Makes appropriations for capital improvements (e.g. roof replacements, HVAC upgrades, etc.) for the next two fiscal years.
In June, Republican Gov. Sununu vetoed the budget passed by the Democrat-dominated Legislature. Two key sticking points drove Sununu's veto.
First, he argued the Legislature's budget used surplus money - revenues that exceeded what the state expected to earn - to entangle the state in long-term spending obligations, like more money for schools or mental health services. Sununu argued the money should instead go to one-off projects. Democrats counter that there's sufficient spending on one-off projects in various places across the budget to account for that surplus.
Second, Sununu argues the budget raises business taxes. Those tax rates were set to go down in 2019. Democrats want to hold them at 2018 levels. They argue this is a freeze, not an increase, since businesses won't pay their 2019 taxes until 2020.
The state is now operating on a continuing resolution, which funds everything at the same levels as the 2017-2018 budget for another three months. Meanwhile, legislators and the governor will work on finding a compromise.
The upcoming budget cycle covers spending for fiscal years 2020 and 2021, which starts on July 1, 2019 and runs until June 30, 2021. The state budget is broken out into two parts: the operational budget and the capital budget.
The NH capital budget for 2020-2021
Gov. Christopher Sununu started the next two-year budget cycle on June 21, 2018 with the first of a series of hearings to decide priorities for spending in the capital budget. The capital budget includes long-term investments into large-scale projects, usually associated with new construction or upgrades. The new state prison for women, which opened in March 2018 at an approximate cost of $48 million, is an example of a capital budget expenditure. The capital budget for 2020-2021 is contained in HB 25. This year’s capital budget includes a host of renovations at the Statehouse, HVAC repairs at the New Hampshire State Hospital campus, new boilers at the Coos County Courthouse, dredging at Hampton Harbor and Rye Harbor, replacing a backhoe at the Veteran’s Cemetery, and more.
The NH operational budget for 2020-2021
The operational budget includes the day-to-day spending, based on revenue from taxes and fees, for state agencies and departments.
Government agencies and departments began working on submitting their requests for funding during the summer of 2018, with a deadline of October 1 of that year. The first draft of the operational budget, known as the “governor’s budget”, was released in February of 2019.
The governor’s budget proposal
On Valentine’s day of 2019, Governor Sununu laid out his two-year budget proposal in front of the Legislature. Overall spending would rise by $1.3 billion thanks in part to larger-than-expected business tax revenue.
Key elements of the governor’s budget include:
- Business tax cuts: The governor wants to continue with plans to steadily continue business tax cuts.
- Rainy Day Fund: Sununu proposed sending $27 million of the state’s surplus to the Rainy Day Fund.
- Education: The governor’s plan includes funding for certain job training programs and a student loan assistance program in the university system, but overall keeps UNH at the same funding level as the last four years. As for public schools, Sununu’s proposal funds specific initiatives but does not make any major changes to the per-pupil school funding formula.
- Mental health: The governor proposed building a new state forensic hospital to replace the Secure Psychiatric Unit at the Concord prison. His budget also provides funding for executing the state’s Ten Year Mental Health Plan.
- Family and medical leave: The plan also includes language to implement Sununu’s version of family and medical leave. It is an opt-in plan that differs from the Democrats proposal in several key ways. See how.
Changes made by the House
The House reworked the Governor’s initial proposal, passing their own version in April along party lines with no Republicans voting in favor of it. It includes $500 million more in state spending than Sununu proposed.
The budget passed by the House includes:
- Mandatory family and medical leave: This program would be funded by a premium on employees’ wages (rather than the opt-in version favored by Sununu).
- Business tax cut freeze: Business taxes would remain at 2018 levels rather than continue to decrease as planned.
- Infrastructure project cuts: The House eliminated most of the infrastructure projects proposed by Sununu as a way of using up surplus money – these were called “pet projects” and “pork” by Democrats in the House, who see other uses for the extra funds.
- Capital gains tax: The House budget institutes a capital gains tax to help relieve property tax burdens and fund education.
- Kindergarten funding: Under the House budget, full day kindergarten funding is no longer tied to keno revenue and would be funded from the education trust fund the same as grades 1 through 12.
- State forensic hospital: House members scaled back Sununu’s proposed $26 million psychiatric hospital construction project back to a $1.2 million planning phase.
The Senate budget
The Senate passed its version of the budget in June, which totals around $13 billion. While there was bipartisan support for some elements of that budget, such as increasing staffing at the Department of Children, Youth and Families, others divided along party lines. New elements of that plan include:
- Giving $40 million back to cities and towns, no strings attached, with most of the money allocated for towns with high poverty rates.
- Increasing the rates health providers are paid for services to Medicaid patients by 6.2%, a change that is estimated to cost around $60 million.
- Changing funding for Medicaid expansion to allow state funds to fill in the gap if contributions from hospitals and insurance fees don't cover the tab.
- Creating 77 new positions at DCYF.
- $17.5 million to build a new secure psychiatric facility.
- More funding for UNH and the community college system, which will allow the schools to freeze tuition prices.
The Senate budget also kept some key elements of the House version, including a mandatory paid family and medical leave plan and eliminating planned cuts to business taxes. The Senate budget increases funding for schools, restoring stablization grants to their original levels and providing extra aid to towns with low property values. However, that $95 million is less than the $160 million the House planned to spend, which would have been paid for with a new tax on capital gains.
The House and Senate compromise budget
The Legislature has passed a compromise budget, largely based on the Senate version, but with a few important changes:
- $138 for schools, restoring stabilization grants, increasing cash for kids receiving free and reduced lunch, and bumping up the per-pupil budget in towns with low property values.
- Dropping a mandatory paid family and medical leave program, which Sununu promised would trigger a veto.
A few other surprises found their way into the budget's trailer bill, HB 2. This includes raising the smoking age to 21, creating a "costs of care" fund for animals confiscated during cruelty cases, and repealing the ban on using state funds to pay for abortions.
A gubernatorial veto
Gov. Sununu vetoed the compromise budget, stating that he opposed an increase in business taxes and the use of surplus funds for ongoing expenses.
What comes next
State agencies are now running on a continuing resolution, which extends funding at last year's levels through September. However, several agencies have applied for extra funds, arguing that important programs and some federal funding are at risk if they have to move forward at those lower funding levels. These include:
- Developmental disability services, to keep the wait list from getting longer over the summer;
- The state parks system, which argues it will have to close parks if it doesn't have more money to pay for extra seasonal employees;
- Temporary Assistance for Needy Families, the welfare program funded through state and federal dollars;
- Moving forward with a water treatment and expansion project in the Manchester area;
- Road resurfacing and repair funds for the Department of Transportation for work that must be done while the weather is good;
The Department of Health and Human Services also needs legislators to approve spending $35 million in federal grant money for substance abuse treatment, which wasn't included in the continuing resolution. Otherwise, that money will have to be sent back.
Last year's budget numbers
The current capital budget for fiscal years 2018 and 2019 is $262 million. The current operating budget approved by the state Legislature is $11.7 billion.
Information about past and current budgets can be found at the state Department of Administrative Services.
2020-2021 state budget bill (part 2).
Temporary spending bill that continues current spending levels until a budget is passed for fiscal years 2020-2021.
2020-2021 state budget bill.
What should NH prioritize in the 2020-2021 state budget?
Gov. Sununu vetoed the budget, saying he opposed an increase in business tax rates and using surplus money for ongoing expenses. The state is now running on an extension of the current budget's levels, giving legislators and the governor time to negotiate a compromise.
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