1. 1 “…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.” New Hampshire Economic Forecast December 13, 2011 Dennis Delay ddelay@nhpolicy.org Board of Directors Todd I. Selig, Chair David Alukonis Michael Buckley William H. Dunlap Sheila T. Francoeur Stephen Reno Stuart V. Smith, Jr. Donna Sytek Brian F. Walsh Kimon S. Zachos Martin L. Gross, Chair Emeritus John D. Crosier, Sr., Emeritus

2. 2 Calculated Risk has the clearest picture of the problem we face:

3. 3 NH – Less of a decline, more recovery.

4. 4 NH’s Great Recession was in the early 1990’s

5. 5 3 Themes NH Recovery in Danger of Stalling State revenues and the downside risk. A structural deficit

6. 66 NH Forecast Revised Down

7. 7 The public sector was a cushion:

8. 8 Now the public sector is a drag:

9. 9 The “Stimulus” is waning Source: Bureau of Economic Analysis

10. 10 Anecdotal evidence from the Fed Bank of Boston, November 30, 2011 Most business contacts in the New England continue to report year-over-year revenue increases, but an uncertain outlook. Retailers cite mixed results and increased optimism about 2012; manufacturing contacts, by contrast, say they are uncertain about the outlook even though most current results remain good. Software and IT continues to see good demand growth, while results are mixed, though mostly positive, for staffing firms. Real estate markets remain subdued. Firms are doing mostly replacement hiring; some cite difficulty in filling specific skilled jobs. Cost pressures are said to be modest.

11. 11 There are Reasons for Optimism: Corporations are profitable and balance sheets are strong Credit quality is improving Consumers are deleveraging Financial institutions in good shape. Exports could be strong because US is cost competitive

12. 12 Downside Risk to the Forecast: There continues to be significant concern about and uncertainty in the global and national economies …. all with significant impact on the New Hampshire outlook. ….. this includes: the European debt crisis, continued weakness in housing markets, low consumer confidence, and government at all levels under significant fiscal stress.

13. 13 3 Themes NH Recovery is in Danger of Stalling State revenues and the downside risk A structural deficit

14. 14 NH General Fund Revenues Change with the NH Economy

15. 15 State Revenues, Expenditures, and Gross State Product

16. 16 This Recession has been very hard on revenue

17. 17 NHCPPS Model Showing Revenues Will Miss by $42 million

18. 18 New Hampshire Revenue Growth Lagging Other States State tax revenue growth during 2Q 2011 was experienced in every state except New Hampshire. –US Personal Income taxes up 16.5% –US Sales taxes up 5.9% New Hampshire state tax revenue grew 3% in 3Q 2011, compared to 7.3% in US and 6.6% in New England: –US Personal Income taxes up 9.2% –US Sales taxes up 3.9% Source: Rockefeller Institute (www.rockinst.org)

19. 19 3 Themes NH Recovery is in Danger of Stalling State revenues and the downside risk. A structural deficit

20. 20 State Revenues Grew Because of New Taxes and Non-Tax Sources

21. 21 Two Thirds of NH Revenue Does Not Grow with Economy, or Is Volatile

22. 22 “…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.” Board of Directors Todd I. Selig, Chair David Alukonis Michael Buckley William H. Dunlap Sheila T. Francoeur Stephen Reno Stuart V. Smith, Jr. Donna Sytek Brian F. Walsh Kimon S. Zachos Martin L. Gross, Chair Emeritus John D. Crosier, Sr., Emeritus New Hampshire Center for Public Policy Studies Want to learn more? Online: nhpolicy.org Facebook: facebook.com/nhpolicy Twitter: @nhpublicpolicy Our blog: policyblognh.org (603) 226-2500