With a breath of relief, the House and Senate passed an $11.9 billion budget to fund state services for the next two years, beginning July 1. Compared to what was appropriated and spent in the previous budget period, the $11.9 billion represents an increase of almost $660 million, or 5.9 percent. This was the largest increase the budget has seen since prior to the Great Recession.
How is this so? Revenues (particularly our corporate, meals and rooms, and real estate transfer tax receipts) have grown more quickly than anticipated. Consequently, budget makers were in the relatively unique situation where they could think about strategically investing in state services and how to provide tax relief to property owners and businesses. This is in contrast to finding ways to cut the budget, which has been the status quo for the last 10 years.
Going into the budget process, there was a general sense that the business community was concerned about four big issues: Workforce development to offset the workforce crunch; investment in treatment, recovery and public safety to help manage the opioid crisis; adequate funding for the state’s Medicaid program to limit business exposure to cost-shifting from public to private premium costs; and infrastructure costs.
If you dig down into the details, what does this budget mean to NH’s businesses?
At the 30,000-foot level, the big winner in the budget process was health and human services, which accounted for almost half of the total increase in spending. This included increasing funding to address the growth in the state’s Medicaid program, along with targeted investments in services to support the Division for Child and Youth Services, which came under fire for being poorly resourced to manage child abuse and neglect cases. It also included mental health services and increases in rates for a number of long-term care providers.
Health and Human Services received a disproportionate share of the increase in state spending (50 percent of the total increase) relative to what they currently spend (40 percent of the total spent in FY 2016-2017).
Corporate Taxes
New Hampshire is generally considered to have one of the most business-friendly tax environments, largely due to the fact the state has no broad-based income or sales taxes. It does, however, have one of the highest corporate tax rates in the country. In the last budget session, budget makers reduced the business profits tax and the business enterprise tax.
These tax reductions were continued, and additional reductions to taxes will take effect on Dec. 31, 2019. The cumulative effect over four years would be an $81 million reduction in taxes paid by NH businesses.
Workforce
The budget includes a reorganization of the state’s economic development activities to help grow NH’s business community. It places additional emphasis on coordinating workforce development activities to expand and improve the state’s workforce. All-day kindergarten, supported by the NH Business and Industry Association, was absent from the final budget, but a bill was passed that supports kindergarten with receipts from an expansion of gambling to include Keno.
The budget also includes a number of increases in spending for specific workforce initiatives. Included in this bucket are increases in appropriations for the Community College System, the establishment of a fund to support the development of K-12 infrastructure across the state, as well as a new scholarship program for NH residents attending NH-based higher education institutions. Some of these dollars might flow to the state’s University System institutions, but no additional dollars were targeted specifically to the University System of NH.
Advocates say substance misuse significantly reduces worker productivity. The budget increases funding to the Governor’s Commission on Alcohol and Drug Abuse Prevention, Treatment and Recovery, which provides funding to substance use treatment providers, funds county drug court systems, provides resources to construct a substance abuse treatment facility at the Sununu Youth Services Center in Manchester and provides funding for five new state trooper positions to support drug interdiction efforts.
Infrastructure
Infrastructure investments in the state were a constant theme in budget negotiations from the outset. In the end, there was little additional funding established in the 2018-2019 budget.
While there were additional resources allocated for one time investments in local highway aid ($30 million) and municipal bridge aid ($6.8 million), as well as the establishment of a Public School Infrastructure Revitalization Trust Fund ($8.5 million), these were funded from anticipated surpluses from the 2016-2017 budget period.
Steve Norton is former executive director of the NH Center for Public Policy Studies, a nonprofit, non-partisan organization in Concord.
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