To save or to spend, that is the question, and also, how to decide where to spend.
State officials recently announced the state has a $26 million surplus left over from the previous fiscal year - good news regardless of where you’re standing. Most would agree any surplus is fantastic news, particularly since some budgeters had the state looking at a $900 million deficit to begin the current biennial state budget. Lawmakers closed that gap and then some.
Republican leaders want to put the excess money in the state’s rainy day fund, a reserve account. The account currently has about $9 million in it. House Speaker William O’Brien, R-Mont Vernon, said lawmakers typically want to see about 5 percent of annual state spending or about $110 million in the account. GOP leaders blame Democrats for “raiding” the account in previous years.
Under existing law, the $26 million surplus will be carried forward to the current fiscal year. In more good news, revenues for the first quarter of this fiscal year will likely be about $10 million greater than the legislature predicted, according to a state press release.
“The fiscally responsible decision is to take the unexpected surplus funds that we learned about last week and use them to shore up the rainy day fund to an appropriate amount, so that our treasurer can go to New York and push for a AAA bond rating, which would save us millions,” O’Brien said in a statement.
State Rep. Keith Murphy, R-Bedford, got the go-ahead from the House Rules Committee to introduce legislation to move any surplus from the last fiscal year into the rainy day fund.
House Majority Leader D.J. Bettencourt, R-Salem, said improving the state’s bond rating will be one of the top priorities of House Republicans next session. He blamed Democrats for cleaning out the rainy day fund to support increased spending. Bettencourt wanted to wait for a state audit to be completed before doing anything with the surplus.
With just the $9 million in the state reserve account, Republicans can make a good case for putting the money into reserves. But many viewed the GOP-crafted state budget as extreme; certainly Democrats have tried to paint it as such. The guess here is that Republicans will win - probably easily given the numbers - in this particular case, but if revenues continue to exceed expectations, things could get nastier if the GOP continues to push for padding the reserve account, in lieu of restoring some budget cuts.
Republicans made some dramatic state cuts in the last budgeting round, and many agreed those cuts were needed, but many Democrats disagreed - and they’ll be sure to point out that surplus funds could be used for needed government programs that were cut this year, particularly programs that help the state’s most vulnerable citizens. That could be a tough messaging battle for the GOP to win.
Who gets the credit?
Republicans certainly want to play this as sound financial management on their part and that they’re bringing fiscal sanity back to the capital. They probably have an argument for that, but Gov. John Lynch might have a case as well. The moderate Lynch introduced a state budget proposal in February that included deep cuts, though the actual budget that was adopted, and not signed by Lynch, went much further than that.
In a press release, Lynch took credit for the surplus, while also crediting state agency heads for careful management. Naturally, House Republican leaders took some credit as well.
“Across state government, we have continued to carefully manage and aggressively reduce costs, generating this surplus,” Lynch said in a statement. “This is very good news for our state and it speaks directly to the strong fiscal management and dedication of state agency leaders.”
In 2008, Lynch instituted freezes on hiring, equipment purchases and out-of-state travel. State agency leaders have also undertaken a number of measures to trim their department budgets, including cutting energy use and in-state travel, and eliminating and reorganizing programs, according to a press release from Lynch’s office.
Not clear sailing yet
Still looming is a $35 million penalty payment stemming from issues with the state Medicaid program in 2004. The federal government is asserting that New Hampshire improperly used federal funds. New Hampshire is fighting that claim but could be on the hook for the $35 million.
House lawmakers had pushed to make additional cuts to address the potential $35 million payment but have backed off that idea. Additionally, reports indicated the Senate isn’t planning on convening again until January, meaning even if the House were to take action, lawmakers would still have to wait until January for anything to happen.
The current $10.2 billion two-year state budget anticipates a $14 million deficit for the current fiscal year.
Not to mention that some economists say the state’s economy is stagnant at the moment. With that in mind, it’s difficult to know how well revenues will continue to increase, particularly in business taxes, which have been strong so far this year.
Stay tuned on the revenues front.