Rebuilding the Rainy Day Fund should be a priority
It’s time to bring New Hampshire back from the brink
New Hampshire’s Rainy Day Fund – sometimes called the Revenue Stabilization Account – was drained of $80 million by the Democrat-led Legislature to maintain or increase spending levels, rather than making spending cuts, during the recent recession.
Under the 2012-2013 Republican budget, New Hampshire was left with a surplus. While most of the money in the surplus was used to help fund the 2014-2015 budget, there is about $15 million left over. The debate in the Legislature this year has been whether or not we should spend some of it, or save all of it.
Republicans in the House and Senate agree that we need to begin rebuilding our Rainy Day Fund. In a presentation to the Senate Finance Committee in January, State Treasurer Cathy Provencher said in order to maintain New Hampshire’s credit rating, we should strive to have a balance equal to 5 percent to 10 percent of unrestricted general fund revenue. In New Hampshire, 5 percent would equal about $70 million; 10 percent would equal about $140 million.
Our current balance of $9.3 million equals just 0.7 percent of unrestricted revenue. That’s not enough to run our state government for more than two days.
Our research into how New Hampshire stacks up to our New England neighbors when it comes to financial security reveals that we rank dead last. New Hampshire has just $7 per capita in its Rainy Day Fund. The next highest is Maine, with $45 per person. Massachusetts leads New England with $205 per person. We often boast about the New Hampshire Advantage, but in this case, we are far from a role model for our neighbors.
It’s no wonder that a leading rating agency, Standard & Poor’s, last month issued a report downgrading the outlook from stable to negative on New Hampshire’s general obligation and state-guaranteed bonds. Days after the S&P report, another major rating agency, Moody’s, labeled New Hampshire as “credit negative.”
While our reserve balance is not the sole factor in the ratings change, it does compound the problem and affects our ability to address potentially major issues like what we face with the recent Medicaid Enhancement Tax court rulings, which could leave New Hampshire with a major hole in funding.
When situations like this occur, even though we realize it will not cover the whole shortfall, it is important to have a reserve account that could help offset the impact if we were to experience a financial emergency.
It’s time to bring New Hampshire back from the brink. Senate Bill 415, a bill that would deposit the entire $15 million surplus into the Rainy Day Fund, will likely be voted on by the entire House in the coming weeks. We have the chance to begin to rebuild New Hampshire’s financial security.
We have the opportunity to learn from our current situation. Responsible spending and budgeting, responsible reserve allocation, and reforming our tax and pension systems will protect our financial stability and credit rating for future generations.
House Republican Leader Gene Chandler is a Republican from Bartlett.