New Hampshire's Budget Deficit - Will it be $700 Million? - Granite Grok

New Hampshire’s Budget Deficit – Will it be $700 Million?

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If you are watching the state budget you understand there is a lot of red ink. Revenues for March were off in the neighborhood of 15%. In April revenues were off more than 35%, actually closer to 40%. In May revenues will be off by about 20%.

June does not figure to make up the shortfall. It is much more likely it too will see revenues fall short of the projection.

The budget when it was passed authorized spending. The spending has grown nearly 20% since control of the New Hampshire legislature changed. The prior legislature refilled an empty “Rainy Day Fund.” It also grew spending in line with population growth plus the inflation rate. Tax rates were reduced and revenue went up which created the surplus.

Some do not understand why cutting tax rates causes state revenue to increase. Let me explain. When you tax something what government does is to raise the price of that good or service.  When the price goes up we purchase less. So taxes are a drag on the private economy. When the government raises tax rates or adds new taxes it takes money out of our pockets. The businesses and citizens of the state have less money to spend and invest.

The government spends part of the tax money on the government itself. It spends the balance part on assorted services. Very little is spent on actual investment; plant and equipment, infrastructure. Nearly all spending done by the government for services discretionary. That is what budget battles are all about. How much of your money should the government take? What should the government spend your money on?

So what will the rest of 2020 bring? It looks like the Governor will extend the declaration of a state of emergency at least through the end of August. That necessarily means revenue shortfalls for July and August. The recovery likely will continue long after that. That implies reduced revenues to the state well into the future.

The question coming into the elections for State Representatives, State Senators, Executive Council and Governor is: Who will best lead New Hampshire out of this virus valley we have taken ourselves into? Which party will best restart the economy? Where does the New Hampshire Advantage come from? Where is New Hampshire in the competition among the state and how do we improve our standing? New Hampshire budget deficit and how to deal with it are important.