The long wait to learn what Governor Maggie Hassan is putting into her budget will end on Thursday. Promptly at 10 o’clock in the morning, she will be introduced into Representatives Hall, and with little ceremony will be introduced again for the purpose of making her budget address.
This happens in New Hampshire every two years. And the Governor’s address sets the framework for the work the House and Senate will do before passing a two year budget in June for the fiscal year that begins on July 1.
After four budget addresses by John Lynch, Governor Hassan will be offering her perspective on how much money the state can anticipate raising over the biennium. And she will be telling New Hampshire citizens, by where she recommends spending money, what her priorities are for the state for the next two years and even further out.
The Governor’s revenue estimates are especially important to me as chair of the Senate Ways and Means Committee. She has the benefit of reams of reports and charts of state revenue going back decades. And she has appointed some advisers to help her track revenues and make predictions.
One factor is clear. The economy is anemic and will not produce large increases in funds from current revenue streams. One of her advisers suggested that growth in the first year of the biennium would be 1.7 percent and 2 percent in the second year.
Let’s be optimistic and say revenue will be up 2 percent in each year. With current general fund and education trust fund revenue around $2.2 billion for the year, 2 percent growth would bring in around $44 million in new money in the first year and a little more in the second year. An estimate of $90 million would be fair.
Before the Governor can factor that growth into the budget, she will need to count up the cost of tax changes and reductions made by the last legislature that become effective in the upcoming budget. That would include elimination of the internet tax, increasing the net operating loss carry forward and raising the threshold for small businesses to begin paying the business enterprise tax.
Those new statutes going into effect on July 1 will reduce revenues by an estimated $50 million. Without doing anything, the increased revenue from growth, $90 million, is halved or more by acts of the previous legislature.
Most pundits think the Governor will favor the licensing of one casino. That could produce a one time fee of as much as $80 million from the company selected to build a gambling facility. But there is wide disagreement of where the money should go: roads and bridges, University System of New Hampshire; mental health and other social service programs.
The caution for the Governor and others that want to get their hands on this money is two-fold. First, while the Senate seems poised to support a casino gambling bill there is great uncertainty if the House will go along. The House under Democrat and Republican leadership has always turned down bills to create casinos. What happens if there is no $80 million fee?
Secondly, the one-time licensing fee if expanded gambling is approved is just that, a fee you collect just one time. The money will be spent, and if you want to repeat that spending in the future, money will have to come from new or increased fees and or taxes or reduced spending in some other areas of state government.
Recently the Governor was quick to reject the idea of an increase in the beer tax. She has not said where she stands on an increase in the gas tax to fund construction and maintenance of roads and bridges. And what will the Governor do about the tobacco tax? I am sure she will allow the tax cut of 10 cents in this biennium to lapse adding a dime to the cost of a pack of cigarettes. Will she try to add another quarter or more to this tax?
There are dozens of issues and key decisions the Governor has made that will be part of her budget. New Hampshire fortunately has a requirement that our biennial budget must be balanced. This is the week the Governor tells us how we can meet that responsibility.
Next Tuesday, Feb. 19, she will again present her budget, but in more detail, to a joint meeting of the House and Senate Finance Committees. That will start the legislative process on the budget with the House getting first crack at it. In early April, the House will send the Senate its version of the budget.
The Senate benefits from this timing as members will know how much our largest taxes provided in March and April, two big months for revenue. After the Senate completes its work, there will be a conference committee of House and Senate members in early June. And if all goes well, we will have a compromise budget that can be accepted by the House and Senate.
Hopefully, by June 30 the budget will be back in the hands of the Governor … to sign into law, let it become law without her signature or veto it. Thursday’s speech is the formal launch of this critically important, every other year process.