CONCORD, N.H. — Gov. Kelly Ayotte vowed Thursday to veto the New Hampshire budget unless lawmakers reverse cuts to health care services, education, and retirement benefits — plunging the spending agreement into uncertainty as it enters its final stretch.
Speaking to reporters Thursday, Ayotte said she could not sign the two-year spending bill, pointing to last-minute changes made by the House and Senate this week.
“If this budget were to come to me now I couldn’t support it and I’d have to veto it,” she said.
Ayotte’s pledge leaves little maneuvering room for lawmakers. House and Senate negotiators reached an agreement Thursday on House Bill 1 and House Bill 2, the spending and policy budget bills. Those bills cannot be changed now.
And while the full House and Senate will meet Thursday, June 26, for an up-or-down vote on the final spending package, lawmakers are not allowed to make changes then either. Floor amendments are not permitted this late in the process, according to House Clerk Paul Smith.
That leaves lawmakers with two unpalatable choices: vote down the budget next Thursday and assemble a package Ayotte will sign, or pass it and challenge the governor to veto it.
Meanwhile, the Legislature faces a tight deadline. The current two-year budget expires June 30; there must be a spending agreement in place by then. That might require lawmakers to pass a short-term continuing resolution when they meet Thursday.
We’ve been here before
The standoff echoed the budget process of 2017, when a small group of fiscal conservatives derailed the House’s budget over complaints it did not cut enough spending, forcing the Senate to forge a compromise bill with Democrats. And it came as Ayotte has faced broad disagreements with House Republicans over spending, in a year where state revenues have been lagging behind expectations.
The last time a governor vetoed the budget was 2019, when Republican Gov. Chris Sununu rejected a Democrat-passed budget over objections that it did not continue a series of planned business tax cuts. In that case, lawmakers passed a continuing resolution in June and a compromise bill did not pass until September.
For Ayotte, three concerns are driving her veto threat: the paring back of a proposal to restore certain state retirement benefits; reductions to the state Department of Health and Human Services; and a change in school funding formula that would see Manchester receive $10 million less than under the current formula.
Ayotte also expressed frustration about the secrecy of the late budget agreements.
“The 11th-hour backroom deal fails to deliver on the promise that we made to all of New Hampshire,” she said Thursday.
Retirement fix at issue
One of Ayotte’s biggest policy priorities this year has been to reverse what was supposed to be a short-term cut to first-responder retirement benefits made 14 years ago.
In 2011, facing the global financial crisis and a massive unfunded liability in the state’s pension fund, lawmakers made deep cuts to retirement benefits for “Group II” employees. Those employees, who include former police officers, corrections officers, and firefighters, saw promised benefits cut as part of a change in the pension formula.
Ayotte devoted funding in her budget to providing additional benefits to Group II retirees vested before Sept. 1, 2013, by increasing what counts toward their earnable compensation when they were working. And the House and Senate passed similar versions of that policy in their budget proposals this year.
But on Wednesday, four days into public negotiations between House and Senate leaders over the final budget agreement, lawmakers introduced an amendment to scale back the previously agreed to restoration of benefits, with some raising concerns about the unpredictable cost of Ayotte’s approach. The new amendment introduces a cap of $120,000 per year for the eligible Group II retirees and eliminates their three highest-earning years from consideration toward compensation, among other changes.
Ayotte swiftly opposed the late amendment, as did a coalition representing police, fire, and corrections unions.
Health care funding cuts
Ayotte has also objected to cuts to health care services. In the House budget proposal, the House passed a $46 million “back of the budget” cut to the Department of Health and Human Services. That cut would require the department to find $46 million in savings without directing the commissioner how to do so.
When the budget came to the Senate, the chamber increased that back of the budget cut to $51 million.
Ayotte’s proposed budget, which relied on rosier revenue projections than the House or Senate versions, did not include any back-of-the budget cuts to DHHS.
On Thursday, Ayotte said the budget “fails in terms of serving our most vulnerable citizens.”
Education funding
Ayotte’s final concern with the House’s budget centered on lawmakers’ proposed change to the school funding formula — specifically, a shift in targeted aid that could see Manchester lose out on $10 million in funding.
The state currently has two targeted aid programs in which the state pays out additional funding on top of the standard per-pupil adequacy funding to school districts with higher populations of low-income students and districts with low property values.
The two types of assistance, known as “fiscal capacity disparity aid” and “extraordinary needs grants,” are designed to give an additional boost to “property poor” districts and help bridge the gap between advantaged and disadvantaged districts.
But this year, Republican Sen. Tim Lang, of Sanbornton, added a cap that would reduce the amount paid out per pupil for large districts. The amendment would apply a cap to school districts with 5,000 or more students; those districts would receive per pupil funding under the standard formula for the first 5,000 students but any students after that would be capped at $3,750 per pupil.
The cap would apply only to targeted aid; it would not affect the $4,200 in base funding districts get per student under the adequacy formula, nor any additional aid categories under that formula.
According to estimates by the Legislative Budget Assistant, the cap would affect only Manchester, which has 12,105 public school students.
In the 2024-2025 school year, Manchester received $116 million in targeted aid; under the proposal, the district would receive $128 million in the 2025-2026 school year, but then $117 million in the 2026-2027 school year, when the cap took effect.
Drastic cut to Manchester
In a statement Wednesday, Manchester Mayor Jay Ruais spoke against the cut.
“I appreciate the difficult nature of this budget cycle and respect the challenging decisions that must be made during this process,” he said. “I urge the Legislature to pursue an alternative path forward that prevents a significant $10.2 million cut that will detrimentally impact Manchester’s students, and our city.”
Manchester Executive Councilor John Stephen, a Republican, accused lawmakers of making Manchester “the whipping child” for balancing the budget.
And Ayotte also opposed what she called a “drastic cut” that “hurts students and teachers and undercuts our future.”
“I urge the Legislature to reverse this cut so we can deliver a best-in-class education to children in Manchester and continue to return historic levels of education funding to the local level,” Ayotte said Wednesday.
By Thursday evening, though, the committee of conference budget agreement was signed, and lawmakers were heading home.
New Hampshire Bulletin is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity.
New Hampshire Bulletin is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity.