Senate proposes revenue gains, fund and program shifts in House budget revisions

Michael Kane, the legislative budget assistant, told legislators during a briefing that the Senate’s revisions to the House-passed budget produce higher revenue estimates and several source-of-fund shifts that leave the Education Trust Fund and rainy day fund with larger projected balances than the House proposal.

Kane said the Senate’s base revenue estimates for fiscal 2025–27 were about $416 million higher than the House’s and that, after schedule adjustments and fund splits, the aggregate difference between the House and Senate proposals was roughly $237 million. He summarized key drivers as differences in business, real estate transfer and tobacco tax splits, and a lower video-lottery-terminal (VLT) revenue assumption in the Senate’s analysis than the House’s.

The briefing matters because those revenue and source-of-fund choices affect how the state funds education adequacy, Medicaid and behavioral-health items, corrections and court resources, and whether and how much is transferred into the rainy day fund ahead of the next biennium.

Kane walked through the surplus statements and schedule 2 adjustments line by line. He said the Senate increased the Department of Health and Human Services lapse estimate after HHS reported it expected a larger lapse for FY25 (Kane reported HHS moved from an assumed ~$22 million lapse to a figure “closer to over $60 million,” producing about $38 million of additional lapse in the Senate numbers). That change, plus revised revenue splits, reduced the amount the Senate expects to draw from the rainy day fund for FY25 (Kane gave the Senate figure as roughly $93.4 million versus the House’s roughly $148.8 million assumption).

Kane described the Education Trust Fund differences as driven primarily by revised tax splits for business taxes, tobacco and real estate transfer taxes (the House used a 70/30 split between general fund and Education Trust Fund; the Senate shifted to approximately 64.5/35.5). He said that change—together with other adjustments including how lottery revenue is treated—leaves the Senate with a notably larger Education Trust Fund balance carried into FY26 than the House (Kane reported the House carryforward at about $71.8 million vs. the Senate’s about $105.5 million for FY26).

The Senate’s treatment of lottery and video lottery terminal revenue differs from the House: the House placed restricted lottery revenue toward adequacy; the Senate kept some revenue flowing to the general fund and adjusted the VLT tax and distribution, including a modestly higher tax rate on VLTs but a different distribution between general and education funds. Kane said the Senate also delayed implementation of a new fund for elderly/blind/disabled exemptions for two years.

Kane summarized policy and appropriation variances the Senate made to the House budget across agencies. Highlights he flagged included: - HHS: a larger lapse estimate for FY25; restored and added appropriations in several HHS program lines (for example, additional funding for developmental services, WIC farmers market grants, Medicaid long-term care eligibility determination staff, and a tier 1 HHS call center); a change in the treatment of Medicaid provider payments tied to a negotiated MET (Medicaid Enhancement Tax) agreement with hospitals; and a Senate change to Medicaid premiums that Kane said cost the Senate about $7 million compared with House/Governor proposals. - Corrections and judicial branch: the Senate restored significant funding the House had cut, added resources for superior court work on YDC claims, and funded some courthouse restorations. Kane said the Senate restored roughly $5 million of the back‑of‑the‑budget reduction in corrections and removed several judicial budget reductions that the House had proposed. - Education: many source‑of‑fund shifts (programs the House funded from the general fund were moved by the Senate back to the Education Trust Fund), changes to adequacy aid and special education fund sources, and a reduction in the Senate’s proposed additional adequate-education aid line that the House had included. - Universities and unique funds: the Senate added general‑fund support for the University System (Kane reported an increase of about $67.5 million in general funds offset in part by reductions in unique funds), and adjusted the UNH/unique funds treatment compared to the House. - Other changes: the Senate maintained liquor revenue dedications (the House had proposed moving liquor revenues into the general fund), added a small nursing‑home bed fee to the general fund (~$300,000/year), and proposed a small Granite Patron of the Arts tax credit program (Kane cited an aggregate statewide cap that the Senate estimated would reduce revenue modestly).

Kane also noted several items the Senate added or changed that are not strictly dollar impacts in the surplus statement: appointment authority for the YDC claims administrator (moving appointment to the executive branch subject to gubernatorial approval rather than judicial‑branch appointment), and policy language on HHS facilities sales intended to protect continuity of services.

Members asked questions about specific items Kane referenced in the schedules, including the renewable-energy fund lapses and the VLT revenue assumptions. Representative Thomas asked where the renewable-energy fund change appeared; Kane directed him to the schedule lines and said the Senate lowered an assumed recurring pickup from $5 million to $4 million per year and had an initial $20 million lapse on the renewable-energy fund shown on schedule lines. Another member asked how VLTs would create new revenue beyond existing historical-horse-racing machines; Kane said both bodies expected some incremental pickup and that conferees will need to reconcile estimates.

Kane closed by reminding legislators there are active conference committees for House Bill 1 and House Bill 2 and that conferees will have roughly a week to reconcile House and Senate differences on revenues, appropriations and fund source decisions. He said LBA staff will be available to provide detail to conferees and that staff can be reached in the State House offices for follow-up questions (Kane: "feel free to visit our office").

No formal roll-call votes or final legislative actions were taken during the briefing; Kane’s presentation was informational and preparatory for upcoming committee‑of‑conference work.

Looking ahead, the conferees must reconcile revenue estimates (including DRA revenue forecasts and VLT/meals-and-rooms assumptions), chosen source of funds for programs that both funds and general fund can bear, and policy sections that the Senate and House have placed in different bills. Kane said DRA will be asked to brief Ways and Means and the conferees directly on revenue estimates.

The briefing transcript and accompanying LBA compare reports and surplus statements (Kane referenced the posted documents and handouts) provide the line-by-line detail conferees will use in House Bill 1 and House Bill 2 committee of conference meetings. Kane encouraged legislators to contact LBA analysts with specific questions about program lines or schedule items.