State finance leaders: ‘We’re in darn good fiscal shape’

New Hampshire Union Leader

Jan. 10--State Rep. Neal Kurk, R-Weare, chair of the House Finance Committee, set the stage for a fairly upbeat assessment of the state's financial picture when he introduced State Treasurer Bill Dwyer before a roomful of lawmakers.

"If he doesn't tell us we're in darn good fiscal shape, he should be fired," said Kurk, as he welcomed Dwyer to the Joint Economic and Fiscal Briefing on Monday morning, a daylong session with House and Senate lawmakers from committees that will soon start the budget-writing process for the next two years.

Dwyer, with a good sense of humor, got straight to the point. "Just for the record," he said, "We're in darn good fiscal shape."

Revenues are running way ahead of budget, mostly in the form of higher than expected receipts from business taxes, and the state appears to be headed for another surplus to end the fiscal year on June 30.

The only question is how big of a surplus, since over-budget spending, particularly in Health and Human Services, has become the major X-factor with six months to go in fiscal year 2017.

Michael Kane, the Legislative Budget Assistant, preceded Dwyer on the podium and laid out a somewhat rosy picture for the members of the Finance and Ways and Means committees of both chambers.

The two-year budget the state is working with assumed the treasury would end the fiscal year on June 30 with a cumulative balance of $300,000, which was the anticipated deposit into the state's rainy day fund.

Instead, the state is on track to end the two-year budget cycle on June 30 with nearly $71 million unspent, with $60 million anticipated for the state's rainy day fund.

Figures like that should set the stage for a budgeting season in which lawmakers are better positioned to satisfy or at least partially satisfy a chorus of demands for spending on the opioid crisis, mental health, workforce development and tuition relief for students attending public universities and colleges, just to name a few.

But then there are the questions Kane included on his "FY 2017 Watch List," foremost among them the potential for overspending by as much as $70 million in the Department of Health and Human Services due largely to unexpected demand for Medicaid coverage by qualified families, despite the improved economy.

The Legislature anticipated a 4 percent decrease in Medicaid costs over the two years of the biennial budget, said Kane. "But that did not occur," he said, "so that's a hit to the budget appropriation."

The Medicaid appropriation also assumed lower rates for the managed care organizations that administer traditional Medicaid in the state, the cost of which is split 50-50 with the federal government.

"In total, those two issues add up to $40-million-plus," Kane said.

Another drag on the year-end surplus will be legislative appropriations still to come for such things as a dairy farmer bailout that could cost between $2 million and $4 million, converting state buildings from steam heat to natural gas, and transferring funds to the health insurance program for state retirees.

John Beardmore, commissioner of the Department of Revenue Administration, reported that revenue from major sources is coming in at, or better than, budget, including the meals and rental taxes, real estate transfer tax and business taxes.

Even though the tax rates on business profits and payrolls were cut as of Jan. 1, revenues from the two taxes are beating estimates month after month.

The state collected an unaudited $646 million in business taxes for fiscal year 2016, compared to $561 million in 2015, a 15 percent increase, Beardmore reported.

Supporters of deeper cuts in business taxes will attribute much of the growth to the tax cuts, while others will credit a booming economy.

"It's been quite an increase," said Beardmore. "You'll see 2013-15 were flat and 2016 popped. Why is that? Ways and Means will chew on that. It's a difficult question to answer unequivocally, but it will be a fun one to analyze."

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