Not too long ago we believed in balanced budgets. But that’s all changed. Other states made the tough decisions. We did not. Today the State of New Hampshire is just another failed enterprise hoping the federal government will cut them a check before the debt capsizes that ship.

Borrowing, transfers, and wishful thinking draw the actual spending cuts and tax increases included in a $295 million budget deal unveiled Tuesday, June 8 at the State House.

House and Senate budget writers have crafted a package that includes nearly $72 million in spending cuts, which doesn’t include an $18.5 million increase in HHS spending. It also contains $4.99 million in tax increases, $51.21 in lapses and transfer among state agencies, $65 million in borrowing, and $112.87 million in speculative revenues that may never be realized.

Summary: Using a historical projection model, state revenues can be projected to fall $84.8 million short of the amount budgeted to balance spending in the first year of the two-year budget. Revenues in the second year of the budget are built off the first year’s projection plus 2.2% growth over that base. At that rate of growth, revenues would be an additional $86 million out of balance in the second of the two budget years. The combined revenue shortfall of $171 million is the largest component of a budget deficit greater than $250 million that legislators must resolve to balance the state’s finances.

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In October, state legislators held a tax summit and a week later held a spending summit. Charlie Arlinghaus’s presentations to each gathering are attached here. Arlinghaus outlined the state’s only two successful modern attempts at tax reform in 1970 and 1993 and warned legislators that reform attempts will only be trusted if revenue neutral. At the spending summit, he pointed out a $200 million deficit in the current budget and warned about a $625 million deficit lurking in the next budget.

Spending Outlook

Taxes and the Economy

Governor Waives Hiring Freeze 71 Times in 2008: Annual cost $3.9 million   Click here to download a copy to your desktop

So far this year, the legislature has passed 38 new or increased taxes and fees that are budgeted to raise $318.6 million over two years. For historical comparisons, there were 29 new taxes and fees passed in the previous two years. In previous legislative sessions, the low has been 9 in 2003-4 with 20 in both 2001-2 and 2005-6. The majority of tax and fee increases have been passed separately from the budget itself.

The budget for fiscal years 2010 and 2011 passed in June of 2009 and additional legislation passed this year include 38 new or increased taxes and fees that are projected to raise an additional $318 million over the two years of the budget.

A study of the total number of tax and fee increases over the last decade shows a consistently high number with the exception of the 2003-2004 legislature. However, the current total for this legislature at 38 is nearly double the 19.5 average of the last four budgets.