NH REVENUES

House Ways and Means Committee Sets Revenue Projections

Serving on the House The Ways & Means Committee means developing revenue estimates for NH.

Our General/Education Trust Fund estimate is $87 million below the Governor and $25 million below the agencies for the three years that include this year's final surplus and the two
-year budget being worked by the Finance Committee. For July16-June17, the fiscal year we are in now, we are $3 million below the agencies and $28 million below the Governor.

The Department of Revenue Administration has the lion's share of "agency" estimates, and gives us a fairly wide range for each tax. It's up to the members of the Ways and Means Committee to make the decisions about where they may be going.

Our ranking member of the committee Susan Almy of Lebanon, NH provides the following analysis of how we developed these revenue estimates.

The W&M estimate was unanimous. It is done by collecting as much data and opinion as we can get, then sitting down and having each committee member contribute their thoughts on what is influencing the changes we are seeing now in FY17 and expect or fear in the following two years. Then we all throw out
numbers, average them, think about it again, and vote on one or more options.

The primary problem is the business taxes. FY16 taxes (money in in July15-June16) were paid on FY15 economic activity. As it happens, national economic growth started to slow during mid-14-mid15, and
slowed more during last year's major election-year uncertainty. Businesses paid good taxes in FY16 on the FY15 activity, and set up estimates on that basis to pay during this fiscal year of FY17.

Few of them changed the estimates, they left them there till they file returns. As they began filing returns for their varied
fiscal years, more than usual asked for refunds, and produced new lower estimates.

We have had a large spurt in refunds, and we are not yet in the main filing period (March-April) for FY17. The DRA can't give us much information about the main filing period in time for the House budget to go out, but we intend to meet again to review the estimates on the 23rd and try to discern whether the risk seems lower.

If we guess too high, and the money isn't there after the budget is passed, the legislature will have to return and make cuts to budgeted programs, cuts that hurt more when you have to make up for 4 months of more of overspending.

What I think is happening is that part of the official surplus booked for FY16 is artificial, a construct of how accounting
works. We got extra taxes in 2016, more than we should have based on what the businesses owed. It is now seen as a surplus which can be used for one-time capital costs. But we are having to give part of that surplus back in refunds (and perhaps lower estimates) now. If we leave that money in an account for one-time uses, expenditures for basic operations in this next budget will be short-changed. And yes, all those tax cuts passed in recent years do not help the situation.