Better than expected business tax collections boosted state revenues in March, cutting the state’s projected budget deficit by more than half with just three months to in the current Fiscal Year. Overall, New Hampshire collected $637 million in March, $26.5 million more than the budget plan. The extra revenues will cut a shortfall of $41 million down to $14.5 million.
Governor Maggie Hassan has asked the Legislature for broad authority to raid dedicated funds across state government in order to fill any deficit left on June 30th. The House budget up for a vote tomorrow gives her that authority, and also requires the Administration to report on where it took the money. Should state revenues run significantly ahead of forecasts for the next three months, there would be no need to drain funds paid for by dedicated fees such as Fish and Game licenses and conservation plates.
March business taxes filled state coffers. Business Profits Tax revenues ran $7.5 million ahead of projections while the Business Enterprise Tax generated $9.3 million more than the plan. Insurance Taxes came in $5 million over budget, while Interest and Dividends alone were 77% higher than anticipated, $4.6 million versus $2.6 million. The Department of Revenue Administration says this surplus may stem from taxpayers filing their federal taxes earlier this year because tax forms were available earlier.
Tobacco tax revenues exceeded projections by $700,000, bringing Year To Date proceeds within $8.8 million of the forecast.
Overall, total state revenues are now running just $14.5 million behind schedule, compared to a $41 million deficit at the end of last month. While Hassan and Democratic budget writers have blamed a 10-cent per pack cut in cigarette taxes for the shortfall, to other sets of taxes are having a much bigger impact of state finances. Communications taxes are off $13.3 million from the budget adopted two years ago. And Medicaid Enhancement Tax revenues are $34 million short.
In fact, the state would be running a significant surplus, even with tobacco and communications taxes failing to meet expectations, if hospitals weren’t in a protracted fight with the state over much how they owe under the MET. Several hospitals dispute what the Department of Revenue Administration says they owe under the tax, which until this past budget was immediately refunded to hospitals under the Disproportionate Share Hospital Program. They are withholding part of MET payments and suing the state for previous cuts to Medicaid reimbursement rates.
The MET dispute is not only creating a potential deficit in the current year’s budget, but could blow a whole in the FY14-15 Budget up for a vote in the House tomorrow. The New Hampshire Hospital Association is warning lawmakers not to count on MET revenues increasing by 19% in 2014 and another 8% in 2015. The budget endorsed last week by the House Finance Committee estimates that in the next two years, the MET will bring in $93.5 million over FY13 revenues.
Update: The original version of this story did not include that the sweep of dedicated funds must get approval from the Fiscal Committee. Thanks to Ben Leubsdorf of the Concord Monitor for the addition.