Concord update: Next NH state budget begins to take shape

On Thursday, Feb. 14, Governor Ayotte presented her proposed budget of $16.5 billion for the next two years to my colleagues and me on the House Finance Committee. If you are interested in learning more about the budget or reviewing the same documents that we are looking at on the House Finance Committee, go to the Office of the Legislative Budget Assistant website.

The governor’s proposed budget is 6.4% (or about $1 billion) higher than the current two-year budget. The largest sources of funds to pay for those expenditures are as follows:

• Federal funds: $5.2 billion (6.4% increase)
• General funds: $4.1 billion (3.2% increase)
• Education funds: $2.6 billion (3.2% increase)
• Highway funds: $0.6 billion (6.2% increase)
• Turnpike funds: $0.3 billion (1.7% increase)
• Liquor sales: $0.2 billion (6.8% increase)
• Lottery sales: $0.03 billion (14.8% increase)

While the governor’s proposed budget includes almost $100 million in additional state aid for special education. It also removes the income eligibility cap on the state’s school voucher program so that the family of any child (regardless of how much that family earns) who leaves the public school system will be able to receive about $5,200 in state funds they can use to pay for homeschooling or private school tuition. Those are state funds that local school districts will no longer receive, putting more pressure on local property taxes. 

The bill to implement that school voucher expansion – HB 115 – will be voted on by the full House of Representatives on Thursday, March 13. I will vote no. 

The governor does provide $10 million in additional direct state aid for the Community College System of NH and $ 6 million to encourage dual and concurrent enrollment at community colleges for high school students but reduces the amount of funding to the University System by nearly $17 million. That will put further pressure on in-state tuition rates at your public state universities, which are already among the highest in the country.

$33 million is allocated to the NH Retirement System (NHRS) to reverse actions taken in 2011 which will help to boost retention and recruitment for public safety jobs like police, firefighters, EMTS and other first responders. While long overdue, teachers and other school and municipal employees who are covered by the NHRS will continue to be adversely affected by the changes made in 2011.

The governor allocates $15 million more to the Division of Children, Youth and Family Services and $10 million more to our Community Mental Centers, but provides $143 million less than what the Department of Health and Human Services recommended it needed just to meet current needs. That will result in significant cuts needing to be made, but the governor did not indicate what those would be.

While the governor’s budget does provide an additional $23 million to the NH Department of Justice to support the large – and growing – number of lawsuits arising from the mistreatment of individuals who were held in the Sununu Youth Development Center (YDC), the budget provides no funding towards the projected $76 million per year required to fully fund the settlement fund established by the state.

In addition to those budget challenges, the House Ways and Means Committee (which is responsible for providing its own estimate of projected revenues for the next two years) has estimated that total general and education funds for the next two years will be about $527 million less than what the governor has projected. In other words, to balance the budget we will need to cut over half a billion dollars from the governor’s proposed budget.

How did we get here? 

We have historically underfunded our state government. That has been particularly true since 2010 when the Bill O’Brien-led Republicans came to power. Recently, Republicans in Concord have been reducing state taxes under the guise of helping NH small businesses and working families.  

• The Business Enterprise Tax (BET), which is based on the compensation businesses pay to their employees as well as any interest and dividends paid by it, has been reduced from 0.75% to 0.55% since 2015.
• The Business Profits Tax (BPT), which is assessed on the taxable profits of any business operating within the state has fallen from 8.2% in 2016 to 7.5% today.
• The Interest and Dividends Tax (IDT) was a tax of 5% between 1977 and 2022 to be paid by any NH resident receiving more than $2,400 of gross interest and/or dividends that has now been eliminated.

The benefits of these tax cuts have disproportionately benefited large corporations (most of whom are headquartered outside our state) as opposed to smaller NH-owned businesses and higher-income households. As a result of these and other cuts, the state has increasingly been unable to meet its basic obligations. As that has happened, the responsibility – and cost – to provide those services has been downshifted to local property taxpayers.

To address that problem, on March 6, I voted in favor of HB 503 which would have restored the BET to 0.75%, the BPT to 7.5% and the IDT to 5%. I was one of only a few state representatives to do so and the bill was defeated 27 in favor (Hampton Representatives Mike Edgar, Erica deVries and Muns) to 345 opposed (Hampton Representatives Nick Bridle and Linda McGrath). I knew the bill would fail, but I believe that if we are going to have a serious discussion about reducing the burden of local property taxes, we need to be willing to begin to have a conversation about providing real relief at the state level.

I also voted in favor of HB 502, which would have ended the ability of large foreign multinational corporations to shift their profits out of New Hampshire to reduce or eliminate their BPT tax liability. The additional revenue generated would have been applied directly to property tax relief. Unfortunately, that bill was also defeated 163 in favor (deVries, Muns) to 209 opposed (Bridle, Edgar, McGrath).

Uncertainty in Washington

Nearly a third ($5.2 billion) of our total state budget for the next two years is assumed to come from the federal government. Whether we in fact receive that funding will be determined by what happens in Washington.

When the Trump Administration temporarily cut all federal funding, several of our NH state agencies were unable to access the funding they rely on to fund day-to-day operations. Luckily, in most cases, their access to those funds was restored quickly.

But, if Congress or the administration implements significant real spending cuts, that could create several significant “holes” in our budget that we will need to address by either raising additional state revenues or by further cutting services.

One of my biggest concerns is if the federal government cuts the 90% share of the cost of the Granite Advantage Medicaid Insurance Program it currently pays, it will trigger a provision in state law that will automatically terminate the program within 180 days potentially leaving approximately 60,000 Granite Staters without health insurance coverage. Not only will that be devastating for those individuals, but it will place an enormous strain on the doctors and hospitals in our state and blow another enormous “hole” in our budget.

And since we do not have many ways under current law to raise revenues at the state level, guess who will have to absorb the lion’s share of those extra costs? Local property taxpayers.

Disappointments

On March 6, one bill that should have passed – HB 583 – did not and one that should not have passed – HB 524 – did.

HB 583 would have automatically enrolled any Medicaid-eligible public school student in a U.S. Department of Agriculture-funded program to provide those children with free breakfasts and lunches.  That was tabled – effectively killing it – with 174 voting against tabling in support of the bill (deVries, Edgar and Muns) to 196 voting in favor of tabling and against the bill (Bridle and McGrath).

HB 524 repealed the NH Vaccine Association which is a voluntary association that helps to fund the purchases of vaccines in bulk at an approximately 30% discount to ensure that providers, clinics and hospitals have a reliable source of vaccines available. Passed 189 in favor (McGrath) to 181 opposed (Bridle, deVries, Edgar and Muns).

Office hours

I will be holding Open Office Hours on Saturday, March 15 between noon and 2 p.m. at the Lane Memorial Library in Hampton. If you have any questions or would just like to say hello, please join me then. In the meantime, if you have any questions, please do not hesitate to contact me at chris.muns@gc.nh.gov.

Chris Muns is one of Hampton's five NH state representatives. He currently serving his third term, having previously served between 2012 and 2014 and 2022 and 2024.