What Gov. Chris Sununu presented last Thursday was a budget that did not overreach and largely maintains existing programs at mostly current expenditure levels.
The governor presented a two-year operating budget of $13.8 billion of total funds, a 5.6 percent increase over the current budget ending June 30, but general and educational fund spending was $41 million less than the current biennium approved budget at $5.45 billion.
That is the first decrease in the general fund budget since the fiscal 2012-2013 budget driven by major revenue shortfalls from the Great Recession and a hefty bill sent from the federal government over the state’s Medicaid program hospital reimbursements.
Sununu’s budget proposal includes hefty revenue projections that would increase 5.5 percent over the current budget plan.
And he would use about $30 million of the state’s $115.5 million rainy day fund to balance the current biennium’s budget which is projected to have a $50 million deficit.
The governor’s boost in revenues comes as he wants to cut taxes for businesses, investors and retirees and tourists, whether native Granite Staters or from some foreign state or country.
Coming out of a recession, logically state tax revenues would increase and the rooms and meals tax should improve noticeably from receipts over the last 12 months when people stopped eating out and traveling. In the current budget year, rooms and meals revenues are down more than 22 percent from what the state was projected to receive from the levy.
Quirks in the state’s revenue stream not anticipated a year ago make analysis of revenues different.
Business taxes tanked at the end of the last fiscal year mostly due to date changes at the state and local level, but since then have performed much better than anticipated, as have the real estate transfer tax, tobacco tax and interest and dividends tax.
Sununu’s revenue projections increase business tax revenues although he wants to cut the rate of the business enterprise tax, the one that hits the state’s small businesses more than major corporations and wants to raise the threshold for filing and paying the tax.
His revenue projections show a projected increase of $20 million for business taxes in fiscal 2022 and another $21 million increase in 2023.
Sununu did not propose lowering the rate of the business profits tax, mostly paid by large multi-state or international corporations which have thrived despite the pandemic.
Sununu is also proposing to cut the interest and dividends tax and eliminate it over five years, yet his revenue estimates include a $7 million increase in 2022, before dropping $4 million in 2023, which would indicate the rate cut would not come until the last year of the next biennium.
Sununu wants to cut the rooms and meals tax by half a percentage point but is projecting a $13 million increase in 2022 and a $21 million increase in 2023, but that figure, $344 million, is still $40 million below what budget writers projected the tax to produce this fiscal year, $386.9 million.
While Sununu made a point to say his proposed budget does not downshift costs to cities and towns, instead sending more money through the rooms and meals distribution in revenue sharing, his budget would shift some nursing home costs to county, i.e. property taxpayers.
Under an agreement between the counties and state several decades ago, counties pick up a larger share of the county nursing home costs and in return the state picks up a larger share of juvenile services costs.
The agreement caps the costs for counties, but the cap has changed over time depending on the state of the state’s finances.
In his proposed budget, he eliminates $3 million in provider payments the state paid this fiscal year and reduces the general fund obligation to cover other costs from $29 million this biennium to $10 million in the new one.
Those are costs that will be obligations for the counties which are funded by property taxes.
The governor’s proposed budget includes about $15 million in new revenue sharing for cities and towns but does not include the $20 million a year included in the current biennial budget.
The current budget also included $50 million in education disparity aid for property poor communities and an additional $12.5 million to help communities with high poverty levels.
Neither aid program appears in Sununu’s proposed budget. The money was one-time money to be distributed during the current fiscal year.
School districts are facing a $90 million shortfall in state aid for the upcoming fiscal year due to lower enrollment, and a federal change in the free and reduced lunch program.
Sununu said the state would make sure no school district is left behind because of the free and reduced lunch change but did not say the state would adjust state aid to offset the loss due to dropping enrollment due to the pandemic.
The House has an April 8 deadline to act on its budget plan and the Senate has until June 3 to act on its plan. A conference committee on the budget has to finish its work by June 30 when the current budget ends.
The two-year budget plan that emerges in June will reflect Sununu’s proposal, but will have many, many changes.
Garry Rayno may be reached at firstname.lastname@example.org.