governmental entities.

Garry Rayno may be reached at garry.rayno@yahoo.com.