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Looking Down the Fiscal Road: NH's Long-term Finances

Executive Summary

Date: April 10th, 2015

Ongoing state budget negotiations have refocused attention on the source and structure of New Hampshire’s state revenues, as well as trends in revenue collections. One key question is whether existing revenue sources can continue to support state spending at current levels. Yet this important (though highly politicized) concern distracts policymakers from long-term questions about New Hampshire’s financial solvency. This is particularly important, given recent fiscal simulations by the Government Accountability Office suggesting that gains in tax revenues and pension assets may still be insufficient to improve states’ fiscal outlook. I

New Hampshire produce a balanced budget every two years, but important strategic questions are overlooked when we consider data on spending and revenues in just two- or four-year increments. Among the questions left unanswered:

• Does New Hampshire spend more or less than states with similar needs?
• How have spending patterns changed over time, and what does that indicate about the state’s priorities?
• How do spending changes impact the state’s fundamental financial condition?
• What kind of spending and revenue decisions must the state make to maintain financial stability while providing legislatively mandated services?

This report introduces a set of indicators to help policymakers better understand the state’s financial well-being and how it has changed over the past decade. Not only does this provide a retrospective assessment of New Hampshire’s financial position. It also provides a benchmark – independent of politics – for forecasting the financial performance of the state. We also present a dashboard that puts New Hampshire’s state spending in a national context.

Our analysis suggests that:

• The State has invested in social safety net services at a higher rate than education, transportation, or other areas.
• While New Hampshire spends, on aggregate, considerably less than the national average, we spend higher on some governmental functions, including public safety and health and human services.
• In terms of long-term fiscal health, post-recession recovery has not yet been reached, as measured by several indicators of state financial capacity.
• Policymakers have shifted liabilities into the future, putting at risk the state’s ability to make future investments.

State policymakers are in the midst of a difficult budget writing process. In addition to meeting the demands of balancing the budget in the short term, policymakers need to take these long-term questions and concerns into consideration.

Report File

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