Senate’s budget revisions raise revenue estimates, alter tax splits and restore some program funding

Michael Caine, legislative budget assistant, briefed lawmakers on the Senate's proposed changes to the House-passed biennial budget, saying Senate revenue estimates were about $416 million higher across fiscal years 2025'2027 and that net revenues after adjustments were roughly $237 million above the House'passed figure.

The Senate'draft changes shift how several tax streams are split between the general fund and the Education Trust Fund, adjust video-lottery-terminal (VLT) assumptions and restore or add appropriations in areas including health and human services (HHS), developmental services, community mental health and higher education. Caine told the group the two chambers have formed a committee of conference to reconcile differences in House Bill 1 and House Bill 2.

Why it matters: the Senate'House differences affect the Education Trust Fund balance, the rainy day fund transfer, and near-term general fund lapses that determine whether a deficit will require a rainy day transfer. Those outcomes, Caine said, will hinge on final revenue and lapse numbers when the fiscal year closes and on decisions the conferees make in the coming week.

Major revenue and fund differences

- Base and adjusted revenue: Caine said the Senate'estimated base revenues for the combined general fund and Education Trust Fund were roughly $416 million higher than the House over FY25'FY27; after schedule adjustments the net difference was about $237 million.

- Video lottery terminals: VLT assumptions were a key driver. Caine said the Senate'assumed lower VLT receipts than the House by about $80 million in one year, while also proposing a different distribution of VLT tax receipts between funds. The House had proposed routing all lottery revenue into adequacy-restricted education revenue; the Senate proposed a split that directs a portion back to the general fund and creates a future fund for elderly, blind and disabled tax-exemption reimbursements in later years.

- Tax-split changes: The House used 70/30 splits for certain business, tobacco and real-estate-transfer taxes (general fund/Education Trust Fund). The Senate changed the split to 64.5/35.5, which Caine said preserves more balance in the Education Trust Fund and produced higher Education Trust Fund balances under the Senate plan.

Balances, lapses and rainy-day fund

- HHS lapse estimate: Caine said HHS revised an assumed FY25 lapse from about $22 million to more than $60 million; the Senate used the higher lapse estimate, which reduced the amount the administration would need to transfer from the rainy day fund.

- Rainy day transfers: Under the House numbers the rainy day fund transfer was projected at about $148.8 million; with the Senate'adopted revenue and lapse assumptions the transfer falls to about $93.4 million. The Senate estimated the rainy day fund ending balance at roughly $249 million under its scenario.

Education Trust Fund

- Caine said the Senate'budget would leave the Education Trust Fund with a positive carrying balance (about $19.2 million remaining at the end of the biennium under the Senate'preferred splits), while the House'proposal required a general-fund transfer to bring the fund to zero as required by law.

Appropriations and policy changes

- Schedule 2 adjustments: The Senate added and removed many schedule-2 appropriation adjustments. Notable restorations or additions included: removal of a Medicaid provider rate reduction the House had proposed (the Senate restored funding instead of the 3% provider cut); roughly $37.8 million in added general funds for community mental health; roughly $31.4 million (plus federal match) to more fully fund developmental services waits (Caine said the Senate'priority was to fully fund the developmental services wait list at the governor'level); and additional funding for the University System (Caine said the Senate added $67.5 million in general funds offset partly by reduced unique funds).

- YDC claims settlement: Both chambers provided funding for the YDC claims settlement fund; the Senate provided $20 million in general funds up front and assumes an additional estimated $80 million in proceeds from a possible future sale of the Sununu Youth Services Center property, subject to timing and approvals.

- Judicial, corrections and other spending: The Senate reversed several House back-of-budget reductions for the judicial branch and restored funding for some courthouses and additional resources for superior court related to YDC claims. The Senate also restored substantial funding to the Department of Corrections relative to the House proposal, but placed reductions in different positions and line items than the House.

Policy and statutory changes

- The Senate'changes include statutory or policy language in House Bill 1 and House Bill 2 across many areas: motor vehicle inspection and fee changes (affecting the Highway Fund), modification of liquor revenue dedication decisions, creation or amendment of programs (for example a Granite Patron of the Arts tax credit the Senate proposed), and temporary changes to how some dedicated funds are lapsed or tapped.

Process and next steps

- Caine told lawmakers a committee of conference has been formed for House Bill 1 and House Bill 2 and will begin later in the week; conferees will need to resolve revenue estimates, fund splits and appropriation differences. He said LBA staff will be available to the conferees and that DRA (Department of Revenue Administration) has been invited to brief members on revenue estimates.

- Questions from lawmakers at the briefing covered specific lines in the surplus statement (including where renewable energy fund lapses appear and where meals-and-rooms caps were removed), the VLT revenue assumptions, and whether tourism declines (fewer Canadian visitors) had been captured in meals-and-rooms revenue estimates — Caine said those are revenue-estimate decisions conferees will have to reconcile and that DRA will be asked to brief members.

Quotes and attribution

"Before you, we're gonna give, the LBA kind of overview of the Senate changes to the House Pass budget," Michael Caine said at the start of the briefing.

Representative Thomas asked where the change taking money from the renewable energy fund was reflected; Caine pointed to the schedule-2 lines on page 4 and 5.

What remains uncertain

The final impacts depend on end-of-year revenues and lapses and on what the committee of conference negotiates. Caine repeatedly emphasized that some balances and transfers are contingent on final revenue receipts and agency lapse decisions.

The LBA offered to provide detailed line-item support to conferees and invited members to the LBA office for follow-up questions. The committee of conference process will determine which Senate and House choices ultimately appear in the enacted budget.