Gov. Chris Sununu presented his budget proposal for the next two years on February 11, 2021. The New Hampshire House of Representatives Finance Committee revised that budget proposal through a series of public hearings and committee meetings. The full House voted on the Finance Committee's budget proposal on April 7 and passed it. Now, the debate moves to the Senate.
New Hampshire’s revenue outlook
The COVID-19 emergency took a toll on the current state budget, and state lawmakers are concerned about a shortfall. However, right now tax revenue is looking much better than it did last summer, when policymakers predicted a $300+ million shortfall. Real estate transfer taxes and business tax revenue both outperformed expectations in the latter half of 2020. Meals and Rooms Tax revenue, on the other hand, is still very low. The state also has more people enrolling in financial assistance programs, particularly Medicaid.
Based on the current economic recovery, budget writers will likely increase revenue estimates after business tax receipts arrive in March.
The governor’s budget proposal
You can find the line-item detail of the governor’s budget proposal here. His executive budget summary included the following highlights.
Gov. Sununu’s budget proposal has sunny predictions for future tax revenue, based on the high returns at the end of 2020. He wants to use this revenue to fund several tax cuts, including:
• Cutting the Meals and Rooms Tax from 9% to 8.5%
• Cutting the Business Enterprise Tax from 0.6% to 0.55%
• Increasing the filing threshold for the Business Enterprise Tax to $250,000
• Phasing out the Interest and Dividends tax over five years
Gov. Sununu talked about cutting taxes on businesses and restaurants throughout his 2020 campaign.
Sununu’s budget proposal also includes sending more Meals and Rooms Tax revenue to towns and cities. You can learn more about that ongoing debate in our issue brief on the subject.
The governor is not proposing any major changes in the school funding formula, despite a pending lawsuit and a recent study commission on that issue. Instead, he is focusing on some smaller funding changes.
For example, the governor proposes using enrollment numbers from the 2019-2020 school year, rather than the 2020-2021 school year, as the basis for per-pupil school funding. Public school enrollment fell during the pandemic, so this could help schools maintain some state funding.
Gov. Sununu also proposes sending $30 million to school building projects.
Separate from the budget process, Gov. Sununu has supported a bill that would let parents take their child’s share of state per-pupil funding to pay for private and/or home schooling.
Gov. Sununu’s budget proposal includes a merger for the New Hampshire university and college systems. Gov. Sununu says this will increase efficiency, and his budget accordingly decreases total funding for both systems.
He also proposes a new state Department of Energy, including an Offshore Wind Industry Development Office.
Paid family leave
Gov. Sununu still hasn’t given up on this issue, which was a feature of the 2018 and 2020 state elections. His budget includes his plan to offer opt-in paid family leave, based on a pool of state employees. You can learn more about the pros and cons in our issue brief on this subject.
Planning for the next rainy day
Gov. Sununu’s budget proposal increases the amount the state saves in the so-called “Rainy Day Fund.”
It also revises the calculations that set the tax rate for the Unemployment Trust Fund. That fund took a major hit during the first coronavirus shutdown. Whenever the fund falls low enough, the unemployment tax rate goes up for businesses. Emergency funding from the federal government helped cushion the blow last year. According to his executive budget summary, Sununu’s new formula aims to “build the fund during strong economic times” and stop future unemployment tax rate increases.
The House budget proposal
The House Finance Committee cut some spending from the governor's budget proposal. The full House of Representatives voted in favor of the Finance Committee’s recommendations on April 7. The most significant changes are as follows.
Rolling back the governor’s emergency powers
One budget amendment requires legislative approval to continue a state of emergency. Under current state law, the governor has the power to renew a state of emergency every 21 days indefinitely—which Gov. Sununu has done throughout the COVID-19 pandemic.
House Republicans say they need this amendment to persuade some representatives to vote for the budget. However, Gov. Sununu threatened to veto the budget if it includes these restrictions. He argues emergency powers are necessary to protect public safety. Learn more about the governor's executive actions during the COVID-19 emergency.
Reproductive health funding
Another budget amendment requires women's health clinics to move abortions to a physically separate location in order to receive any family planning funds from the state. The amendment is targeted at providers such as Planned Parenthood.
There are several bills in the NH Legislature this year aimed at abortion. Learn more on our Abortion and Contraception topic page.
Ban on critical race theory
The House Finance Committee added text from HB 544 to the budget. That bill prohibits any public employee training or education in New Hampshire that teaches "divisive concepts." The definition of "divisive concepts" includes several concepts on race and sex, such as the concept that "an individual, by virtue of his or her race or sex, is inherently racist, sexist, or oppressive, whether consciously or unconsciously." As a result, schools would not be allowed to teach critical race theory or systemic racism.
Earlier in March Gov. Sununu said he opposed HB 544.
Cuts to Health and Human Services
The House Finance Committee recommends cutting over 200 positions from the Department of Health and Human Services (DHHS). Many of those positions are currently unfilled due to a statewide workforce shortage as well as a hiring freeze during the COVID-19 emergency.
The committee also cut out Gov. Sununu’s proposal for a statewide paid family leave program.
In response to allegations of abuse and to save money, House budget writers recommend closing the Sununu Youth Services Center, New Hampshire’s juvenile detention facility.
Lastly, the House Finance Committee cut out funding for a new forensic psychiatric hospital that was postponed by the COVID-19 emergency. New Hampshire is facing a lawsuit over some patients being housed at the state prison because New Hampshire lacks a secure psychiatric facility.
Higher education changes
While Gov. Sununu proposed merging the community college and university systems and cutting their funding, House budget writers want to slow down the process without cutting any funding this budget cycle.
The House Finance Committee also removed a student loan forgiveness program in the governor’s budget but kept a low-income student scholarship program.
Adding back some spending
The House Finance Committee is recommending higher spending than the governor in some budget areas. For example, the committee voted to restore funding to the Small Business Development Center (SBDC) that was cut in Gov. Sununu’s budget.
The committee also added historic horse racing to the budget. Historic horse racing allows people to bet on historic horse races with minimal detail about the horses and jockeys. Historic horse racing terminals have been compared to slot machines, but supporters argue they could boost revenue for charities and the state.
What comes next?
The full House of Representatives voted on the budget when they met on April 7. They passed their version of the budget. Next, the debate moves to the Senate. If you have an opinion on the budget, contact your state senator and let them know how you would like them to vote. Click here to find who represents you.
If you want to learn more about the New Hampshire budget process, check out the following Civics 101 podcast episodes featuring Citizens Count staff:
The State Budget: How It's Made
The State Budget: Where the Money Goes
Citizens Count will update this issue brief with new information as the budget process continues.
Last update: April 9, 2021