Senate alters House budget with different revenue estimates, tax splits and targeted restorations

Michael Caine, the legislative budget assistant, briefed the Senate Finance-related parties on the Senate's changes to the House-passed biennial budget, saying the Senate's revenue estimates and policy choices left the Education Trust Fund and the rainy day fund in different positions than the House plan.

The overview explained that Senate revenues for fiscal years 2025'27 were roughly $416 million higher on base estimates than the House's numbers, but after interfund splits and other adjustments the net difference between the House and Senate proposals over the three-year period was about $237 million. Caine attributed much of the variance to differences in estimates for video lottery terminal (VLT) revenue and to alternative splits of business, tobacco and real estate transfer taxes between the general fund and the Education Trust Fund.

Why it matters: the revenue and split differences change how much each fund can appropriate and whether the rainy day fund must cover shortfalls. The Senate's approach produced a positive Education Trust Fund balance going into 2027 and a larger rainy day fund balance under its estimates; the House proposal required a larger transfer from the general fund to bring the Education Trust Fund balance to zero.

Caine walked the group through the surplus statement and schedule 2 adjustments that underpin the two bodies' competing positions. He said the Senate assumed larger lapses in HHS spending after updated agency information (raising the 2025 lapse estimate by roughly $38 million) and negotiated revenue pick-ups including additional auditors in the Department of Revenue Administration. The Senate also changed the split of business, tobacco and real estate transfer taxes from the House's 70/30 split in favor of the general fund to a 64.5/35.5 split, shifting more receipts to the Education Trust Fund under the Senate plan.

On appropriations, the Senate restored or altered several reductions the House had proposed. Notable changes include restoration of funding for developmental services to better match the governor's level, removal of a provider rate reduction in Medicaid the House planned to apply, added targeted HHS programs (for example, funds for guardianship contracted services and additional support to address eligibility backlogs), and partial restorations for the Judicial Branch and the Human Rights Commission. The Senate also added roughly $67.5 million in general funds for the University System of New Hampshire while reducing "unique" funds used by the university system.

Caine highlighted program- and fund-level choices that differ between the bodies: the House had proposed reserving all lottery revenue for adequacy grants in the Education Trust Fund, while the Senate left lottery and VLT revenue partly available to the general fund and created a path for a new reimbursement program for elderly, blind and disabled property tax exemptions in later years. The Senate removed a meals-and-rooms distribution cap the House had proposed, restoring expected local distributions there.

On specific line items, the Senate increased funding for community mental health programs by roughly $37.8 million in general funds and funded developmental-services wait-list reductions with about $31.4 million in general funds plus the federal match. The Senate also changed the YDC (youth development center) claims approach by front-loading settlement funding and preserving a pathway for proceeds from sale of the Sununu Youth Services Center to be deposited into the YDC settlement fund.

Several tax-policy and administrative changes drove the revenue differences. The Senate added multistate auditors in DRA (estimated additional general-fund revenue of about $2.8 million over the biennium), adjusted assumptions on tax amnesty (an estimated $5 million total, split between funds), and altered the statutory split percentages on business, tobacco and real estate transfer taxes. Caine also noted a difference in the Senate's assumed VLT tax rate on BLT owners (31.25%) and how VLT receipts are routed between the general and education funds compared with the House plan.

Committee of conference and next steps: Caine said conferees for House Bills 1 and 2 have been appointed and will begin negotiations, with staff available to provide line-by-line detail and to run revenue and lapse true-ups. He emphasized remaining uncertainty: final FY25 revenues, actual lapses and pending settlements will affect the final numbers and transfers to the rainy day fund.

Representative Thomas asked where the renewable energy fund lapse appeared in the materials; Caine pointed to the schedule 2 lines showing an initial $20 million lapse and a change in the Senate's estimate of recurring revenue from the renewable-energy fund, and he directed members to page and line references in the compare report. Caine also said the Senate and House revenue estimates will need to be reconciled in committee, and he noted the Legislative Budget Assistant office is available for follow-up briefings, including a requested DRA presentation on revenue estimates.

The presentation contained detailed schedule-by-schedule comparisons; Caine encouraged members to visit the LBA office for the full line-item documents and to consult staff ahead of committee of conference work.

The briefing concluded with Caine noting, "There has been a committee of conference formed for House Bill 1 and 2, which will start later this week," and an invitation for legislators to follow up with the LBA staff for clarifications and the supporting schedules.