By GARRY RAYNO, InDepthNH.org
CONCORD — After a string of substantial budget surpluses, New Hampshire state government found itself in deficit at the end of the 2025 fiscal year, according to its Annual Comprehensive Financial Report dated Dec. 23, 2025.
Information in the report puts the state’s deficit for the second year of the past biennium at $67.3 million, which was covered by withdrawing that amount from the state’s Rainy Day Fund, which now has a balance of $225.2 million dollars.
The biennium budget the House and Senate passed in the 2025 session and Gov. Kelly Ayotte signed, anticipated a surplus of $28.4 million with a transfer to the Rainy Day Fund of $88.8 million for fiscal 2025.
The current biennial budget is anticipated to withdraw $49.6 million from the Rainy Day Fund to balance that two-year budget.
The current budget also anticipates the Education Trust Fund, which supports state adequacy aid to school districts and charter schools, Education Freedom Accounts, and some special education and building costs, would have a $117. 3 million surplus.
However, revenue raised last fiscal year was less than anticipated and produced a $47.2 million shortfall that was covered by the surplus in the trust fund so the year ended with $101.2 million.
The auditors did find that $20 million from the Education Trust Fund was used to pay for activities that are the general fund’s responsibility.
The percentage of money going into the Education Trust Fund from business, rooms and meals, tobacco and real estate transfer taxes, will be less this biennium and with the expansion of the Education Freedom Account program, the fund’s surplus is expected to be reduced significantly over this biennium leaving only $20 million surplus at the end of fiscal year 2027.
After years of significant growth in business taxes fueled by the federal COVID rescue and relief money and the America Rescue Plan Act of 2021, the past fiscal year saw businesses taxes plummet and finished the fiscal year $131 million below what budget writers estimated.
The interest and dividends tax, which ended Jan. 1, 2025, was also below estimates by $9.3 million due to a large number of returns, according to the Department of Revenue Administration.
Other problem revenues highlighted in the audit were liquor revenues which have been falling precipitously for the last three fiscal years going from $133.3 million in fiscal 2023, to $109.6 million in 2024 and to $85.9 million in 2025.
The tobacco tax has also showed a downward trend as fewer people are smoking, going from $217.8 million in fiscal 2023, to $189.5 million in 2024, and to $184.4 million in 2025.
The real estate transfer tax had performed better than expectations until 2025 when it produced $183.8 million, which was $21.7 million less that the prior year, but did rebound to $202.2 million in fiscal 2025.
The two revenue sources that helped offset the downward trend were the interest the state earned on surplus money and federal funds not yet expended from the federal relief and rescue programs, growing from $205.8 million in the “other category” in fiscal 2023 to $253.3 million in 2024 and to $253.7 million in 2025.
Lottery returns, which go into the Education Trust Fund, went from $189.5 million in 2023 to $207.9 million in 2024 and to $209 million in 2025.
The insurance tax also increased over the three-year period from $156.8 million in 2023 to $163.3 million in 2024 and to $176.4 million in 2025 due to premium increases.
The budget approved in 2024 for the past fiscal year was $3.14 billion in general funds, according to auditors but was adjusted through legislation and other adjustments to $3.4 billion, while revenues for the fiscal year were $3.1 billion which was $63.9 million below the estimated revenue targets for a balanced budget.
Highway Fund
The auditors found the Highway Fund used for construction and repair of roads and bridges, state police and other related expenses, ended the 2025 fiscal year with an operating surplus of $63.1 million, which is down from fiscal year 2023 when it was $86.2 million.
Much like the general and education trust funds, the Highway Fund is spending down its operating surplus because revenues, although they are increasing over the past three years, are not keeping pace with spending.
The fiscal year shortfall of revenues and spending was $13.6 million for fiscal 2025.
The fund faces another challenge beginning this year when the Transportation Department will have to begin paying on its $200 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan used to complete the construction of the I-93 expansion from Salem to Manchester by shifting other federal and state money and grants to the project while still maintaining local construction and maintenance programs
Until this year the state only needed to pay the interest on the loan which was $2.2 million in fiscal 2025, but the premium payback is projected to be $23.4 million beginning this fiscal year.
Fish and Game Fund
Much like its counterparts, the Fish and Game Department is spending down its operating surplus because annual revenues do not meet annual spending.
A self-funded agency, it had a $10.7 million operating surplus in fiscal 2025 compared to $11.6 million for fiscal 2024.
Revenues for both years were nearly the same at $14.8 million in fiscal 2025 but the agency ended the year with a $600,000 deficit.
Overall
State revenues are only one side of the picture, as federal funds, local and county funds and non-governmental organizations also contribute to state operations.
For revenues, the largest percentage, 44.8 percent, comes from grants and contributions mostly from the federal government, while 17.6 percent comes from charges for service, which are largely fees, 13 percent are from business taxes and 9 percent from special taxes.
State property taxes such as the Statewide Education Property Tax account for 5.2 percent of revenue, 3.2 percent from the rooms and meals tax, interest and miscellaneous are 2.5 percent, while business license taxes and personal taxes are both 2.3 percent.
Nearly half of all government spending is for health and human services at 46 percent, with education 19.5 percent, and administration of justice and personal protection is 16.5 percent.
General government accounts for 7.6 percent of government spending, transportation is 6.5 percent, resource protection and development is 3.8 percent and interest is .1 percent.
The auditors wrote “In our opinion, based on our audit and the audits of others, the accompanying financial statements, referred to above, present fairly, in all material aspects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the state, as of June 30, 2025, and the respective changes in the financial position, and where applicable, cashflows thereof for the year then ended in accordance with US generally accepted accounting practices.”
The state’s auditor is KPMG LLP.
Garry Rayno may be reached at garry.rayno@yahoo.com.