The next legislature and governor will need to implement policy changes totaling approximately $300 million to bring the next New Hampshire General Fund budget into balance. Without such action or other dramatic changes in underlying trends, the gap between state revenues and spending will produce a $300 million deficit by July 1, 2007.

 

This paper extrapolates recent trends in General Fund revenues and spending through the end of FY 2007. The paper does not address the Education Trust Fund but assumes that it will remain in balance for each of the years through 2007.

 

If no changes are made to current laws, programs, or taxes, the Center’s analysis concludes that the General Fund will be $71 million in the red at the end of the current biennium on June 30, 2005. This projection contrasts with the $70 million surplus expected and embodied in the budget passed by the legislature and signed into law by Governor Benson on September 4, 2003. The Center projects an annual operating deficit of $119 million in FY 2006 and $116 million in FY 2007. Absent dramatic changes in the economy or any changes in policy, the sum of three years of deficits would be $306 million.

 

These projections are based on continuing existing programs without alteration, maintaining all existing laws and regulations requiring various programs, agencies, and functions, and no change in existing tax laws. Thus, this is a measure of the gap that the governor and legislature will face in early 2005 when they begin to construct the budget for the FY 2006-2007 biennium. The absolute magnitude of this potential deficit is unprecedented in New Hampshire. The

potential deficits the state faced during the recession of the early 1990s, however, were a larger percentage of General Fund spending at that time.