2010 Efforts

New State Legislature Faces Staggering Financial Issues

The most immediate financial issue New Hampshire faces this year is the projected state budget deficit that could be as high as $900 million. This issue will define this legislative session at the State House in Concord.  Following two years of budget cuts, state employee layoffs, and attempts to sell state assets, it is not exactly clear how the Legislature will confront this new deficit.  But there is general agreement that the dramatic change in the makeup of the Legislature will likely translate into budget cuts not higher taxes and fees. That’s because a more conservative GOP took control of both the NH House of Representatives and the NH State Senate in November, and because the Governor has promised to veto a broad based sales or incomes tax.  The wild card for possible revenues is expanded gambling – something that has failed to pass the Legislature for several sessions.

A longer-term financial issue is the state retirement system, which is estimated to have an unfunded liability of $4 billion with an additional $2.5 billion in unfunded associated benefits.  There are no less than 20 bills already filed with suggested fixes to the problem, including cuts in benefits and higher contributions.

If that’s not enough, the Medicaid Program, which is funded by both the state and federal governments, is about to expand dramatically under the healthcare reform law passed by Congress, with potentially thousands of new recipients and millions in higher state costs.  Even with a few years of federal subsidies to the program to ease the change, NH could be facing an added $30 million in costs to the Medicaid Program that already costs some $1.3 billion and is around 28% of the entire state budget.

And then there is education funding.  The NH Center for Public Policy Studies has estimated that the cost of the state’s aid to public schools for 2010 will total $941 million — $50 million more than 2009.

The dilemma facing the Legislature and the Governor is how to cut the state budget while maintaining basic state services in a state where demand for services is going up.  While NH doesn’t have the scale of state budget problems facing Illinois and California, the final decisions on budget cuts will cause some pain in NH – most likely in local communities.  About half the state budget goes to NH communities in one form or another.

On other fronts — some interesting bills already filed in the NH Legislature include one that would require the Attorney General to join state lawsuits challenging the federal healthcare reform law;  another that would repeal the Regional Greenhouse Gas Initiative; and still another that would support the Arizona immigration law.  There are also bills filed to address the Business Profits Tax deduction for reasonable compensation.  And, perhaps a very timely bill would give the Governor line item reduction power of items in any appropriations bill.

On the brighter side — the NH economy is recovering better than most states.  The state has regained almost half the jobs it lost during the recession (4.5%), and is the fastest growing state in New England.  Economist Dennis Delay at the NH Center for Public Policy Studies says that NH will likely regain all of the jobs lost by the first quarter of 2012.

Look for our annual member survey on the NH business climate in the coming few weeks.  Your participation is greatly appreciated and will help us gauge the economy from a technology perspective.

Last, to help position the NH economy for the future, the NHHTC is collaborating with the Business and Industry Association of NH in an advanced manufacturing initiative that includes research into that sector as well as the eventual creation of a plan to energize it.   Advanced and tech manufacturing in NH has four times the economic impact of any other sector.  We are excited about this collaboration and its potential impact on New Hampshire.