1

Looking towards the Next Budget Conversation

BIA Policy Committee12-08-09

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

Steve NortonDirector, NHCPPS

2

Intent to Spend: Change in General Fund Appropriations as Passed in HB1

Data are from HB1 as passed by the Legislature.

These do not reflect actualexpenditures which can behigher or lower.

These figures make no adjustments for back of the budget changes, one time monies, changes in accounting methods, DSH payments, or foundation aid changes.

Biennium Total % Change1990-1991 $1,308,716,1571992-1993 $1,420,944,015 8.6%1994-1995 $1,858,304,390 30.8%1996-1997 $1,823,831,871 -1.9%1998-1999 $1,907,540,590 4.6%2000-2001 $2,158,306,501 13.1%2002-2003 $2,440,271,465 13.1%2004-2005 $2,732,014,547 12.0%2006-2007 $2,714,048,216 -0.7%2008-2009 $3,189,586,031 17.5%2010-2011 $3,155,159,886 -1.1%Average Compound 9.2%

Total General Funds

3

Intent to Spend: Total Funds

Data are from HB1 as passed by the Legislature.

These do not reflect actualexpenditures which can behigher or lower.

These figures make no adjustments for back of the budget changes, one time monies, changes in accounting methods, DSH payments, or foundation aid changes.

Biennium Total

% Change from Previous Biennium

1990-1991 $3,241,416,2271992-1993 $3,875,303,225 20%1994-1995 $4,942,998,832 28%1996-1997 $5,142,648,273 4%1998-1999 $5,589,662,183 9%2000-2001 $5,498,717,018 -2%2002-2003 $7,801,747,846 42%2004-2005 $8,914,499,078 14%2006-2007 $9,338,396,518 5%2008-2009 $10,347,177,822 11%2010-2011 $11,549,504,230 12%

Average Compound 14%

Total Funds

4

Why Engage in These Conversations?

• Revenues have declined considerably and spending has increased, though at slightly less than historic rates.

• Potential budget hole (this) next biennium will likely require hard choices.

• Size of the budget hole (and steps necessary) a function of– JUA decisions– Continuation of enhanced FMAP– Economic recovery– Existing efforts at controlling spending

5

The Size of Government (Employees) -- 2007

State and Local Employees FTEs per 10,000 Residents(Source: Tax Foundation)

New Hampshire, 550

US Total, 546

-

100

200

300

400

500

600

700

800

900

1,000

Wyo

ming

Alaska

Kansa

s

Miss

issipp

i

Verm

ont

Alabam

a

Louis

iana

Delawar

e

New Je

rsey

Mon

tana

Main

e

Virgini

a

Hawaii

Miss

ouri

US Tot

al

Georg

ia

Minn

esot

a

Conne

cticu

t

Mar

yland

Tenne

ssee

Mas

sach

uset

ts

Orego

n

Illino

isUta

h

Florida

Arizon

a

6

Size of State Government (Spending)

Total State Expenditures per Capita, SFY2007

New Hampshire, $3,459.69

United States, $4,773.04

$0.00

$2,000.00

$4,000.00

$6,000.00

$8,000.00

$10,000.00

$12,000.00

$14,000.00

$16,000.00

$18,000.00

Alaska

Wyo

ming

Hawaii

Alabam

a

Louis

iana

Mas

sach

uset

ts

Wisc

onsin

Arkan

sas

Orego

n

North

Dak

ota

New Je

rsey

Miss

issipp

iIo

wa

Mon

tana

Was

hingt

on

Nebra

ska

South

Car

olina

North

Car

olina

Kansa

s

Tenne

ssee

South

Dak

ota

Idah

o

Illino

is

Miss

ouri

Colora

do

Nevad

a

Source: www.statehealthfacts.org

7

Total State Taxes as Percent of State GDP

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

United States NEW ENGLAND New Hampshire

8

Balancing the NH General Fund & Education Trust Fund, 1979-2013

$0

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

$2,250

$2,500

$2,750

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

State Fiscal Year

Mil

lio

ns

of

Do

llar

s

Non-tax GF Revenue:Medicaid EnhancementTobacco Settlement (2002 & 03)Flexible Federal Grant (2003)

GF + ETF Expenditures

Merrill

GreggSununuGallen

Shaheen

Benson

Regular General Fund Taxes and Revenues

Statewide Property Tax

Other ETF Taxes

Lynch?

Stimulus (ARRA of 2009)

and JUA

2012-2103: How much of a problem?

9

How Big a Hole? The Crystal Ball

• JUA decision - $45 million– State closed 2009 books without JUA monies (found additional savings).

• Federal response - $250 million – Health legislation contains language continuing enhanced matching

dollars. – Health legislation contains language that could cost the state $100

million unless the DSH program is changed. • State Revenues Economic recovery• Efforts at controlling spending

+ Hiring freeze, other executive orders brought in almost $200 million ($70 million more than anticipated).

– Three high risk areas• Exposure to $180 million in new education expenditures• 25% increase in general fund requirements for retirement system. • Ongoing growth in caseloads in Medicaid

10

Revenues

11

Actual 2008 Revenues for the following Taxes in $ Millions ($mill) Current ($mill)

2008 Rate BaseBusiness Profits Tax $385.4 8.50% $4,534Business Enterprise Tax $232.7 0.75% $31,027Statewide Property Tax $363.0 0.21% $170,082Meals and Rooms Tax $214.3 8.00% $2,679Liquor Revenues $133.0 28.30% $470Interest and Dividends Tax $118.7 5.00% $2,374Real Estate Transfer Tax $116.3 1.50% $7,753Communication Service Tax $80.9 7.00% $1,156

12

General and ETF Fund Revenue by Source FY 2008

2008 NH Unrestricted Fund Revenue Sources

Business Profits Tax17%

Business Enterprise Tax10%

Statewide Property Tax16%

Tobacco Tax7%

Other Revenues4%

Interest and Dividends Tax5%

Estate and Legacy Tax0%

Dog & Horse Racing Revenue

0%

Liquor Revenue6%

Transfer from Lottery3%

Meals and Rooms Tax9%

Beer Tax1%

Board and Care1%

Insurance Taxes4%

Court Fines & Fees1%

Securities Revenue2%

Communications Taxes4%

Real Estate Transfer Tax5%

Net "Medicaid Enhancement"

5%Total:

$2,367 million

13

Comparing NH to New England and the US in FY 2008

2008 State Revenues by Major Source

1.6%

45.7%

6.4%

42.2%

4.1%2.7%

34.4%

3.7%

57.1%

2.2%

17.2%

35.2%

9.6%

32.5%

5.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Property Taxes Sales Taxes Licenses Income Taxes Other

US NE NH

14

Comparing NH to New England and the US in FY 2008

2008 Income Taxes to State Government (as % ofTotal Taxes

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

US NE NH

Individual income Corporation net income

15

General Fund Revenue ($ million) New Versus Old Revenues

Compound annual rate of increase:

3.8%

2008

Old Source Old Rate

New Sources

Increased Rates

Beer Tax $12.2 $12.7 $12.7Board and Care Fees $14.5 $19.9 $19.9Business Profits Tax $111.0 $317.4 $317.4Business Enterprise Tax $0.0 $77.7 $77.7Estate & Legacy Tax $24.3 $0.2 $0.2Insurance Tax $43.1 $95.9 $95.9Securities Revenue $0.0 $34.7 $34.7Interest & Dividends Tax $40.7 $118.7 $118.7Liquor Sales $55.1 $133.1 $133.1Meals & Rooms Tax $83.8 $206.7 $180.9 $25.8Park Revenue $7.3 $0.0Dog & Horse Racing $10.5 $3.0 $3.0Real Estate Transfer Tax $32.3 $77.7 $54.4 $23.3Communications Tax $12.8 $80.9 $9.5 $71.4Tobacco Tax $38.2 $57.1 $26.2 $30.9Utility Tax $8.2 $6.3 $6.3Court Fines & Fees $22.6 $31.3 $31.3Savings Bank Tax $12.6 $0.0Other $33.1 $117.5 $89.0 $28.5"Medicaid Enhancement" $0.0 $93.1 $93.1Total $562.2 $1,483.9 $1,098.5 $305.4 $80.0

1990 2008Revenue Source

16

General Fund Revenue

($ million)

Compound annual rate of

increase:

5.5%

Beer Tax $12.2 $12.7Board and Care Fees $14.5 $19.9Business Profits Tax $111.0 $317.4Business Enterprise Tax $0.0 $77.7Estate & Legacy Tax $24.3 $0.2Insurance Tax $43.1 $95.9Securities Revenue $0.0 $34.7Interest & Dividends Tax $40.7 $118.7Liquor Sales $55.1 $133.1Meals & Rooms Tax $83.8 $206.7Park Revenue $7.3 $0.0Dog & Horse Racing $10.5 $3.0Real Estate Transfer Tax $32.3 $77.7Communications Tax $12.8 $80.9Tobacco Tax $38.2 $57.1Utility Tax $8.2 $6.3Court Fines & Fees $22.6 $31.3Savings Bank Tax $12.6 $0.0Other $33.1 $117.5"Medicaid Enhancement" $0.0 $93.1Total $562.2 $1,483.9

1990 2008Revenue Source

17

NH General Fund Revenues (Current $)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

State Fiscal Year

Mil

lio

ns

of

Do

llar

s

Taxes and rates in place in 1988

Medicaid EnhancementNew taxes

Increased rates

$543

$990

$1,360$1,353

18

NH General Fund Taxes as % of Gross State Product, 1971-2008

1.50%

1.75%

2.00%

2.25%

2.50%

2.75%

3.00%

3.25%1

971

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

Year

Includes all regular state GF taxes but does not include Medicaid enhancement, tobacco settlement, rebates, etc.

19

Future Revenues? Year Over Year Change in Revenue Sources (By Month)

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Jul-0

6

Sep-0

6

Nov-0

6

Jan-

07

Mar

-07

May

-07

Jul-0

7

Sep-0

7

Nov-0

7

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-0

8

Nov-0

8

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-0

9

Month

% C

ha

ng

e R

ela

tive

to P

rio

r Y

ea

r's M

on

th

General FundsBusiness TaxesMeals and RoomsSweepstakes

20

How did the State respond to the 1990 recession?

• Early 1990’s recession was much worse in New Hampshire than in the US.

• Changes to state taxes were significant:– BET created in 1994– Meals and Rooms tax increased from 7% to 8% in 1990– RETT 30% 'temporary surcharge' in 1990– Communications Tax revamped in 1991– Utility Tax revamped in 1992– Tobacco Tax increased in 1990 and again in 1991 (17 cents to 21

cents to 25 cents)– Medicaid Enhancement Revenue from $50m in 1991 to $250m in

1994

21

And what about 2010?

• Increase in Fees: $58m – Motor Vehicle Registrations ($41m)

• Increase in Taxes: $103m– Meals and Rooms Increase: $27m– Tobacco Tax Increase: $24m– LLC Change: $15m

• Big increase in federal $ through stimulus

22

What about 2012?

23

State Spending in NH

24

Where Do We spend?

Distribution of Appropriations (Total Funds) by Type of Expenditure (2009)

Program Expense73%

Consultants0%

Other0%

Debt Service4%Admin Expenses

5%

Total Personnel14%

Benefits4%

25

What is Driving Total Fund Spending?

Change in Per Capita, Inflation Adjusted Total Fund Appropriations from 1999 - 2009

$347.06

$204.86

$94.63 $88.49

$8.21

-$24.21

-$100.00

-$50.00

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

Education Health andHuman

Services

Admin ofJustice andPublic Prtn

GeneralGovernment

ResourceProtection andDevelopment

Transportation

26

And General Fund Spending Only? Change in Per Capita,

Inflation Adjusted Expenditures by Major Budget Line Items1999-2009

-$20

-$10

$0

$10

$20

$30

$40

$50

$60

$70

Medicaid Provider Payments

Retirement System

Retirement Health

HHS: Developmental

Catastrophic Aid

School Building Aid

Debt Service

HHS State HospMunicipal Revenue Sharing

Corrections

NHCPPS: Fiscal Feast and Famine

27

In other words

• If you really want to control spending (and demand for taxes) you must focus on – Education (adequacy, school building aid,

catastrophic aid)– The Medicaid Program– The Corrections System– The Retirement System– Constraints on hiring, travel, purchasing (e.g.

Governor’s Executive Orders)

28

The Common Burden

• A significant portion of the state’s budget is funding local activities– Is eliminating the distribution of meals and

rooms disbursement a reduction in spending? – Is eliminating or reducing state contributions

to retirement a reduciton in spending? – Is eliminating or changing school-building aid

a reduction in spending?

29

Change in the burden?

30

The Questions

• How to Control Spending? – What factors are driving costs forward? – Is the state doing things that it shouldn’t be doing? – Is the state doing things inefficiently? – How do we know if we’re spending too much/too little

or just the right amount? • Outcome measures are non-existent• Comparisons across states are difficult due to reporting

differences.

• Look at four areas as examples: Corrections, Medicaid, Education and Retirement

• Unless otherwise noted, state by state financial comparison data are from the U. S. Census Bureau, Annual Survey of Government Finances

31

Prison Operating CostsPrison Operating Costs

Expenditures Per Inmate (2001)

$22,650$25,949

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

Main

e

Mas

sach

uset

ts

New Y

ork

Orego

n

Penns

ylvan

ia

Wyo

ming

New M

exico

North

Car

olina

Mar

yland

New H

amps

hire

Nebra

ska

Califo

rnia

Iowa

Delawar

e

Arizon

a

Mon

tana

India

na

Kansa

s

Georg

ia

Kentu

cky

South

Car

olina

Oklaho

ma

Wes

t Virg

inia

Texas

Miss

ouri

Alabam

a

National AverageNew Hampshire

There are many possible reasons why prison operating costs are higher in NH including wages, energy, age of plant, employee counts, etc…

32

State Corrections SystemState Corrections Expenditures per Inmate

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

United StatesNew EnglandNew Hampshire

Source: NHCPPS Analysis of Census data on Government Finance

33

Change in Spending

Average Annualized Change in Corrections Spending Per Inmate 1998-2007NH CPPS Analysis of Census Data on State Spending

3.8%

2.4%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Califo

rnia

Wyo

ming

Verm

ont

Mar

yland

New Je

rsey

Was

hingt

on

Alabam

a

Nebra

ska

Main

e

New Y

ork

Mas

sach

uset

ts

New H

amps

hire

Delawar

e

Hawaii

Mon

tana

New M

exico

Louis

iana

Georg

ia

South

Dak

ota

Mich

igan

United

Sta

tes

Arkan

sas

Wisc

onsin

Virgini

a

Miss

ouri

Rhode

Islan

d

Conne

cticu

t

Tenne

ssee

Kansa

s

Alaska

Wes

t Virg

inia

Oklaho

ma

Miss

issipp

iUta

h

Penns

ylvan

ia

North

Dak

ota

North

Car

olina

Kentu

cky

Illino

is

Texas

Nevad

a

South

Car

olina

India

naIo

waId

aho

Orego

n

Ohio

Florida

Colora

do

Minn

esot

a

Arizon

a

New Hampshire

United States

34

Are We at a 3 Biennium Decision

Point. Build a New Prison? NH State Prison System

0

500

1,000

1,500

2,000

2,500

3,000

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Population Capacity

North CountryCorrectionalFacility

35

We are not without options

• Understand the issues associated with recidivism (Pew and the Justice Reinvestment Project).

• Review the state criminal justice code to ensure that the state has struck the right balance between public safety and incarceration.

• Continue to review and analyze the implementation of alternatives to traditional jail and prison sentences.

• Increase the focus on re-entry support, including substance abuse and job training for inmates, as well as community supports more broadly.

36

Medicaid Spending =

# of People

Mentally Ill

Disabled

Elderly

Family and Child

* Benefit * Price/Unit * Utilization

* Benefit * Price/Unit * Utilization

* Benefit * Price/Unit * Utilization

* Benefit * Price/Unit * Utilization

Eligibility Filter

How Does Medicaid Work?

37

Growth in MedicaidAnnual Growth in Per Capita Medicaid Expenditures (1995-2004)

New Hampshire, 5.2%United States, 7.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Alaska

New M

exico

Main

e

Miss

issipp

i

Miss

ouri

Wyo

ming

Penns

ylvan

ia

Kentu

cky

Califo

rnia

India

naOhio Io

wa

Kansa

s

Florid

aUta

h

Wisc

onsin

Rhode

Islan

d

South

Dak

ota

Wes

t Virg

inia

Illino

is

Texas

New H

amps

hire

Mas

sach

uset

ts

New Je

rsey

Mich

igan

US Health Expenditure Accounts data from www.statehealthfacts.org

38

Eligibility Generosity? Medicaid Enrollees Per Person in Poverty (Income <133% of Federal Poverty Level)

86%81%

0%

20%

40%

60%

80%

100%

120%

140%

160%

Verm

ont

Main

e

Delawar

e

New Y

ork

Distric

t of C

olum

bia

Mas

sach

uset

ts

New M

exico

Iowa

United

Sta

tes

Mich

igan

Wes

t Virg

inia

Louis

iana

Hawaii

New H

amps

hire

Arizon

a

Miss

ouri

Miss

issipp

i

South

Dak

ota

Mar

yland

Kentu

cky

Florida

Idah

o

Colora

do

Orego

n

Texas

New Je

rsey

Nevad

a

United States

New Hampshire

Source: NH Center for Public Policy Analysis of Medicaid Enrollment Data from www.statehealthfacts.org

39

Reimbursement (Physicians)Medicaid Physician Payment Index

Percent of National Average

100%

98%

0

0.5

1

1.5

2

2.5

Alaska

Nevad

a

Conne

cticu

t

New M

exico

Mon

tana

North

Dak

ota

Was

hingt

on

Mar

yland

South

Car

olina

Louis

iana

Iowa

Kansa

s

South

Dak

ota

Miss

issipp

i

Kentu

cky

Arkan

sas

Wisc

onsin

Texas

New H

amps

hire

Minn

esot

aOhio

India

na

Florida

Califo

rnia

New Y

ork

New Je

rsey

New HampshireUnited States

The Urban Institute: Medicaid Physician Fee Analysis 2008

40

2008 Reimbursement (Nursing Homes)

Medicaid Nursing Home Reimbursement as Percent of Costs

89%97%

0%

20%

40%

60%

80%

100%

120%

Arkan

sas

North

Dak

ota

Mich

igan

Tenne

ssee

Mon

tana

North

Car

olina

Virgini

a

Califo

rnia

Utah

Nebra

ska

Avera

ge o

f Sta

tes

Penns

ylvan

ia

Iowa

Nevad

a

New Y

ork

Mas

sach

uset

ts

South

Dak

ota

Delawar

e

Verm

ont

Miss

ouri

New H

amps

hire

Illino

is

United States New Hampshire

NHCPPS Calculations of Data from “A Report on Shortfalls in Medicaid Fundingfor Nursing Home Care,” ELJAY, LLC

41

Medicaid Benefits and Utilization?Total Medicaid Payments Per Enrollee (FY 2006)

(Benefit X Utilization)

$4,575

$6,047

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Distric

t of C

olum

bia

New Y

ork

Main

e

Conne

cticu

t

Mas

sach

uset

ts

Mar

yland

Nebra

ska

Wes

t Virg

inia

Iowa

Delawar

e

South

Dak

ota

Utah

India

na

Virgini

aId

aho

United

Sta

tes

Nevad

a

Wisc

onsin

Miss

ouri

Florida

South

Car

olina

Illino

is

Alabam

a

Arkan

sas

Texas

Califo

rnia

New Hampshire

United States

Source: www.statehealthfacts.org

42

Options?

• Further benefits changes?– (Chiropractic is out, Podiatry is in?)– Prior authorization expansions (Currently occupational therapy,

ambulance, wheel chair van?)• Further reimbursement rate changes?

– Reductions? – Prospective outpatient hospital payment?

• More intensive management of the utilization of services? – Accountable Care Organizations– Further intense disease management opportunities (low hanging fruit

has been taken)• Medicaid Eligibility (Dec 2011, ARRA ends. Or does it?)• Reform (if it happens) may simplify Medicaid but will cost more ….• Primary drivers in the future the aging of the population.

43

NH Retirement System Hit Hard by Stock Market Losses

Source: NHRS CAFR

NH Retirement System Annualized Investment Returns

1.4%

20.0%17.5%18.6%17.5%

14.4%13.2%

-6.7%-6.4%

2.5%

14.9%

10.2%10.0%

16.0%

-4.6%

-20.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

ActualTarget

12 Mos 6/30/09 (prelim)

44

Change funding requirements for retirement?

Actuarial Funding Ratios -125 Pubic Pensions FY 2008Source: www.publicfundsurvey.org, 9/09

0

20

40

60

80

100

120

140

IN OK KYM

O HICO AZ LA KS NJ NJ

ME

MN

WA

MD NV AZ IL ND

MN VA

MO

WV PA RI

VA PA GA AR MT TX

ND ID VTGA

MO NC

WA NC NY

ME

WA

NH 67.8%

45

NH Spends Slightly More On Average Per Student

Total Education Spending by State, 2007

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

UT ID TN AZOK

MS TX NC SD NV

CO AR KYW

A AL FLM

O SCNM IA LA IN KS

OR ND MT

GA NE CAM

N ILW

V USOH M

IVA W

INH HI

PAM

EM

D DE AK RIM

A CTW

Y VTDC NJ

NY

Do

llars

per

Pu

pil

NHUS

46

State of NH Contribution to aid low relative to the rest of the country.

Percent State Revenue of Total Revenue for Education by State, 2007

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

DC NE SD IL ND PA TX NH CT RIFL

MD

MO NJ LA VA

OH CO SC TN ME

GAM

A NY IA US MT AZ

WY OK IN W

IOR M

S UT NV KY NC KS ALW

V MI

AK CAW

A DEM

N ID NM AR VT HI

NH

US

47

But state aid has grown the most quickly in NH (due to reforms of 1990)

Annual Percent Change State Revenue for Education by State1997-2007 (adjusted for inflation)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

DC UT MI IN M

OW

A OK TX NV FLW

V WI

SC IA TN GA AK NC PA KYOR CO NE IL ND AL

SD US LA ID KS MT VA RI

ME DE

MS AZ CT

NM CA NJOH M

AM

DM

N NY AR HIW

Y VTNH

Do

llars

per

Pu

pil

NH

US

48

Education Finance: $183 million question

• Adequacy: $123 million question (in 2012-2013) resulting from loss of stimulus funds

• Adequacy: $20 million in CPI adjustments (at 3%)

• Adequacy: ‘Collar’ will be eliminated raising a $45m dollar question.

• School Building Aid: $40 million question

49

Summary

• Budget hole? Too early to tell, but risk is there for a sizeable problem. The size depends on: – Supreme Court and the JUA– Fed decision-making (DSH and Stimulus)– Economic recovery and revenues in NH– Spending changes likely in the mix

• Local Aid• Education adequacy and school building aid• Medicaid transformation• Corrections policy• Retirement system

50

Spending Summary

• Reflecting our low tax burden, spending is low relative to the rest of the nation (4th lowest, overall)

• Only in a few instances are we above the national average in level of spending or growth over time (on a per capita basis)– Corrections– Medicaid unit cost

• Opportunities for spending reductions exist, but will take political will and legislative action. – Constraining purchase, hiring, and other admin– What shouldn’t we be doing?– Transformational opportunities?

51

Transformational Policy Opportunities

• Medicaid Care Management – Significantly broaden management of care (utilization)

• Medicaid payment reform (prospective payment for outpatient?)

• Retirement– Tiered system (new vs. old employees)– Change contribution amounts

• Corrections– Re-entry– Home-confinement– County vs. State management of the system– Reimplementation of good time

• Education?

52

What Process Issues Can We Resolve?

• Have a conversation about outcomes instead of simply spending. What value do we receive for our expenditures?

• You can’t manage what you don’t measure. Pew gave the state a failing grade for our state management and we deserve it. We do not have monthly expenditure reports.

• Budget process/documents do not link up outcomes, with assumptions– Program efficiencies (aka reducing recidivism, implementing

care management) may be available but will be politically difficult.

– Bigger savings are available if the political will is there to make the legislative changes necessary to change what government offers.

53

All of our reportsare available on the

web:

www.nhpolicy.orgwww.nhpolicy.org

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

Board of Directors

Donna Sytek, Chair

John B. Andrews

John D. Crosier

William H. Dunlap

Shelia T. Francoeur

Chuck Morse

Todd Selig

Stuart Smith

James Tibbetts

Brian Walsh

Kimon S. Zachos

Martin Gross

Staff

Steve Norton

Dennis Delay

Ryan Tappin

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