Ken Weyler, R-Kingston, chairs the New Hampshire House Finance Committee. He summed up the challenge of crafting the state’s new two-year budget when he said, in part, last week: “The revenue just isn’t there.”
That lack of anticipated revenue resulted in a House Finance Committee budget that is $643 million less than what was proposed by Gov. Kelly Ayotte for the next two fiscal years.
What remains to be seen in this process, according to budget analysts, are the revenue numbers for April, as the New Hampshire Senate begins crafting its version of the biennium budget, which will run from July 1, 2025, to June 30, 2027.
Among the budget analysts is Phil Sletten, research director at the New Hampshire Fiscal Policy Institute (NHFPI). In remarks April 7, he offered some good news/bad news relative to revenue.
The good news, according to Sletten, is that in February and March, revenues for the General Fund and Education Trust Fund (the two largest components of the state budget) “have been above target and substantially above target.” That’s due, he said, primarily to better-than-expected insurance premium tax revenues, as well as real estate transfer tax receipts.
The bad news, according to Sletten, is the revenue from business taxes, which represent the lion’s share of tax revenue for the state.
“If we look at business tax revenues, that’s where revenues have been down, on average, about 20% relative to the prior year,” he said. “For the last several months, for most of this fiscal year so far, if we look at year-over-year revenue changes, revenues have been down.”
The NHFPI webinar, which attracted some 800 people who signed in, focused on the House Finance Committee budget. The webinar keyed in on the differences between the Finance Committee’s budget against what was originally proposed by Ayotte.
The governor’s proposed operating budget for the biennium came in at $16.01 billion. The House Finance Committee budget, which was taken up by the full House on Thursday, April 9, came in at $15.37 billion, a difference of $643 million.
The House Finance version is much more pessimistic about revenue, thus the reductions in spending. It believes revenue will fall $149 million from projections, compared to Ayotte’s estimates of being $81 million behind projections.
April’s revenue numbers from corporation tax filings will be key, according to Sletten, for the Senate as it crafts its version of the budget.
“Those April business tax revenues are key, because that will be the bulk of business tax revenue from the first quarter of this year and returns from last year,” said Sletten. “So, the Senate will look at those revenues and be informed as to what revenues might look like, information the House didn’t have. Now, the Senate Ways and Means Committee will crunch those revenue estimates, and the Senate Finance Committee will use those revenue estimates to craft its version of the state budget in the next phase.”
Ultimately, the budget has to be reconciled among the Ayotte, the House of Representatives and the Senate versions.
Sletten and other NHFPI analysts, Jessica Williams and Nicole Heller, went through the budget, category by category, comparing the House Finance Committee version to Ayotte’s version. Ayotte’s budget provides slightly more spending compared to the current budget — $15.2 billion now vs. $16.01 billion proposed by Ayotte.
Among the big differences in the $15.37 billion House Finance Committee version are these:
The Department of Health and Human Services (DHHS) appropriations would decline by approximately $269 million (3.8%) versus what Ayotte proposed.
One of the biggest changes, according to NHFPI, is a 3% reimbursement rate reduction for all Medicaid service providers in the state. That, along with reductions in Community Mental Health and Developmental Disability Services, said Williams, “will likely create a significant constraint for providers and their ability to provide services.”
Also threatened, depending on action by the federal government, is the state’s expanded Medicare program, called Granite Advantage. It depends on 90% funding from the federal government. If funding falls below that threshold, it triggers a stop to the program, and “the state would have to make a policy choice,” said Williams.
Among the other key House Finance Committee changes to Ayotte’s budget, as reviewed by the NHFPI are:
- Reductions in funding for the University System of New Hampshire, totaling $50 million, or a 33% decrease from current biennium funding levels.
- Personnel reductions at the Department of Corrections, 190 positions, including 149 existing employees.
- Elimination of the Human Rights Commission, Child Advocate, Housing Appeals Board, and Arts Division.
- Elimination of $14.6 million from the Division of Travel and Tourism Development’s budget for promotional and marketing used to encourage tourism, a big factor in meals and rentals tax revenue.
- Increases aid to school districts while imposing budget caps, funding expansions for Education Freedom Accounts and more for public charter schools.
- Boosts to Retirement System funding for certain police and firefighting personnel.
The House Finance budget language also includes language that prohibits “…diversity, equity, and inclusion (DEI) in public schools,” including K-12 schools, academic institutions, and institutions of higher education. Failure to comply, according to NHFPI, means a risk to state funding.
Here’s what the state Department of Administrative Services (DAS) is saying about the current outlook.
For March, revenue received for the General and Education funds totaled $388.4 million, which was above plan by $9.6 million (2.5%) and below the prior year by $340.3 million (46.7%). Year to date, according to DAS, revenue totaled $1,885.2 million, which was below plan by $6.6 million (0.3%) and below prior year by $444.5 million (19.1%).
Here is the March breakdown by the particular categories of tax revenue, per DAS. The following shows what the March revenue was to plan, what it was to March 2024, and what it was year to date for current FY25.
- Business taxes totaled $139.2 million, which were $14.8 million (9.6%) below plan and $18.4 million (15.2%) above prior year. YTD collections were below plan by $129.1 million (16.6%) and $90.2 million (12.2%) below prior year.
- Meals and Rentals Tax (M&R) receipts came in below plan by $0.6 million (2.6%) and below prior year by $1.5 million (6.3%). YTD total receipts were $8.3 million (3.3%) above plan and $6.5 million (2.6%) above prior year.
- Tobacco Tax receipts were $11.8 million, which were $4.9 million (29.3%) below plan and $3.9 million (24.8%) below last year. YTD collections were $24 million (14.9%) below plan and $7.7 million (5.3%) below last year.
- Liquor Commission receipts totaled $7.6 million or $3.9 million (33.9%) below plan and $1.6 million (17.4%) below prior year. YTD revenue was $18.4 million (19.8%) below plan and $17.1 million (18.7%) below last year.
- Interest and Dividends Tax collections were $3.9 million, which were $0.9 million (30.0%) above plan and $4.7 million (54.7%) below prior year. YTD collections came in at $63.3 million, which were above plan by $21.7 million (52.2%) and $11.5 million (15.4%) below prior year. The Interest and Dividends Tax has been repealed.
- Insurance Tax receipts were $12.3 million above plan and $0.4 million below last year. YTD collections were $35.4 million (23.7%) above plan and $16.9 million (10.1%) above prior year.
- Real Estate Transfer Taxes were $13 million, which were above plan by $2.5 million (23.8%) and $3.5 million (36.8%) above last year. YTD collections were $3.7 million (2.3%) below plan and $15.7 million (11.2%) the prior year.
Regarding the Lottery Commission, DAS said its transfers to state coffers in March were above plan by $7 million (56%), “due to overall strong sales, including strong sports betting and historic horse racing.”
The Lottery said last month that it expected some 500,000 wagers on the men’s and women’s NCAA basketball tournaments.
Gaming is expected to be a significant contributor to state revenues in the next budget, according to NHFPI.
The House Finance Committee’s version generates more revenue for the state than the governor’s proposal by increasing maximum ticket amounts from $30 to $50; adding video lottery terminals at the state’s charity casinos; changing the splits of revenue between video lottery terminal operators, charitable organizations and the state; adding “high-stakes” gaming options at the casinos; and allowing Keno anywhere in the state, removing local authority to say no.
