The New Hampshire Economy and Fiscal Structure Carsey Policy Leadership Initiative Fellows Ross Gittell James R Carter Professor Whittemore School of Business and Economics, UNH
The NH Economy • The fastest growing economy in New England region • A leader in employment and population growth • Transformation in the economy over the last quarter century • In-migration of college educated baby boomers • Per capita income growth • High technology industry concentration and growth • Current Positioning: Broad-based, resilient economy • Looking Forward: Issues of Concern • Rising inequality in the region and state • Demographic trends which will strongly influence the state’s economic future
NH Economic Highlights • Rising per capita income… improving in rank among 50 states…from 25th to 6th in last quarter century • Lowest poverty rate in the nation • Leading New England region and the Northeast in population and employment growth over the last quarter century and again in the 2000’s • Consistently one of the ten lowest unemployment rates in the nation. • Strong high technology industry positioning …ranked 9th in employment concentration in high technology industries • The last quarter century economic change related to: • Rising productivity with increased concentration in higher value added activities, such as high technology products and services, new product development, professional and business services and education and health services • Rise in educational attainment of adult population • In-migration of baby boomers • and the inter-relationship among these three
NH Employment: Totals, Industry Shares, Relative Concentration
Gross State Product: New England Economic Partnership (NEEP) forecasted average annual growth in US and New England states. NH relatively “slowed” growth over next 5 years expected.
Total Employment Forecasted average annual growth in US and New England states. NH expected to again lead region in employment growth, near US average. NH leading employment growth in slow growing region.
Unemployment in the region is expected to remain below US average because of slow labor force growth. VT and NH lowest unemployment in the region and among the lowest in the US.
Demographics related to economic future -- Aging population -- Slow growth in labor force and the population
Income distribution in New Hampshire and the Region From low inequality to rising disparity over the last business cycle, 1990-2004...
The ten states with the lowest HH income inequality in 2004 and their change in rank 1989-2004. NH low disparity, 1989-04 experienced greatest increased disparity of low ranking
Why low disparity in NH? In New England, NH has highest percentages of total income in lowest income quintiles, well above US average.
Some of the reasons for the sharp increase in disparity …in NH and New England • Technology based economies and the “take off at the top” of the income distribution. • Hollowing out of the middle class with loss of manufacturing jobs and global outsourcing.
NH Fiscal Structure Overview -- One of only 2 states w/o broad based personal income or sales tax. (Thought of as part of the “NH Advantage”) -- Increasing reliance on business taxes -- Increased dependence on highly variable real estate transfer tax -- Budget, spending and state policies determined/limited by fiscal structure and “the pledge” -- School funding crisis/case. Is there going to be change?
NH’s Leading Tax Sources and Economic “Drivers” • Business Taxes • US Corp Profits with a one-year lag • Other (S&P 500, Exports) • Rooms and Meals • Employment changes in NH • Employment changes in New England • Other (Per Capita Income, Labor Force, Unemployment) • Real Estate Transfer • Median Housing Price • Housing Sales/Permits • Interest Rate • Other (Population)
NH State Government Spending: Expenditures by Category • Health and Social Services, 38% • Education, 31% • Justice and Public Protection, 8% • General Government, 7% • Other, 16%
NH Fiscal “Highlights” • Per Capita State and Local Tax Burden ($3,040 in 2005), 38th of 50 states rank • State and Local Tax Burden as a Percentage of Income (7.4%), 49th rank • Per Capita State and Local Government Property Tax Revenue ($1,701 in 2002), ranked 3rd of 50 states
State Expenditures • Per Capita Spending State and Local Spending on Primary and Secondary Education ($1,418 in 2002), 21st rank of 50 states • Per Capita State and Local Spending on Higher Education ($440 in 2004), 45th • Per Capita State and Local Spending on Public Welfare Programs ($807 in 2002), ranked 34th • Per Capita State and Local Spending for Housing and Community Development ($121 in 2002), ranked 17th of 50 states • While NH ranks 6th in per capita income