New Hampshire is expecting nearly $99 million more in tax revenue than planned for in fiscal year 2018, according to an estimate from the office of the Legislative Budget Assistant.
Lawmakers are planning to spend almost all of it this session.
At a presentation before the House Ways and Means Committee on Tuesday, Deputy Legislative Budget Assistant Chris Shea said that as of Monday, the state should receive a significantly higher sum than had been budgeted, much of it driven by windfalls from business taxes in recent months.
“Right now, you’re about $99 million ahead of plan through April, give or take a million or two,” he said. The excess is likely due in part to a response by businesses to a new federal tax overhaul that passed in December, Shea added. The new law may have driven additional revenues by incentivizing companies to divert overseas money back into the country, Shea said, a process known as repatriation.
In New Hampshire, the surge has been sudden. Nearly half of the surplus, $45.9 million, came from the month of April alone, according to the office – the latest filing month.
That month, the state’s business profits tax is expected to bring in $99.8 million – $27.3 million more than had been anticipated. The business enterprise tax is set to run $13.8 million surplus for that month, while a settlement from a 1998 lawsuit with tobacco companies brought in an extra $10.9 million.
The $99 million projection accounts for both general fund and education trust fund revenue; the Legislative Budget Assistant did not separate the two, Shea said. A more detailed breakdown is expected from the Department of Revenue Administration on Wednesday, Shea added.
But whatever the final figures, the money may not last long. A series of spending bills that left the Senate Finance committee Monday would eat away at nearly all of it if they pass.
Members of that committee approved amendments that would add $20 million toward fixing red-listed bridges and $10 million to the Rainy Day Fund. And lawmakers face an additional $13.5 million appropriation to cover a new, tentative contract agreement between the state and its four public employee unions.
The state is also eyeing a $10 million appropriation for school safety initiatives approved by the Senate last week and a $38 million designation to cover payments to hospitals after a federal court ruling in March.
Nearly all the money the state is expected to receive would be taken up in present legislation, Shea said.
“And it’s not over yet,” quipped Rep. Norman Major, R-Plaistow, chairman of Ways and Means Committee.
Major and other members of the committee said they were surprised by the Senate committee appropriations, detailed by Shea at the hearing Tuesday.
“That doesn’t mean it’s going to happen,” Major added.
The excess revenue reignited a long-running dispute between Republicans and Democrats over budget planning.
Senate Minority Leader Jeff Woodburn, D-Whitefield, said he isn’t surprised by the windfall. The Legislature tends to under-project its planned revenues, allowing it to underfund its agencies during the budgeting process, Woodburn said.
Then, when revenues come in higher, lawmakers dole out the extra money selectively, he argued.
“I think we’re seeing all the games of budgeting and whatnot that often occurs,” he said. “We don’t follow the estimates, so therefore we have these surpluses; then we give money out like we’re John Rockefeller handing out dimes.”
But Senate President Chuck Morse, R-Salem, rejected Woodburn’s characterization. The Legislature didn’t lowball projected revenues, he argued; the excess money was largely the result of the federal tax overhaul – impossible to foresee back in spring 2017, he said.
Meanwhile, the state is spending its revenue surplus this year on one-off initiatives, Morse continued – a better strategy than using rosy estimates to increase appropriations that state agencies would come to rely on, he said.
“This is definitely because Washington lowered taxes, and we’re seeing a bump in New Hampshire,” he said. “I think we have to be careful. I think it’s a new budget, and as we’re seeing money that we believe is going to be surplus this year, we’re going to put it to one-time projects.”
That doesn’t sit well with Greg Moore, the New Hampshire state director of Americans for Prosperity. Moore, whose organization advocates for limited government and holds strong influence over legislators in election years, said the state should use its excess to lower business taxes further. That would offset a side effect of the federal tax bill – the mass elimination of exemptions – which could result in higher taxes for businesses if state taxes aren’t also lowered, Moore said.
Speaking Tuesday, Moore urged the Legislature to capitalize on the revenue cushion and speed up its timeline for proposed cuts to the business profits tax, by moving the 2021 planned reduction – from 7.7 percent to 7.5 percent – forward to 2019.
“This is exactly the wrong direction,” he said. “We should be looking to provide additional tax relief to continue to grow our economy. The fact is that we’re overtaxing our citizens by $99 million. That’s what it looks like to me.”
(Ethan DeWitt can be reached at edewitt@cmonitor.com, or on Twitter at @edewittNH.)