The looming challenge of writing the next two-year state budget for Gov.-Elect Kelly Ayotte came into more clear focus with a significant slump in state business tax revenues last month.
November is not one of the four months in the year when most of the state's taxes and fees come into New Hampshire coffers.
But now, five months into the current fiscal year, returns from the state's two main business taxes on corporate profits and business activity are $60 million off the forecast of legislative tax experts.
Compared to the same five months in 2023, those taxes are down by 20.9%, a total decline of $76 million.
All taxes and fees have brought in $882 million this year compared to $968 million from July through November 2023.
Upon taking the oath of office Jan. 8, Ayotte has just five weeks to put together the spending plan for all of state government.
Ayotte attended the hearings in October when state agency heads presented their priorities and offered how they could live with retiring Gov. Chris Sununu's directive that they cut 4% in the first year.
Sununu said he hasn't tried to overwhelm Ayotte with massive budget briefings and instead learn on her own in private sessions she has been holding with key state officials.
"We have been pretty restrictive in handing it to her," Sununu told reporters. "Hopefully she can just build on what we have done."
The four-term Gov. Sununu said the state's economic fundamentals remain strong and should help the state remain financially healthier than its neighbors.
"I think this is the best transition we have had in 30 years," Sununu said of his handoff to Ayotte, a former U.S. senator and attorney general.
Bradley: New White House change could lead to economic upturn
Outgoing Senate President Jeb Bradley, R-Wolfeboro, said this revenue slowdown has been expected and can be manageable for Ayotte and larger Republican majorities in both the state Senate and House of Representatives.
"I am optimistic that a new (presidential) administration and a pro-growth economic agenda could help give a boost to revenues here and across the country," Bradley said.
"I'd say this is a cause for caution but not for panic."
For November alone, the state took in $117 million from all taxes, which was $19.7 million (14.1%) below legislative estimates.
Revenue Commissioner Lindsey Stepp said an upgrade information management system gives her agency more accurate data about how much business tax revenue comes from the 7.5% business profits tax and how much from the .55% Business Enterprise Tax.
The low-rate, BET is broadly applied to a firm's salaries, interest and dividends.
The BPT brings in 68% while the BET provides the remaining 32% of business tax revenue, Stepp said.
Stepp said reduced corporate estimate payments and big tax revenues were behind the business tax shortfall.
Business tax refunds totaled $47 million so far this year; they were $54 million during the same period last year.
The Legislature starting in the 2022 tax year capped at 500% of liability how much a business could hold onto in business tax credits without having to request a refund.
This cap will drop further to 250% of tax liability in 2029.
Another hole to fill
Ayotte must also deal with the reality that the state's tax on unearned income, interest and dividends, going away on Jan. 1.
The 5% tax has been sliced down to 3% over the past few years and last month brought in only $600,000.
The same tax three years ago last month brought in three times that much.
The state's main hospitality tax on hotel rentals and restaurant meals continues to be strong reflecting a solid summer and fall tourism seasons. For the year, the tax has brought in $3 million over forecast and $4.8 million over the prior year.
While experts believe New Hampshire housing prices may have finally peaked, profit from the state's tax on buyers and sellers of real estate has outperformed expectations three months in a row.
Stepp said the sales lag by a month but transactions in October were up 4.4% over the same month in 2023 and property values soared by 11.9%.
klandrigan@unionleader.com