A recent policy report has found that New Hampshire’s fiscal outlook is stronger than original state projections issued earlier this year.
Phil Sletten, senior policy analyst with the New Hampshire Fiscal Policy Institute, published the report on the institute’s Common Cents blog.
While revenue projections have markedly improved since the first months of the COVID-19 health crisis, there are still many unknowns as the pandemic continues to evolve, Sletten told The Center Square by email.
“New Hampshire’s fiscal outlook is considerably better than it was following the initial pandemic-affected round of revenue projections in the late spring and early summer,” Sletten said. “While revenue shortfalls were projected to be potentially well over $500 million early in the pandemic, the actual state budget shortfall could be considerably smaller by late June, the end of this state fiscal year. Both higher-than-expected revenues and reduced use of state funds by public agencies relative to the amounts planned in the state budget have helped reduce the gap thus far.”
The report notes higher revenues may be due to certain businesses experiencing increased demand amid the pandemic, and the New Hampshire Department of Revenue Administration making tax administration changes that may have limited the number of refunds issued in September.
Real estate transfer taxes have rebounded since the spring, and interest and dividends receipts have done better than expected, the report found. A decline in rooms and meals revenue, along with motor fuels receipts, have been offset by an increase in revenues from lottery, tobacco, and liquor sales, which may be caused by business closures in other states.
Further restrictions could disrupt the upward trend in New Hampshire, Sletten said.
“If additional widespread restrictions on certain types of economic activity, such as those that occurred in the spring, are required due to elevated prevalence of the 2019 novel coronavirus, then some revenue sources would see significantly reduced receipts,” Sletten said. “For example, closing on-site dining at restaurants would likely significantly reduce receipts from the Meals and Rentals Tax, which is the state’s third-largest tax revenue source.”
State agencies, which have been directed to implement cost reductions, also have underspent by larger margins than anticipated, the report found, but absent future federal relief, concerns persist that this may not continue without cuts in services.
“The state’s fiscal outlook is better than feared earlier in the pandemic, but there will likely still be a significant budget deficit,” Sletten said. “The state will have to use additional resources, including potentially federal assistance, to avoid funding reductions in key state services during a time when Granite Staters need much more support to make ends meet than they did just a year ago.”
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