State Budgets

State of the State: New Hampshire

Implementing right-to-work along with corporate and property tax reform, would enhance economic opportunity.

New Hampshire Governor Chris Sununu’s proposed budget (including federal funds) for the next two fiscal years is a 7.1 percent increase compared to the current biennium budget. The government offices with the largest increase in funding in terms of raw dollars are the Department of Information Technology, assorted offices within the Department of Health and Human Services, the Office of Energy and Planning/Strategic Initiatives and New Hampshire Employment Security. Spending increases aside, the governor’s plan continues the Granite State tradition of no personal income tax and no state sales tax.

Despite the overall spending growth, many parts of the budget received no increase, and some programs were actually cut. Spending on New Hampshire’s University System holds steady, though the Community College System is getting a spending boost to the tune of $3 million each operating year of the biennium budget. In fact, almost 40 percent of program areas in the state budget will either get the same amount of funding or see a decrease in spending. Thus, it would be fair to say Governor Sununu’s proposed budget entails more targeted spending than an across-the-board increase in state spending.

The governor also hopes for the state government to pick up an $18 million tab (over two years) for full day kindergarten. Current New Hampshire policy only pays for half-day costs per student. Instead of this approach, ALEC has recommended accomplishing the policy goal of full-day kindergarten through the use of vouchers, as articulated in the Smart Start Scholarship Program model legislation. This “allows students to use a scholarship to attend a public school outside their district as well as a private school.” Such a policy gives “parents the widest array of choices so they can choose the school that best meets their child’s needs.”

One of the most important proposals Sununu has offered is his idea for an “Infrastructure Revitalization Trust Fund”(IRTF). The fund would use much of the collected surplus revenue to increase the grant money allocated to towns for repair of their roads and bridges along with assisting schools in dealing with safety concerns. Although Reason Foundation’s Annual Highway Report does indicate the state ranks 39th in deficient bridges and 31st in rural interstate pavement condition, lack of funding is not necessarily the issue. The state ranks near the bottom (42nd) in administrative disbursements per mile. Perhaps more focus should be placed on increasing the overall cost-effectiveness (22nd) rather than diverting so much surplus revenue to IRTF rather than tax reductions. A positive in the governor’s proposal is the expected growth in the state’s Revenue Stabilization Reserve Account (its Rainy Day Fund) to $100 million. This account is only allowed to be tapped if there is a budgetary gap where revenues were lower than anticipated.

The proposed budget also allocates more money from the state to authorized charter schools, reaching almost $44 million in 2019. The governor promises this funding will be linked “to the state’s average per pupil expenditure” and will help “eliminate uncertainty and volatility for administrators, teachers and parents.” The charter school framework in New Hampshire warrants a “D” in the ALEC 21st annual Report Card on American Education. The lack of private school choice programs (“F”) along with dismal teacher quality and policies (“D) helped earn the state an 9th worst in the nation overall education policy rank. Expanding choice would likely improve education quality far more than simply spending more taxpayer dollars.

Despite the Granite State’s strengths and Sununu’s proposals, there remains work to be done. For example, the top marginal tax rate for corporations is a steep 8.2%; and although New Hampshire doesn’t have a personal income tax or sales tax, it does have the highest property tax burden in the nation. New Hampshire also ranks a lackluster 37th in the nation in terms of burdensome regulations according to the Pacific Research Institute. Furthermore, the recently released ALEC report Unaccountable and Unaffordable 2016 ranks the state’s pension funding level at 43rd nationally. Using a risk-free rate of return of 2.344 percent, New Hampshire’s state pensions are unfunded in excess of $13,000 per capita with a funded ratio of just 28 percent.

Overall, the state has much to celebrate in terms of economic policy advances. The newly released 10th edition of the ALEC report Rich States, Poor States ranks the state at an all-time high of 18th nationally for economic outlook. If legislators at last approve right-to-work and implement corporate and property tax reform, opportunities will abound even more in the Live Free or Die state.

In Depth: State Budgets

Smart budgeting is vital to a state’s financial health. The ALEC State Budget Reform Toolkit offers more than 20 policy ideas for addressing today’s shortfalls in a forthright manner, without resorting to budget gimmicks or damaging tax increases. One way to stabilize budgets over time is to embrace…

+ State Budgets In Depth