Senate shifts House budget: more revenue, different tax splits, restores some HHS and judicial funding

The Senateproposal to the House-passed biennial budget raises estimated revenues and changes how some taxes are split between the general fund and the Education Trust Fund, producing different surpluses and pay-fors than the House plan, the Legislative Budget Assistant said Thursday.

Michael Caine, legislative budget assistant, told legislators the Senate's revenue estimates were about $416 million higher across fiscal years 2025to2727 than the House's base estimates and that schedule 2 adjustments and differing fund splits reduced the net difference to about $237 million over the three years. "This is called schedule 2 of the surplus statement," Caine said while walking lawmakers through the comparison.

The changes matter because they alter the Education Trust Fund and rainy-day fund balances available to fund adequacy grants, school building aid and other programs. Under the House proposal the Education Trust Fund beginning balance for fiscal 2026 was about $71.8 million; the Senate projects about $105.5 million. The House assumed a roughly $148.8 million transfer from the rainy-day fund in 2025 to cover a general fund shortfall; the Senate's comparable transfer is about $93.4 million, Caine said.

Key differences and why they were made - Revenue and lapses: Caine told the committee the Senate Ways and Means adjusted revenue estimates after April receipts and agency discussions. A notable change came from Department of Revenue Administration estimates and conversations with Commissioner Stepp; the Senate increased some business-tax revenue assumptions that contributed to the $416 million base increase. HHS also revised its lapse estimate: the House/ governor estimate assumed a $22 million lapse in HHS for 2025, while HHS later indicated lapses closer to $60 million, allowing the Senate to assume larger lapses and reduce required rainy-day transfers.

- Tax splits and VLTs: The House had proposed 70/30 splits of business, tobacco and real-estate-transfer taxes between Education Trust Fund and general fund; the Senate changed those splits to roughly 64.5/35.5, shifting revenue back to the Education Trust Fund. Video lottery terminal (VLT) revenue estimates also diverge: the Senate assumed materially lower VLT receipts than the House (about an $80 million difference in estimates across the period) but proposes allocating a portion of BLT tax proceeds to the general fund in 2026 and 2027 while creating a new fund in later years for elderly/blind/disabled tax-exemption reimbursements.

- Schedule 2 adjustments (appropriations and offsets): The Senate added roughly $2.4 million in schedule 2 appropriation increases for 2026 compared with the House's schedule 2 reductions of about $13.3 million; for 2027 the House's schedule 2 reductions were larger ($55 million vs. the Senate's $19 million). The Senate also restored or added back funding in several areas the House had cut or removed in its back-of-budget adjustments, including for corrections and certain judicial branch items.

Program-level restorations and changes - Human services and behavioral health: The Senate increased HHS lapse estimates but restored funding for community mental health and developmental services. Caine said the Senate added roughly $31.4 million in general funds (and a like amount in federal match) to reduce the Developmental Services wait list to the governor's level and added about $37.8 million in general funds for community mental health programs.

-Judiciary and public defense: The Senate removed the House's back-of-budget reduction for the Judicial Branch (about $7.8 million over the biennium) and added funding for courthouse preservation and additional Superior Court resources tied to YDC claims litigation. The Senate also provided $3.8 million for the public defender program.

- Corrections: The Senate restored roughly half of the House cuts in corrections but applied its own reductions; Caine said funding and position restoration/removal in corrections will be a detailed focus for the conference committee.

- Higher education and unique funds: The Senate added about $67.5 million in general funds to the University System over the biennium while reducing certain "unique" other-fund contributions, producing a net divergence driven largely by changes in source-of-fund choices.

- YDC claims settlement fund and Sununu Youth Services Center: The Senate provided $20 million upfront to the YDC claims settlement fund (the House had $10 million per year as a nonlapsing fund). Caine said the Senate also assumed potential additional proceeds (an $80 million estimate) from the sale of the Sununu Youth Services Center property; sale proceeds would be deposited directly into the settlement fund under the senate language.

- Liquor revenue, nursing home bed fees and Medicaid: The House proposed moving liquor revenue into the general fund and funding certain programs with general appropriations; the Senate generally preserved existing liquor revenue dedications and adjusted appropriations accordingly. The Senate also added a small nursing-home-bed fee shift (about $300,000 per year) to the general fund and changed Medicaid premium and cost-sharing mechanics in ways that reduced premium revenue by roughly $7 million across the biennium.

Questions and next steps Representative Thomas asked where the renewable-energy fund adjustments appear; Caine directed legislators to schedule 2 (page 4) and pointed to a $20 million lapse and smaller annual revenue assumptions in the Senate plan. Caine also said conferees should be prepared for detailed negotiations: "We won't be able to give you reasons on decisions, but we'll be able to give you the detail behind those decisions," he said, offering LBA staff assistance to members during the committee of conference.

No final conference outcomes were recorded in the briefing; Caine said a committee of conference for House Bill 1 and House Bill 2 was already formed and expected to begin later in the week. The LBA's comparative surplus statement and a detailed schedule 2 comparison were posted and available to legislators and staff for the conference process.

Ending Lawmakers and staff were directed to LBA offices for follow-up and to request specific program detail. The next formal steps are the committee of conference sessions on House Bill 1 and House Bill 2, where the House and Senate conferees will attempt to reconcile the differing revenue estimates, tax-split decisions and appropriation choices described in the briefing.