When Gov.-elect Kelly Ayotte is sworn into office Thursday, she and her fellow Republicans who gained ground in Concord on Election Day will have the power to implement many of the policies they ran on — from housing, to immigration, to taxes.
But the GOP’s stronger hand in the State House this year coincides with some significant financial challenges: sagging state revenues, a scarcity of affordable housing, potentially budget-busting liabilities from pending school funding lawsuits, and the growing, multimillion-dollar cost of addressing decades of abuse at the state’s youth detention center.
Ayotte and top State House Republicans ran on the promise to hold the line on taxes and fees, and GOP lawmakers say voters should expect them to address any funding shortfall with reduced government spending.
“There is always stuff that can be cut,” House Majority Leader Jason Osborne told the Union Leader this week.
House leaders are simultaneously pursuing fresh cuts to state business taxes, including a 0.5 percent reduction to the Business Enterprise Tax.
“Every time we’ve cut taxes in New Hampshire, we’ve seen revenue go up, and I have no doubt that would be the case in this scenario as well," said Rep. Joe Sweeney, the House’s Deputy House Majority Leader.
But that hasn’t always been the case, and falling business tax collections have been a source of concern for many state budget watchers recently. Last month, the state’s Business Profits Tax and Business Enterprise Tax, which account for about 40% of overall state revenues, came in $23 million under target — a worrying sign for the coming budget cycle.
At a press conference Tuesday, Democratic lawmakers stressed they are not proposing increasing taxes or revisiting the repeal of the state’s tax on interest and dividends income, which was finalized Jan. 1. But they were adamant in stressing their desire to hold Republicans accountable for any service cuts or increased local tax burden stemming from the next state budget.
“We are here as Democrats, to make sure that Republicans don't just pass the costs of critical services on to you and your property taxes, because make no mistake, that’s what they’ll do,” said Sen. Cindy Rosenwald of Nashua.
First up: Writing a new state budget
Crafting the state’s next two year spending plan will be the first major political test for lawmakers and the new governor.
As a candidate, Ayotte repeatedly promised not to raise taxes. She also stressed her goal to boost pensions for public safety workers, and more broadly governing in the vein of outgoing-Gov. Chris Sununu, who never had to cut spending, and whose eight years in office benefited from both a mostly strong economy and more than a billion dollars of federal aid.
Ayotte’s circumstances could be quite different. While unemployment here remains historically low and collections from taxes on rooms and meals remain strong, the state no longer has the benefit of collecting interest on unspent federal aid to pad the budget.
It’s also unclear what new sources of revenue, if any, Ayotte might be willing to entertain in the next state spending plan. Her opposition to marijuana legalization — something that has become a perennial policy debate in Concord — takes one possible source of fresh state revenue off the table. Some in her party are looking at ways to increase the state’s growing take from charity gambling, but Ayotte’s position on this front is less clear. As New Hampshire attorney general, Ayotte opposed allowing more gambling here. It’s an issue that has historically divided both parties in New Hampshire, though Democrats are using its terminology to paint the coming budget as a Republican enterprise.
“With their trifecta in Concord, Gov.-elect Ayotte will own this year’s budget and any agency cuts, which will hurt the many services all Granite Staters rely on,” Deputy House Democratic Leader Laura Telerski said Tuesday.
While the budget is almost certain to include significant — and specific — policy decisions for Ayotte’s administration, it’s worth recalling she won election by stressing the far broader message of not “Massing Up” New Hampshire — as she described it, avoiding policies favored by our neighbors in the Bay State.
However elastic that objective may be, the Republicans who now control Concord — from Ayotte on down — appear committed to doing so, even if the goal remains fuzzily defined.
