CONCORD, N.H. — Governor Chris Sununu presented his state budget proposal on Tuesday, indicating his policy priorities for the next two years and his plan for state spending in light of national economic uncertainty over a potential recession.
Addressing the state Legislature, Sununu highlighted his plan to increase education spending by $200 million, give state workers a raise, and pay health care providers more under Medicaid, while promising not to increase state taxes or fees. Sununu, who’s weighing a potential presidential run, touted New Hampshire as an example of fiscal responsibility, although his remarks mostly focused on the biggest issues facing the Granite State. That includes housing and homelessness, substance abuse, and mental health.
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The proposal includes $14.9 billion in spending over the next two years, up from the $13 billion authorized over the last biennium.
Funding for these initiatives would not come from raising taxes but from shifting resources, the governor said Tuesday.
He spoke to a joint convention made up of the state’s 400-member House of Representatives and 24-member Senate. The budget Sununu presented Tuesday is far from a done deal; rather it’s a wish list of what he hopes to see in the final budget. Moving forward, it’s lawmakers who will control what to include in the budget.
Are we heading for a recession?
The economy is slowing, but the governor’s budget doesn’t seem to forecast a full-blown recession.
While the state’s revenue from two major business taxes isn’t projected to keep growing, it will remain relatively stable, allowing the state to fund some of the new initiatives the governor proposed Tuesday. The state’s rooms and meals tax is also expected to stop growing.
“When it comes to our state’s finances, times are good,” Sununu said. “We have managed smartly, maintained our economic advantages and lived within our means.” He said the state would build up its reserves “during the good times we are currently experiencing” to shield the state from possible future downturns.
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No new taxes
Sununu’s budget includes no new taxes or fees, he announced Tuesday. And his budget includes one tax cut: removing the 7 percent communications services tax, which he called outdated and regressive.
As a source of revenue, this tax has been declining since 2012, when some previously taxed internet services were excluded. It’s also gone down as fewer people use landlines. The $30 million per year generated by this tax is about the same as what the governor appropriated for the entire Department of Business and Economic affairs.
The tax disproportionately impacts older Granite Staters, who tend to rely on landlines and traditional phone calls, according to an executive summary of Sununu’s budget plan.
About 12 percent of the state and local taxes collected in New Hampshire in 2022 came from the business profits tax, and about 5 percent came from the business enterprise tax, according to NH FPI. Republican lawmakers introduced a bill this session that would reduce the business enterprise tax rate. Republicans and Democrats have introduced bills that would modify provisions of the business profits tax.
Big changes to education funding
The governor used his budget to propose a big change in how the state funds education, a long-standing issue as many districts have struggled to fund their schools. Sununu proposed updating the education funding formula, which would send an additional $200 million to schools over the next two years. That would translate into around $1 billion to schools over the next decade.
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“Right now the education funding formula is overly complicated and fundamentally imbalanced, creating an unspent surplus each year,” Sununu said. His proposal would increase base aid by 25 percent and free and reduced school lunch by 30 percent.
He promised that would reduce the property tax burden for towns around the state while increasing how much base aid they receive from the state for their students. More details about Sununu’s proposal to update the funding formula are forthcoming. He is set to appear before the House Finance Committee on Wednesday morning to provide a detailed review, according to Tuesday press release.
Sununu proposed spending $5 million to certify hundreds of new computer science teachers and include robotics instruction in middle and high schools.
The governor also proposed doubling the budget for the state’s Education Freedom Account Program that allows eligible students to use public money for private schooling or homeschool expenses. His budget allocates $60 million for the program. It’s currently limited to students whose families earn 300 percent of the federal poverty level; Sununu’s budget would expand eligibility up to 500 percent of the federal poverty level for some categories of students including children in foster care, migratory children, homeless youth, children in military families, English-language learners, and students who are bullied among others. The state is currently facing a lawsuit, arguing the program is unconstitutional.
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Touting the success of this program is one way Sununu could assert his conservative credentials to a national audience as he weighs a presidential run, as the debate over school choice extends well beyond New Hampshire.
A raise for state employees
State employees could get a raise, if Sununu’s budget proposal becomes law. He included a 10 percent increase for all state employees in his proposal, which he said would be the biggest raise they’ve received in almost 50 years.
That raise would go into effect this year, and state employees would get an additional 2 percent raise the following year.
That arrangement has the strong support of the State Employees’ Association of New Hampshire.
“We are looking forward to supporting the historic and meaningful raise for state employees in Governor Sununu’s budget every step of the way,” said Rich Gulla, president of SEA/SEIU Local 1984 in a written statement following the address.
The state employs about 10,000 people, but 20 percent of state positions are currently vacant. Government departments have struggled with the same workforce shortages impacting private employers in the state. When it comes to public positions, the vacancies are affecting areas across state government, including state police and nursing staff, according to the governor’s executive budget summary.
Increasing pay for state employees would help address recruitment and retention, Sununu said Tuesday.
Push to streamline professional licensure
To keep promoting a business-friendly environment, Sununu said his budget includes “landmark legislation” to grant universal license recognition for professionals coming into New Hampshire from other states.
“If you have a substantially similar license and you’re in good standing in another state, there is no reason why you should not have a license on Day 1 in New Hampshire,” he said.
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Currently, the state’s Office of Professional Licensure and Certification oversees a wide variety of licensed professions, from accountants and acupuncturists to barbers, midwives, veterinarians, and more. Sununu said his proposal would fully remove 34 “outdated” license types. It was not immediately clear which 34 would be eliminated. More details are expected when the bill text is release in the coming weeks.
The proposal for universal license recognition, which Sununu said would incentivize working professionals to move here, drew immediate praise from the New Hampshire branch of Americans for Prosperity, a political advocacy group that promotes “economic freedom and liberty.”
“New Hampshire is suffering from a labor shortage, and this policy is a commonsense step to take to relieve that burden from employers,” said AFP-NH deputy state director Ross Connolly.
New Hampshire Democratic Party Chairman Ray Buckley, meanwhile, dismissed Sununu’s proposed licensing reforms as “a right wing talking point” that ignores the fact that licensure exists to protect people from unprofessional individuals.
In recent years, New Hampshire lawmakers have enacted limited measures to recognize some out-of-state licenses. In 2018, they passed a bipartisan bill to allow temporary licensure of certain health professionals from certain nearby states. In 2021, they codified some of Sununu’s emergency orders during the COVID-19 pandemic, including emergency licenses for medical providers. In 2022, they made those emergency licenses permanent.
Some have cited the pandemic-era changes as evidence that New Hampshire can safely make similar moves for other licensed occupations.
Sununu also said his proposal would eliminate 14 regulatory boards and create an independent office of regulatory review and government efficiency to be a watchdog to root out unnecessary rules and regulations.
“We’re committed to breaking down regulatory barriers,” he said. “We want to lower the cost of entry to do business here, increase free market competition, and (signal) to the rest of America that New Hampshire truly is the Number 1 state in America for economic freedom.”
Amanda Gokee can be reached at amanda.gokee@globe.com. Follow her @amanda_gokee. Steven Porter can be reached at steven.porter@globe.com. Follow him @reporterporter.