Unpacking New Hampshire’s next budget

On February 13, Gov. Kelly Ayotte provided her budget proposal to the state Legislature. She promised to prioritize funding for special education and law enforcement, but also promised roughly $150 million in budget cuts. Meanwhile, President Trump is overhauling federal funding, which makes up roughly one-third of New Hampshire’s budget. Now it’s up to the state Legislature to sort through competing priorities and uncertain revenue, and draft a final budget for the Granite State.

Who is in charge of the government’s budget?

This year President Donald Trump and Elon Musk, through “DOGE” (Department of Government Efficiency), have ordered sweeping cuts to federal spending. Many of these cuts are being challenged in court because the U.S. Constitution gives Congress the “power of the purse,” the ability to tax and spend public money.

Like the federal government, New Hampshire gives its state Legislature the power to set the state budget. The governor starts the process by introducing a budget proposal, but that proposal must go through the usual legislative process of public hearings and votes. At the end of that process, the governor can sign or veto the whole budget. The executive branch does not have the power to change the bill that lands on the governor’s desk.

In New Hampshire there have also been disputes between the Legislature and the judicial branch over the “power of the purse.” On several occasions the New Hampshire Supreme Court has found that the state violated the state Constitution through its funding choices. For example, a 2013 lawsuit forced the state to build a new prison for women. The state Supreme Court has also issued multiple rulings against the public school funding formula passed by the Legislature. Sometimes legislators and the governor have pushed back against these court rulings; on more than one occasion legislators introduced a constitutional amendment that would give the Legislature greater power over school funding. None of those amendments passed, however. Lawmakers must wait and see how the state Supreme Court rules in the latest school funding case to know how that may impact the state budget.

What’s in Gov. Ayotte’s budget?

In her budget address Gov. Ayotte highlighted several funding priorities, including:

• A nearly 50% increase in funding for special education
• Allowing all students currently enrolled in public school to participate in the Education Freedom Account program, which lets students spend the per-pupil share of public school funding on private or home school expenses
• Increasing state funding for the Community College System (by about $10 million)
• Funding the Northern Border Alliance and other law enforcement initiatives, including increased funding for retirement benefits

Her budget also includes policy changes, such as:

• Reversing the bail reform law passed last year and limiting the conditions for bail
• Requiring state agencies and departments to process permits related to housing within 60 days
• Placing a moratorium on new landfill permits
• Allowing charitable gaming locations to bring in slot machines, which would in turn increase state revenue from gambling

It’s worth noting here that there can be a blurry line between writing a state budget and writing state policy. The state budget is made up of two bills: HB 1 and HB 2. HB 1 sets the dollars going to each department. HB 2 makes any related changes to law. For example, if HB 1 uses funds from slot machines, HB 2 has to write the laws allowing them.

Over the years lawmakers have put more and more policy changes into HB 2. For example, in 2019 the Legislature used the budget process to raise the age to buy e-cigarettes. In 2021 the Legislature included a ban on abortion after 24 weeks. Whether or not these policy changes are appropriate additions to the state budget is up for debate; sometimes the budget becomes a bargaining tool for policymakers.

Gov. Ayotte also promised roughly $150 million in spending cuts this year, although she did not provide specifics in her speech before the Legislature. One big cut comes from the University System, which would get about $16.5 million less over two years. The University System is already planning a tuition increase.

Gov. Ayotte also added co-pays for some Medicaid recipients. If the Trump administration or Congress cuts federal Medicaid funding, the Legislature might need to make a lot more changes to that program in New Hampshire, or cover the difference by cutting other state programs.

What are the next steps?

There will be public hearings on the state budget bills, HB 1 and HB 2, that anyone can participate in. The dates for those hearings are not yet public, but you will be able to find them on the official General Court and the Citizens Count websites.

After gathering public testimony and setting their own priorities, the House Finance Committee will submit their budget proposal to the full House of Representatives for a vote. Assuming that passes – which almost always happens – the bill then goes to the state Senate. Once again, there will be public hearings and then a full Senate vote.

Usually the Senate changes the House budget bill. This can reflect a disagreement on policy, but it may also reflect a changing revenue outlook. The more time passes, the more information the state gets about how much money it is collecting through taxes. For example, Gov. Ayotte is predicting a rosy rebound in business tax revenue this year. If business tax revenue continues its downward trend, however, legislators will have to cut spending even further.

The House and Senate usually set up a conference committee of selected legislators to negotiate a final, compromise budget in June. That budget bill then goes before the full House and Senate, then goes to the governor’s desk for a signature or veto. The governor almost always signs the bill. If not, legislators go back to the drawing board with a new bill.

How do you think New Hampshire should prioritize its spending? Let your legislators know what you want to see added to or cut from the state budget. Get started by learning who represents you and how to contact them.