Bartlett Study Finds $900 million budget problem

“Tax Hikes on the Horizon” warns of budget imbalance in both spending and revenue

The Josiah Bartlett Center’s report “Tax Hikes on the Horizon” found potential revenue shortfalls of more than $200 million dollars and an unbudgeted spending obligation of $600-$800 million dollars. Study author and Center president Charlie Arlinghaus said “ There is a growing hole in the New Hampshire state budget. Alone it would require tax increases that would cause undue economic damage. Coupled with a planned but undefined increase in education spending, the amount will be too large to close with small changes to our current tax structure.”

“The revenue estimates are no longer accurate. The Senate is already considering changes but the size of the problem is $151 to $235 million. The largest shortfalls will be from business taxes, the real estate transfer tax as well as tobacco and related taxes.” Arlinghaus said.

“In the past exaggerated revenues have led to serious budget problems.” Arlinghaus cited problems with the 2002-03 budget that required six different executive orders to cut spending after the budget passed and was only balanced with by spending most of the state’s reserves and with a one-time grant from the federal government.

“ However, all other changes to revenues or spending pale in comparison to a potential increase in education spending that would require a complete restructuring of the budget,” Arlinghaus warned. “The legislature is about to pass a financial obligation that begins immediately but won’t be included in the budget or even be priced out for another year. The state spending definition called adequacy is left out of the budget. But the obligation begins ‘upon passage.’ It is a little like going on a shopping spree and waiting for the credit card bill to come. You owe the money, you’re just waiting for the shock of opening the envelope in the mail.”

“Rough estimates place the additional cost at $620 - $860 million, far beyond the means of our current tax structure. The only feasible solution is to delay the effective date of the act until the measure’s actual cost can be identified and debated along with the tax increases and other spending reductions it will require.”

The study says that the $200 million revenue problem can’t be closed by any of the state’s large taxes without undue economic damage but urges immediate attention to the problem. “The time to face this budget problem is now. To paper over revenue problems and hope for the best is to delay the problem until it has to be dealt with in an emergency fashion. Better to make decisions strategically and involve everyone elected to represent us.”

read Bartlett Center document Policymatters_taxhikes