By: Phil Sletten, Research Director, NHFPI
As part of the New Hampshire Fiscal Policy Institute’s 10 County State Budget tour, my colleagues and I travelled across the state to discuss what the State Budget is, how it is structured, what it funds, how State revenue and spending decisions interact with local property taxes, what the budget means for affordability and household costs across New Hampshire, and more.
There are four chances left to join the conversation. Learn the details for our upcoming events in Laconia, Newport, Portsmouth, and Gorham at www.nhfpi.org/tour.
Reflecting the spirit of New Hampshire’s residents, we found Granite Staters to be deeply engaged, invested, and passionate about how the State Budget, and decisions made by our lawmakers in Concord, impact our everyday lives and communities. Below are some of the questions that kept coming up about how the budget works, and a few answers, too.
Where does the money actually come from, and is it enough
Many attendees were focused not just on what New Hampshire spends money on, but on how the State and local governments raise revenue, and whether that money is sufficient to meet the state’s needs.
The State relies heavily on federal funding, like all states do, as well as business taxes, taxes on restaurant meals and hotel rooms, State-level property taxes for education, taxes on cigarettes, sales of liquor and lottery tickets, taxes on buying and selling property, and a bunch of smaller taxes and fees. Recent reductions to business tax rates, the repeal of a tax on interest and dividends, and adjustments to other revenue sources all shape how much funding is available.
State lawmakers must write a balanced budget each year, so when revenues fall from one source, they must be raised through another, or policymakers have to decide which services to reduce. These decisions can raise questions about long-term sustainability and well-being, especially as health care, education, and infrastructure costs grow.
How is the State Budget structured
Another common thread of questions was curiosity about how the State Budget is organized and why it works that way.
The State Budget is written as two separate pieces of legislation. The Operating Budget Bill (House Bill 1 or HB 1) directs where most of the money goes, and lists line items as one might image in a budget. The Trailer Bill (HB 2) includes the policy language that supports HB 1. State government agencies kick off the budget process with funding request proposals, which estimate their needed funding levels to carry out their designated responsibilities and services. The governor uses those requests to build a proposal, and then the Legislature makes the changes it wants before the budget returns to the Governor for consideration and, in most cases, approval.
All State Budget expenditures are divided into six main categories: Health and Social Services, Education, Justice and Public Protection, Transportation, General Government, and Resource Protection and Development. Two-third of all expenditures are in Health and Social Services and Education. Services within these categories can shift, but usually only do during State agency reorganizations. Categorization can feel a bit vague. For example, the Lottery Commission is under “Education” because it raises money for education.
Attendees were also interested in what happens when things don’t go as planned, or changes need to occur after the budget is finalized. The State can draw from its Rainy Day Fund or reopen the State Budget in response to economic downturns or emergencies, such as the 2007-2009 Great Recession. More regularly, the Joint Legislative Fiscal Committee and the Executive Council work with State agencies to manage smaller-scale changes needed in the budget.
Where does the money go and who benefits
Finally, many of the most detailed questions focused on how funds are distributed and who ultimately benefits from State spending.
Participants wanted to connect the dots between State-level decisions and local impacts. For example, a significant portion of State spending, about 44% of the State Budget, goes to the New Hampshire Department of Health and Human Services. Federal programs, particularly Medicaid, also play a major role in funding services by providing federal matching dollars for eligible expenditures. Meanwhile, education funding continues to be one of the most discussed topics, particularly as shifting demographics lead to lower enrollment and can change the distribution of dollars from one community to another.
The NHFPI State Budget tour presented a great opportunity for Grantie Staters to connect with each other and have their fiscal policy questions answered directly. The number of people at these events demonstrated how much Granite Staters are involved and care about what happens in New Hampshire. When Granite Staters are informed and engaged, we can all benefit.
There are four chances left to join the conversation. Learn the details for our upcoming events in Laconia, Newport, Portsmouth, and Gorham at www.nhfpi.org/tour.