Battle Over Ed. Trust Fund, Psych Unit Likely Crafting Budget Sununu Won’t Veto

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Garry Rayno is's State House Bureau Chief. He is pictured in the press room at the State House in Concord.

By GARRY RAYNO, Distant Dome

CONCORD – The Senate Finance Committee is making progress on its version of the state’s two-year operating budget, but much remains to be done.

The House sent the Senate a budget that increased funding for key social services, education, higher education and workforce development along with a new capital gains tax.

It also sent the Senate a budget that was guaranteed to be vetoed by Gov. Chris Sununu which included ample one-time spending to devour any surplus in his proposed budget.

He used the age-old axiom that surplus funds generated by a growing economy should not be used to grow government programs that will have to be cut when revenues decline as they always do.

That is a tried and true Republican philosophy that Democrats, who now control the legislature and executive council, do not adhere to and never will.

If the cash is available, it should be spent on short-funded programs which will produce better results when money levels are sufficient to do the job is the Democrats’ philosophy.

In past years, both Democrats and Republicans have been willing to bend the axioms while crafting two-year operating budgets.

Operating budgets do not often align with rigid philosophies and they should not if they are to address the most pressing needs of a state such as New Hampshire’s ongoing opioid epidemic that continues to claim an average of more than one life a day from overdoses.

The House budget also did some other things that Sununu opposed such as freezing reductions in business tax rates, eliminating his proposed $27 million, 40-bed facility to replace the long-controversial Secure Psychiatric Unit at the state prison and the Capital Infrastructure Revitalization Fund which contained tens of millions of dollars for projects in a couple dozen communities, and retaining the Education Trust Fund which he eliminated in his proposed budget.

The Senate is trying to meet the governor halfway while retaining much of the work on social services and education contained in the House budget.


On Friday the Senate Finance Committee voted to eliminate the capital gains tax with Senate Majority Leader and committee vice chair Dan Feltes of Concord lamenting the decision noting the expansion of interest and dividends tax to include capital gains only affected the top 1 percent of the state’s earners while it would have provided more state education aid to the poorest school districts.

However, the committee on a party line vote turned down an attempt to remove the freeze on business tax rate reductions and voted unanimously to change the way the business profits tax is apportioned and brought state business tax laws in line with federal statutes.

Those changes are expected to produce about $50 million over the biennium and would help to replace the estimated $150 million the capital gains tax would have produced.

The change in apportionment was sought by many of the state’s largest manufacturers and goods producers who will pay less in taxes although out-of-state companies selling into New Hampshire are expected to pay more.

Big Issues remain

The committee is making progress, but some big and controversial issues remain to be decided if the Senate is to produce a budget Sununu would sign or at least let go into law without his signature.

The most controversial issue remains a new secure forensic mental health facility to replace the SPU and also serve as a receiving facility for people with acute mental illness who now wait in hospital emergency rooms for days if not weeks until a bed opens at the New Hampshire Hospital.

Early last week, Administrative Services and Health and Human Services officials met with the committee but could offer few concrete details instead asking lawmakers what they wanted.

The House had eliminated the facility from its operating budget because the House Finance Committee said members were not given enough details to make an informed decision about the project.

Senate budget writers had a few more details but not enough and they gave officials a Friday deadline to produce plans for different sized facilities with different programs.

“I want this thing to be clear to everybody at this table,” D’Allesandro said. “This is a lot of money and a lot of significant decisions.”
He noted he did not want to make a mistake like the one made 10 years ago to let children into the state hospital.

That will be one of the most difficult decisions the committee will have to make in the next week.

Education Trust Fund

What to do with the Education Trust Fund will be another difficult decision for Senate budget writers.

The trust fund was created when lawmakers crafted their answer to the Supreme Court’s Claremont education funding decision two decades ago.

The idea was to create a lock box for the tax money raised to increase funding for school districts. Lawmakers have a way of using available money for things other than what they are intended.

The highway fund is a perfect example. The fund is the depository for money from auto registrations and the gas tax and was intended to pay for highways and bridges. But state police, the attorney general’s office and even health and human services use money from the fund for various programs and services.

The Education Trust Fund ran a deficit from the time it was created until several years ago when it began running a surplus largely due to the growth in business taxes.

The money cannot be used for anything but education funding and Sununu and some lawmakers want to be able to use the surplus for non-education purposes.

The Senate will have to decide if the House was wise in retaining the current separation or if eliminating it is advantageous.

There are ardent advocates on both sides, and this will be a battle.

Education funding

The House education funding plan spends about $170 million more than Sununu proposed to help school districts with the cost of educating students.

The House plan has three components.  One is returning stabilization grants to their original level before lawmakers approved an annual 4 percent reduction.

Suffering school districts like Berlin, Pittsburg, Stratford, Claremont and Newport all cite the loss of stabilization money as key to sending their schools into crisis.

Earlier this session, the Senate approved bringing the grants back up to their original level and that is probably a sure bet to be included in the Senate budget.

Another component of the House plan is a commission to determine the actual cost of an adequate education which currently is about $3,636 per student, far below the average cost of about $15,000 per student. The commission is not as popular in the Senate. 

Some wonder why establish the commission when a lawsuit filed by the ConVal School District could upend the outcome.

And the House plan created disparity grants for the second year of the biennium, replacing the stabilization grants. Disparity grants would help schools with a high percentage of students on the free and reduced lunch program, an indication of poverty, and with low property values per student, which results in high property taxes.

Education funding reform advocates called the package a start to addressing the growing disparity between property-rich and property-poor communities and the education opportunities available to their students.

Senate budget writers will decide between a couple of plans in the coming days — none as generous as the House package — and the committee is not likely to be unanimous in its decision.
The hard work begins this week with the goal being a budget the governor does not veto.

The Senate is moving toward the governor, but will it be far enough? That is the question.

Garry Rayno may be reached at

Distant Dome by veteran journalist Garry Rayno explores a broader perspective on the State House and state happenings for Over his three-decade career, Rayno covered the NH State House for the New Hampshire Union Leader and Foster’s Daily Democrat. During his career, his coverage spanned the news spectrum, from local planning, school and select boards, to national issues such as electric industry deregulation and Presidential primaries. Rayno lives with his wife Carolyn in New London. is New Hampshire’s only nonprofit, online news outlet dedicated to holding government accountable and giving voice to marginalized people, places and ideas. 

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