N.H.’s bond outlook falls from ‘stable’ to ‘negative’
Standard & Poor’s downgraded the state’s outlook on general obligation and state-guaranteed bonds from “stable” to “negative” yesterday, based largely on a recent court ruling that said a state tax on hospitals that brings in significant revenue is illegal. That ruling, combined with the state’s low reserve fund and unfunded pension liability, puts New Hampshire in a “thin financial position,” the report from the credit rating agency said.
The state’s bond rating remains at AA. If the state’s bond rating goes down, interest rates will rise, causing the state to spend more to service its debt. Despite the downgrade in the state’s bond outlook, the Standard & Poor’s report rated the state’s financial management as “good.”
Earlier this month, Hillsborough County Superior Court ruled that the Medicaid Enhancement Tax the state levies against hospitals is unconstitutional because it treats hospitals differently from other facilities that provide health services. The state plans to appeal the decision, which would leave significant holes in the state budget if it stands. The current state budget includes $145.9 million in revenue from the tax.
Senate and House Republicans were quick to jump on the downgrade yesterday as evidence that the Legislature needs to put $15.3 million in surplus money from last year’s budget into the rainy day fund. The Republican-led Senate passed a bill to do that, but the House passed a different bill that would give $7 million of that surplus to the state Department of Health and Human Services. The state’s rainy day fund has $9.3 million, which is less than 1 percent of the unrestricted general fund budget. Former state treasurer Catherine Provencher said the fund should be 5 to 10 percent of the general fund. The state also has a $4.64 billion unfunded liability in the public employee pension system.
“The S&P analysis provides a clear road map as to how we can improve our state’s economic position and better prepare for unanticipated fiscal events. As stewards of the taxpayers’ dollars, it is our responsibility to take these recommendations seriously and act accordingly,” Senate President Chuck Morse, a Salem Republican, said in a statement.
Both of the Republican candidates for governor, Walt Havenstein and Andrew Hemingway, as well as the state Republican Party, blamed the downgrade on weak leadership by Democratic Gov. Maggie Hassan.
Democrats, however, placed the blame on the last Legislature, led by Republicans, which reduced how much the hospitals were reimbursed for the tax. Hassan said the downgrade underscores the need to work quickly to solve the looming problems if the state can no longer levy the hospital tax. In statements, both she and House Speaker Terie Norelli, a Portsmouth Democrat, appear to be maintaining their positions on the need to send some surplus money to the HHS rather than the rainy day fund.
“We worked with the governor and Senate during the budget process last year to begin the recovery from the decisions made by the prior Legislature that left us vulnerable to litigation, weakened our communities and lacked the forward thinking that is essential to keeping the state’s economy strong,” Norelli said. “Fiscal stewardship is about more than just spending as little as possible today, it’s about ensuring that we make smart choices about how we spend each and every taxpayer dollar.”
(Kathleen Ronayne can be reached at 369-3309 or firstname.lastname@example.org or on Twitter @kronayne.)