Revenue Shortfall will Add $75.5 million to state deficit

by Charles M. Arlinghaus

JBC: Revenue Shortfall will add $75 .5 million to state deficit

"The current projection of a $75.5 Million shortfall will likely get worse unless the economy grows stronger."

" New Hampshire State revenues are currently on a track to produce a shortfall of more than $75 million in the fiscal year ending June 2008. That shortfall could be reduced by a strong economic performance over the next months but will likely grow larger as corporate profits growth slows after the explosive growth of recent years ," according to Center President Charles Arlinghaus.

While Medicaid Enhancement revenue will be close to budget projections, combined business taxes will be $27 million behind budget projections and the rest of general revenues will be $48.5 million below budget. All told, revenues are on track to be $75.5 million short of the budgeted amount when the fiscal year ends in June.

A revenue shortfall is more damaging even than it seems because of the way the New Hampshire budget is put together. Revenue has always been estimated somewhat cautiously to provide a cushion in case spending is somewhat higher than expected or the economy doesn’t look as bright as once thought. That cautiousness has been necessary because annual spending has almost always significantly exceeded the budgeted amount.

A significant surge in audit revenue in October obscures the true budget picture but a detailed analysis of historical trends shows a clear problem on the revenue side of the budget. The detailed report is available at www.jbartlett.org.

Current Range of a Projected $75.5 million Revenue Shortfall

 

projected

high

low

Medicaid Enhancement

0

-1.0 million

0

Business taxes

-27 million

-50 million

+22 million

Insurance tax

0

0

0

Other general Revenue

-48.5 million

-86.6 million

-14.3 million

Total

-75.5 million

-137.6 million

+7.7 million