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“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”

The NH State Budget Past, Present and Future

Oct 17, 2012NH Center for Non-Profits

Public Policy Council

Board of DirectorsSheila T. Francoeur, ChairDavid AlukonisMichael BuckleyWilliam H. DunlapEric HerrRichard OberJames PutnamStephen J. RenoStuart V. Smith, Jr.Donna SytekBrian F. WalshMartin L. Gross, Chair EmeritusJohn D. Crosier, Sr., Todd I. SeligKimon S. ZachosDirectors Emeritus

Major Takeaways• State spending declined over the recession.• Lion’s share of spending changes in Personnel and reductions in

provider payments (with unknown impact). • Next legislative session faces same structural budgetary problems

– Spending growing quicker than revenues– Low economic growth slow revenue growth– Political will to

• Cut spending? • Raise taxes? Gambling, Tobacco Tax, ????

– Additional policy issues• State business interest in long term economic development view. • Potential shortfall for 2013?

– Implementation of managed care?– Revenue changes in last legislative session impacting current revenue situation

• Additional expense associated with Medicaid expansions?• Stated platform by candidates to

– Reinstate funding to university?– Reinstate funding to hospitals?

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What We Did

• Attempt to provide short and long term context for decisions– Analysis of Expenditure Data (2010-2012)– Analysis of HB1 and HB2 (2-13)– Meetings with Commissioners (DHHS,

Environmental Services, Corrections, Administrative Services, Attorney General)

– In Depth Analysis of Changes within DHHS

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What do we actually know?

2010 2011 2012 Annualized ChangeALL OTHER $4,285,632,618 $4,228,753,292 $4,008,384,632 -3.3%BENEFITS TOTALS $297,028,068 $326,429,323 $265,294,359 -5.5%CONSULTANTS TOTALS $41,352,762 $39,475,080 $31,783,543 -12.3%CURRENT EXPENSE TOTALS $103,566,426 $103,709,429 $92,698,469 -5.4%FULL TIME PERSONNEL TOTALS $601,141,389 $594,929,844 $547,572,734 -4.6%OVERTIME TOTALS $20,136,240 $21,791,428 $20,665,663 1.3%PART TIME TEMP PERSONNEL TOTALS $46,864,326 $50,052,311 $34,596,326 -14.1%(blank)Grand Total $5,395,721,830 $5,365,140,707 $5,000,995,726 -3.7%

Total Fund Actual Spending

Spending – based on total fund state spending fell 3.7% between 2010 and 2012

4 Major Areas of Budgetary Change

• Medicaid and DSH• Pension - Retirement System• University System Funding• Personnel• Other smaller (though large in aggregate)

program changes

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Where Were the Changes Made in Spending in DHHS?

HHS Agency 2010 Actual 2011 Actual 2012 Actual 2013 Budget 2010-2011 2012-2013 Change PercentHHS: Developmental Serv Div Of $239,226,875 $252,708,153 $260,523,292 $278,306,491 $491,935,028 $538,829,783 $46,894,755 9.5%HHS: Health Mgmt Office Of $80,029,144 $77,754,915 $75,663,747 $95,718,512 $157,784,059 $171,382,259 $13,598,200 8.6%HHS: Glencliff Home For Elderly $12,557,549 $12,635,354 $13,093,076 $14,136,078 $25,192,903 $27,229,154 $2,036,251 8.1%HHS: Juvenile Justice Serv $26,579,588 $25,316,434 $25,180,081 $29,246,514 $51,896,023 $54,426,595 $2,530,572 4.9%HHS: Behavioral Health Div Of $116,188,742 $113,176,277 $111,717,293 $119,304,996 $229,365,019 $231,022,289 $1,657,270 0.7%HHS: Elderly - Adult Services $419,282,538 $433,982,656 $389,736,401 $424,313,432 $853,265,194 $814,049,833 -$39,215,361 -4.6%HHS: New Hampshire Hospital $67,491,318 $62,873,474 $58,684,211 $63,514,626 $130,364,792 $122,198,837 -$8,165,955 -6.3%HHS: Children And Youth $126,391,192 $114,350,854 $106,751,405 $117,635,288 $240,742,045 $224,386,693 -$16,355,352 -6.8%HHS: Transitional Assistance $106,747,521 $103,767,098 $91,784,671 $97,219,593 $210,514,619 $189,004,264 -$21,510,355 -10.2%HHS: Commissioner $766,140,932 $778,291,309 $655,026,239 $663,781,390 $1,544,432,241 $1,318,807,629 -$225,624,612 -14.6%

Total $1,960,635,399 $1,974,856,524 $1,788,160,416 $1,903,176,920 $3,935,491,923 $3,691,337,336 -$244,154,587 -6.2%

Some areas in HHS saw increases (DD, Clencliff, JJ) – some saw significant reductions

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Budget Reductions (10-11 to 12-13)

Division 2010-11 2012-13 ChangePercent Change

Postsecondary Educ Comm $10,464,285 $25,134 -$10,439,152 -100%Employment Security Dept Of $90,274,490 $78,333,030 -$11,941,461 -13%Labor Dept Of $42,983,451 $29,742,885 -$13,240,566 -31%HHS: Children And Youth $240,742,045 $224,386,693 -$16,355,352 -7%Executive Branch $120,026,889 $101,817,528 -$18,209,361 -15%HHS: Transitional Assistance $210,514,619 $189,004,264 -$21,510,355 -10%HHS: Elderly - Adult Services $853,265,194 $814,049,833 -$39,215,361 -5%NH Retirement System $109,524,188 $26,010,562 -$83,513,626 -76%Transportation Dept Of $1,277,151,856 $1,187,225,573 -$89,926,283 -7%HHS: Commissioner $1,544,432,241 $1,318,807,629 -$225,624,612 -15%

Includes actual spending for 2010-11 and 12. SFY 13 is the budgeted appropriation

Top 10 Largest Total Fund Reductions by Division

While some of the changes reflect accounting changes (or fund reallocations), some did not: HHS elderly and Adult, NH Retirement

System, and DSH changes reflected in Commissioner’s Office

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Where Were the Changes Made in Spending in DHHS?

HHS Agency 2010 Actual 2011 Actual 2012 Actual 2013 Budget 2010-2011 2012-2013 Change PercentHHS: Developmental Serv Div Of $239,226,875 $252,708,153 $260,523,292 $278,306,491 $491,935,028 $538,829,783 $46,894,755 9.5%HHS: Health Mgmt Office Of $80,029,144 $77,754,915 $75,663,747 $95,718,512 $157,784,059 $171,382,259 $13,598,200 8.6%HHS: Glencliff Home For Elderly $12,557,549 $12,635,354 $13,093,076 $14,136,078 $25,192,903 $27,229,154 $2,036,251 8.1%HHS: Juvenile Justice Serv $26,579,588 $25,316,434 $25,180,081 $29,246,514 $51,896,023 $54,426,595 $2,530,572 4.9%HHS: Behavioral Health Div Of $116,188,742 $113,176,277 $111,717,293 $119,304,996 $229,365,019 $231,022,289 $1,657,270 0.7%HHS: Elderly - Adult Services $419,282,538 $433,982,656 $389,736,401 $424,313,432 $853,265,194 $814,049,833 -$39,215,361 -4.6%HHS: New Hampshire Hospital $67,491,318 $62,873,474 $58,684,211 $63,514,626 $130,364,792 $122,198,837 -$8,165,955 -6.3%HHS: Children And Youth $126,391,192 $114,350,854 $106,751,405 $117,635,288 $240,742,045 $224,386,693 -$16,355,352 -6.8%HHS: Transitional Assistance $106,747,521 $103,767,098 $91,784,671 $97,219,593 $210,514,619 $189,004,264 -$21,510,355 -10.2%HHS: Commissioner $766,140,932 $778,291,309 $655,026,239 $663,781,390 $1,544,432,241 $1,318,807,629 -$225,624,612 -14.6%

Total $1,960,635,399 $1,974,856,524 $1,788,160,416 $1,903,176,920 $3,935,491,923 $3,691,337,336 -$244,154,587 -6.2%

NHCPPS Analysis of state data on expenditures and HB1 (for SFY 2013)

Some increases, some decreases

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Total DHHS ChangesIdentified in Budget Process

Total Changes in DHHS from 2008 through 2013 (in 1,000 of $)

-$293,824

$12,080

-$66,737

-$43,185

-$24,123

-$23,200

-$19,099

-$11,275

-$6,926

-$1,998

-$1,939

-$304

-$350,000.00 -$300,000.00 -$250,000.00 -$200,000.00 -$150,000.00 -$100,000.00 -$50,000.00 $0.00 $50,000.00

Provider Payments

Service Reduction

Efficiency

Program Closure

Eligiblity Change

Care Management

Funding Change

Federal Changes

Program Elimination

Eligibility Change

Service Elimination

Program Expansion

NHCPPS Analysis of DHHS Budget Documents

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Service ReductionsAccounted for 14% of Total

Changes

Program ReductionsAdministrative Reductions-Personnel ($32,244)Treatment Services Contracts ($1,261) Reduce Px Eval; Px/Tx Contracts ($779)Reduce Governors Commission Funding ($4,734)Eliminate funding for DD Wait List $6,295Eliminate funding for ABD Wait List $816Reduce funding for Family Support Services Medicaid & Non-Medicaid ($1,277) In Home Support Waiver - Current services Reductions ($997) SMS Contract Reductions- 95% of 2011 ($68)Reduce general funds for SSBG programs ($3,888)

Reduced class 512 transportation of clients ($268) Across the Board Reduction to Homeless Shelters & Prevention Programs ($552) Restructure Continuing Care Unit (G Unit) ($4,995) Eliminate the funding for Incentive funds ($6,160) Stop Voluntary Cases ($1,256) Stop Director Authorized Cases ($1,047) Reduce Head Start Collaborative Funding ($625) Eliminate Drug Testing of DCYF clients ($400)Remove rental subisidy-housing assistance ($6,600)TANF Emergency Assistance ($1,500)

APTD-Provide assistance to clients to get SSI ($551)Funding for family planning programs. $694Decrease funding for emergency preparedness ($700)Eliminate general funds for STD prevention ($688)Reduction in Public health lab services ($300)BT Contracts for Program Services ($771) Adjustment to SCHIP Premium Rate increase ($2,480)Medically Frail Kid's Waiver - Program Start up ($400)

DHHS Program Closures and Eliminations

NHCPPS Analysis of DHHS Budget Documents

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Questions• Approximately 20% of changes in health and

human services were program reductions or eliminations and eligibility changes– How many people are no longer receiving services

(regardless of the source) that were receiving them before?

– What is the impact of those changes short-term and long-term.

• Approximately 60% of the changes involved reductions to provider payments (including DSH and other reductions). – What has been the response from the non-profit and

philanthropic community to these changes?

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What about the next biennium?

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And What About Revenues?

NHCPPS Projection of 2013 Combined General Fund & Education Trust Fund Revenues

(in millions of $)

-$400

-$300

-$200

-$100

$0

$100

$200

July

Aug

Sep

t

Oct

Nov

Dec Jan

Feb

Mar

Apr

May

June

Month of Fiscal Year Completed

Abo

ve (B

elow

) Bud

get

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Revenue Risk Points

• Additional $26 million in potential ‘loss’ associated with other changes– NOL changes - $1m to $10 million threshold change

• Loss credits for corporate taxes (BPT/BET)• Another national/international issue (Europe?)• Lawsuits MET and Use of DSH for general

fund• Long term revenue forecast models are

imprecise at inflection points, often leading to conservative revenue estimates

Demand for Spending

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School Age PopulationNH public school enrollment, Pre K through Grade 12

0

50,000

100,000

150,000

200,000

250,000

05-06 06-07 07-08 08-09 09-10 10-11 11-12

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Demand for Safety NetNew Hampshire Free/Reduced School Lunch Eligibility

18.2% 18.9% 19.4%20.9%

24.0%

25.7%26.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

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Corrections System Growing Again?

Average Number of Inmates

2,321 2,277 2,280 2,3312,431 2,429 2,439 2,389

2,254 2,305

0

500

1,000

1,500

2,000

2,500

3,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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New Hampshire Productivity Growth by Decade

3.4%

30.6%

18.5%

12.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

1970 to 1980 1980 to 1990 1990 to 2000 2000 to 2010

Percent Change in Real GDP per Job in BEA Regions

12.5%14.5%

17.9%

12.6%

17.3%

20.9% 21.1% 20.1% 19.0% 18.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

New Ham

pshir

e

New Engla

nd

Mideas

t

Great

Lake

sPlai

ns

Southe

ast

Southw

est

Rocky M

ounta

in

Far W

est

US Tota

l

2000 to 2010

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Innovation and Costs• Human Capital

– Adults with a BA or Better– Per Pupil Spending– 2011 8th grade NAEP Math

Score– 2011 8th grade NAEP Science

Score• Economic Creativity

– Patents Per Capita– Venture Capital Per Capita– R and D (% of GDP)– Doctorates per Capita

• Business Base– Per Capita Income– High Tech Jobs as % of Total– Business Birth and Death Rate– Internet Usage

• Costs– Health Care Cost Per Capita– Commercial Energy Costs

Per Kilowatt– Housing Affordability– Mature Firm Tax Burden

• Infrastructure– State Debt per Capita– Percent of bridges in trouble– Transportation spending per

capita– Road conditions

(roughness)

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New Hampshire Scores Well

New Hampshire's Economic Scoreboard for 2010New Hampshire's ranking among the 50 states and New England.(Rank of '1' is best; for example 1 is lowest tax rate, highest income, etc.)

National New EnglandCategories Rank RankFavorable Tax Climate (state and local burden on income, 2008) 1 1Standard of Living (by inverse of poverty rate 2009) 1 1Most Livable State (CQ Press, 2010) 1 1Safest State (Lowest crime rank, 2009) 1 1Child and Family Well Being (Annie E. Casey Foundation, 2010) 1 1Education – Adults with High School Degree or better (2009 ACS) 4 1Healthiest State (CQ Press, 2010) 5 2Per Capita Income (2009) 10 3Education – Adults with College Degree or better (2009 ACS) 9 4

Ranks are for states only, not including District of Columbia

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Translate into Public Policy

Policy Focus - Innovation and Costs

State RankingHuman Capital

Economic Creativity

Businesss Base Costs Infrastructure Total

New Hampshire 4 9 6 38 42 10

Connecticut 5 5 14 44 45 18Maine 14 47 28 39 41 39Massachusetts 1 1 3 49 49 1Rhode Island 20 8 22 47 50 44Vermont 2 10 17 42 44 13

Policy Focus - Innovation and Costs

State RankingHuman Capital

Economic Creativity

Businesss Base Costs Infrastructure Total

Relative to New England 48% 63% 36% 86% 92% 43%Relative to US 16% 36% 24% 152% 168% 40%

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Questions• Questions about the role/scope/goals of state

government remain. • In an era of constrained resources, have we

allocated our resources in a way that maximizes the benefit to the state (as defined above)?– Economic (infrastructure, etc…) vs. Safety Net

• Are there revenues on the table (e.g. gambling)? – Short term (limited, even in the case of gambling)

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“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”

Board of DirectorsTodd I. Selig, ChairDavid AlukonisMichael BuckleyWilliam H. DunlapSheila T. FrancoeurStephen RenoStuart V. Smith, Jr.Donna SytekBrian F. WalshKimon S. ZachosMartin L. Gross, Chair EmeritusJohn D. Crosier, Sr., Emeritus

New Hampshire Center New Hampshire Center for Public Policy Studiesfor Public Policy Studies

Want to learn more?• Online: nhpolicy.org• Facebook: facebook.com/nhpolicy• Twitter: @nhpublicpolicy• Our blog: policyblognh.org• (603) 226-2500