NH CARES state of the budget
According to a NH CARES (NH Citizens Advocating for
Responsible and Essential Services) analysis, New Hampshire's budget
deficit may force more than $200 million in human services budget cuts
in the next biennium
May 2004
Large cuts to New Hampshire's Dept.
of Health and Human Services, in the range of $100 million in state
funds per year for the next biennial budget, are both likely and unavoidable
if we continue with the policy of no new taxes or tax rate increases.
This is because even in an economic upturn our current tax system will
be unable to make up a $287 million budget hole that we have created
for fiscal years 2006-07. That deficit will be the result of draining
reserve accounts and using one-time funds in 2003-05, as well as a projected
decline in federal and state revenues.
State Revenues: State revenues came in close
to projections through April 2004, and may meet or slightly exceed projections
for FY '04. Nonetheless, even if NH experiences rapid economic growth,
the resulting growth in state revenues will be much lower than in the
past. This is because at its current high rates, the Business Enterprise
Tax dampens the swings in business taxes both ways – and most
of our other large revenue sources have limited growth potential in
an upturn.
One-Time Revenues: Countering the good news about
our current revenues is the truly scary news that we used a large amount
of one-time revenues to balance our current biennial budget. With the
federal deficit and entrenched opposition to raising revenues, no replacement
funding is in sight for 2006-07. Further, the Office of Legislative
Budget Assistant has confirmed that the package of savings and revenue
enhancements put in the budget at the insistence of the Governor will
not likely materialize and replenish the Rainy Day Fund as planned.
The depletion of these funds alone has resulted in a huge “revenue
cliff” and a budget hole that Governor Craig Benson has repeatedly
stated he is not willing to fill with even small increases in existing
taxes (as other governors of both parties have historically done when
faced with such deficits). Also, unlike past years where we have been
rescued by large increases in federal funding, given the current federal
deficit and plans to plug loopholes like the one NH has used to funnel
Medicaid dollars into the general fund, NH will be lucky to keep our
existing level of federal funds, let alone be rescued by a new windfall.
In sum, what is different about the 2006-07 budget situation is that
not only did we drain our reserves and use other one-time funds with
no real prospects of replacing them, but the governor appears inflexible
in his commitment to not raise taxes in any way, regardless of the resulting
impacts on state government.
Scary Numbers, Budget Reality:
1. The Rainy Day and Health Care Funds, which held a combined $70 million
in 2003, will be drained by the end of the current biennial budget (June
30, 2005).
2. The $77-million windfall NH received from Congress as part of the
Bush tax cut package ($50 million in block grant + $27 million in estimated
enhanced Medicaid match) also will not be available for 2006-07.
3. The phase-out of the state’s Estate and Legacy Tax and its
reduced share of federal estate tax will likely reduce revenues by approximately
$40 million for 2006-07.
4. The loss of hospital Medicaid Enhancement Tax ("Mediscam")
dollars because the federal government has closed that loophole will
likely reduce revenues by at least $100 million for 2006-07.
These four reductions in available revenues for fiscal years 2006-07
add up to a budget hole of $287 million. And as long as the governor
continues to use his veto to block all tax increases, it is very difficult
to see how this huge budget hole can be filled without equally huge
budget cuts.
Even scarier, this projection does not include any of the inevitable
cost overruns in the current budget. To create the illusion of a balanced
budget, cost estimates in critical safety-net areas such as community-based
services for elders and Medicaid prescription drug costs were unreasonably
low. The differences between those estimates and the actual cost of
services will have to be made up in the 2006-07 budget just to keep
services at current levels.
While NH has been here before, it has never been with a governor determined
to not raise revenues who appears insulated from the costs, havoc, and
pain large cuts will likely inflict on NH citizens and the operation
of state government.
In sum, this projected $287-million revenue hole puts huge pressure
on the Dept. of Health and Human Services -- the largest and most expensive
department in state government -- to ratchet down spending immediately,
and to continue cutting by at least $100 million per year in general
funds for 2006-07. While some efficiencies might be found to reduce
the impact, because of unavoidable increases in costs of care and reimbursement
rates that fail to cover even the current costs of services, the reality
is a $100-million annual cut will significantly reduce the array, quality
and effectiveness of services that DHHS provides to NH citizens and
communities.
The impacts of these cuts on NH’s social fabric, quality of life,
and economy are complicated and hard to predict. But their enormity
is certain to break NH’s historic commitment to a basic human-services
safety net. These cuts will be significant and far-reaching both in
their impacts on individuals and families and in shifting of costs to
communities and their major source of revenue – the property tax.
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Examine New Hampshire's current
operating budget, for fiscal years 2004-05.
Reports from New Hampshire's Consensus
Revenue Estimating Panel.
