Gov. Kelly Ayotte’s first budget promised no new taxes and a leaner state government. The numbers tell a more complicated story about winners, losers, and long-term risk in New Hampshire’s 2026–27 spending plan.
By Granite State Report
Introduction: A new governor, an old New Hampshire question
On Feb. 13, 2025, a newly inaugurated Gov. Kelly Ayotte walked onto the House floor in Concord with a familiar New Hampshire promise: no broad-based tax increases and a tighter state budget. In her first budget address, Ayotte called her recommended spending plan for fiscal years 2026 and 2027 “a recalibration of the way we do business,” stressing that she would balance the books by “taking a hard look at spending,” not by raising taxes.
Behind the rhetoric was a roughly $16 billion, two-year proposal that would touch nearly every corner of public life in the state—from special education and Medicaid to universities, prisons, housing, and arts grants.
Within weeks, the House Finance Committee rewrote that plan, cutting about $643 million in proposed spending and eliminating positions, programs, and agencies in the name of more conservative revenue estimates.
By June 27, after months of hearings, floor fights, and a last-minute compromise bill, Ayotte signed a $15.9 billion final budget—smaller than her opening bid but larger than the House’s version—funding state government through June 2027.
This article examines the new budget proposal that launched that fight—what Ayotte actually put on the table, how lawmakers reshaped it, and what the underlying choices reveal about New Hampshire’s fiscal direction. The central question is simple:
Does the new budget “recalibrate” state government for long-term stability, or does it quietly shift risk onto local taxpayers and the most vulnerable Granite Staters?
1. The basics: What Ayotte proposed
Ayotte’s recommended budget for fiscal years 2026 and 2027 arrived less than five weeks after she was sworn in as New Hampshire’s 83rd governor, pledging to continue Chris Sununu’s low-tax, pro-business approach while warning that “budget cuts are coming.”
Topline numbers
According to the nonpartisan New Hampshire Fiscal Policy Institute (NHFPI) and the National Association of State Budget Officers (NASBO), the governor’s proposal would:
- Appropriate about $16.0 billion over the biennium from all funds.
- Spend $8.21 billion in FY 2026 and $8.33 billion in FY 2027 before certain revenue transfers—annual increases of 0.8% and 1.5% over the current budget.
- Rely on $5.23 billion in federal funds, making up “nearly one-third” of total spending—roughly in line with prior New Hampshire budgets.
While total spending would grow modestly, Ayotte’s Executive Budget materials pointed to a 3.5% cut in General Fund spending—about $150 million—relative to current law, achieved by trimming across agencies.
That distinction matters. The General Fund is the state’s most flexible pool of money—funded by state taxes and fees rather than federal programs or legally restricted accounts. Cutting that pot while holding total spending relatively flat is less a diet than a reshuffle: more reliance on federal dollars and dedicated funds, less on discretionary state revenue.
How it fits into New Hampshire’s biennial budget cycle
New Hampshire passes a two-year budget every odd-numbered year, covering the fiscal years that begin the following July. Ayotte’s proposal, unveiled in February 2025, was the opening volley in the negotiation over funding for state fiscal years 2026 and 2027.
Under the state constitution, the governor proposes; the House and Senate rewrite; a conference committee irons out the differences; and the final package must be balanced before it can be signed.
Ayotte’s budget arrived at a particularly uncertain moment:
- Business tax revenues—long a major state funding source—had started to sag.
- Federal pandemic relief dollars were expiring.
- The state faced lawsuits over school funding and public employee retirement benefits that could dramatically alter future obligations.
Ayotte pitched her plan as a way to “keep us on the path to greater prosperity” while preparing for those headwinds.
2. The governor’s pitch: Recalibration without new taxes
In her budget address—and in the Executive Summary circulated to lawmakers—Ayotte used the word “recalibration” repeatedly. Her framing rested on three core claims:
- No broad-based tax increases. New Hampshire would continue to avoid a general income or sales tax, and her budget did not reverse recent business tax rate cuts.
- Targeted investments in education, public safety, and workforce. She highlighted special education, Education Freedom Accounts, community colleges, and law enforcement retirement as key priorities.
- “Thoughtful” cuts that would not “substantially impact” citizens. The 3.5% General Fund reduction, she argued, came from efficiencies rather than service reductions.
On paper, the proposal does lean into several politically popular investments. But the trade-offs beneath that surface—especially in health care, higher education, and social services—are less tidy than the governor’s speech suggests.
3. Where the money goes: Key spending priorities
3.1 Education: Special ed boost, school choice expansion, and shifting burdens
Education is one of the clearest areas where Ayotte tried to put a stamp on state policy.
Special education aid
The proposal would increase state Special Education Aid by $32 million over the biennium, a 47.2% boost compared with the current budget, bringing total appropriations to $99.8 million.
Advocates for local districts have long argued that New Hampshire underfunds special education, forcing school systems to rely heavily on property taxes. A near-50% increase is significant by any measure. But even with the bump, NHFPI notes that state aid would still cover only a fraction of actual special education costs, leaving local taxpayers on the hook for the rest.
Education Freedom Accounts (EFAs)
Ayotte’s budget also proposed a major expansion of Education Freedom Accounts, the relatively new program that allows eligible families to use a share of state per-pupil funding for private, religious, or home schooling expenses.
The governor’s plan would eliminate the income cap for students transferring from public schools, effectively making EFAs available to any current public school student regardless of family income.
NHFPI estimates the budget sets aside $73.5 million for EFAs in 2026–27, a 47.6% increase over the current biennium’s spending.
Citizens Count, a nonpartisan civic information nonprofit, summarizes the move this way: Ayotte’s plan “allows all students currently enrolled in public school to participate in the Education Freedom Account program,” fundamentally widening access while preserving income limits for families who never enroll in public schools.
Supporters see EFAs as a way to personalize education and give families leverage over school systems; critics argue that rapid expansion drains money from already strained public districts and accelerates inequality. Regardless of where one stands, it is clear that state money earmarked for EFAs grows much faster than aid to traditional public schools under the governor’s blueprint.
Community colleges and workforce training
Ayotte’s budget would also increase funding for the Community College System of New Hampshire by roughly $10 million, continuing a tuition freeze and expanding career and technical education programs, according to both the Executive Budget Summary and independent analyses.
That investment is framed as a workforce strategy: build local talent for “in-demand jobs” while keeping young people in the state. New Hampshire’s aging demographics—and long-standing concerns about “brain drain”—make that more than a rhetorical flourish.
3.2 Public safety and retirement: Fixing old promises
A second cluster of priorities sits in public safety and retirement.
Ayotte proposes $32.9 million over the biennium for the New Hampshire Retirement System to increase benefits for certain police and firefighters (Group II members) whose pensions were reduced by 2011 reforms.
The move responds to years of frustration from law enforcement and fire unions and comes as a lawsuit over those prior changes winds its way through the courts.
Her budget also funds the Northern Border Alliance and other law enforcement initiatives, part of a package she argues is necessary to address fentanyl trafficking and border-related crime.
These choices are politically potent. They align Ayotte with first responders and public safety while also addressing legal and moral questions about retroactive pension cuts.
3.3 Housing, homelessness, and social services
Despite widespread agreement that New Hampshire faces a housing crisis, the governor’s budget offers incremental rather than transformative funding in this area.
According to NHFPI, the proposal:
- Increases funding for housing shelter services, including at least $15 million to support shelters, higher reimbursement rates, and targeted services for people experiencing homelessness related to substance use disorders.
- Requires state agencies to process housing-related permits within 60 days, intended to speed development.
At the same time, Ayotte calls for decreasing funding for the Choices for Independence (CFI) Medicaid waiver program, which helps older adults and people with physical disabilities receive in-home care instead of moving into nursing facilities.
Hospitals would also see reduced payments for uncompensated care, meaning less state support for services provided to uninsured patients.
In other words: modest new resources for shelters and some housing processes, but cuts to certain forms of long-term care and hospital support.
3.4 Higher education and the University System
One of the clearest “losers” in Ayotte’s proposal is the University System of New Hampshire.
The budget cuts state support to the system by about $16.5 million compared with the current biennium, according to Citizens Count and NHFPI.
New Hampshire already spends less per capita on public higher education than almost any other state; further reductions risk higher tuition, program cuts, or both.
Ayotte frames the shift as prioritizing “career-focused” community college programs over four-year campuses, but the long-term impact on the state’s research capacity and workforce pipeline remains uncertain.
4. How the governor pays for it: Revenues, federal reliance, and rainy-day hedging
4.1 Business taxes, gambling, and federal dollars
Ayotte’s proposal banks on stable if modestly growing business tax revenues, despite recent softening.
To raise additional money without broad-based taxes, the budget and accompanying policy bills lean on:
- Legalizing slot-machine gaming at charitable gaming locations, which would increase state gambling revenue.
- Continuing to rely heavily on federal funds, which, as noted, account for about one-third of total budgeted spending.
The heavy use of federal dollars is standard for New Hampshire but carries risk at a moment when Congress is debating cuts and the last of the COVID-19 pandemic aid is fading out. NHFPI warns that “forecasting expenses and revenues for the next two years is exceptionally difficult,” with federal uncertainty one of several compounding factors.
4.2 The Rainy Day Fund and reserves
The proposal also contemplates transfers to and from the state’s Revenue Stabilization Reserve Account (the “Rainy Day Fund”).
NHFPI and NASBO report that under both the governor’s plan and subsequent House changes, policymakers aim to keep more than $200 million in reserves by the end of the biennium—healthy by historical standards, though modest relative to total spending.
Ayotte’s team argues that maintaining strong reserves while trimming General Fund spending and avoiding new broad-based taxes is evidence of fiscal discipline. Critics counter that balancing the books in this way depends on cuts that disproportionately affect vulnerable populations and on optimistic assumptions about future business tax performance.
5. The House rewrites the budget: $643 million in cuts and eliminated jobs
If Ayotte’s proposal tried to split the difference between restraint and investment, the New Hampshire House of Representatives pushed harder on the brake.
5.1 A more pessimistic revenue outlook
The House Ways and Means Committee adopted lower revenue estimates than the governor’s office, particularly for business taxes. House Finance Chairman Ken Weyler argued that “the revenue just isn’t there,” pointing to economic uncertainty and federal policy as reasons to budget more conservatively.
To hit those targets, the House Finance Committee voted on April 3 to reduce total funding by about $643 million compared with Ayotte’s proposal, bringing the biennial total down to roughly $15.4 billion—about 4% less than the governor’s budget.
NHFPI calculates that while the House plan is still slightly larger than the current 2024–25 budget in nominal terms, it represents a cut once inflation is considered—and it reduces General Fund appropriations, shrinking the flexible state dollars available for policy priorities.
5.2 Where the House cut
According to NHFPI, Citizens Count, InDepthNH, and NHPR, the House budget:
- Reduces University System funding by about $50 million over the biennium—far deeper than the governor’s $16.5 million cut.
- Eliminates 190 positions in the Department of Corrections, raising concerns from the governor and advocates about prison staffing and safety.
- Cuts Medicaid provider reimbursement rates by 3% and reduces funding for services for people with developmental disabilities and community mental health, among other health programs.
- Defunds or eliminates several offices, including the State Council on the Arts, the Human Rights Commission, the Office of the Child Advocate, the Housing Appeals Board, and the Right-to-Know Ombudsman, primarily for General Fund savings.
- Maintains and in some cases expands policy changes around Education Freedom Accounts and gaming, mirroring or going beyond Ayotte’s proposals.
House Republicans framed these choices as necessary to avoid tax increases and to prepare for possible federal cuts. Many Democrats, advocacy groups, and some Republicans warned that the reductions would have “devastating and long-lasting effects on the neediest in our state,” in the words of Rep. Mary Jane Wallner, the committee’s former chair.
5.3 Jobs on the line
NHPR and InDepthNH both highlight the budget’s effect on public employment: state jobs—especially in corrections and certain health programs—would be eliminated under the House plan.
That has knock-on effects. Fewer corrections officers can mean more overtime, stress, and safety risks. Cuts in community mental health or disability services can push more people toward crisis care or institutionalization, which is often more expensive in the long run.
6. The Senate as mediator: Restoring health care and moderating cuts
When the budget reached the Senate in May, the Senate Finance Committee signaled it would act as a moderating force between the governor and the House.
In early May, senators moved to restore several high-profile health care cuts, including:
- Reversing the House’s 3% Medicaid provider rate cut.
- Restoring funding to address the developmental disabilities waitlist.
- Reinstating money for community mental health support.
Senate Finance Chairman James Gray said the committee wanted to send a message that senators had “listened” to the public testimony that overwhelmingly opposed the health cuts.
Citizens Count notes that the Senate’s version of the budget also:
- Funds the University System at $85 million per year, higher than the House but still below some advocates’ requests.
- Eliminates only 60 corrections positions instead of 190.
- Restores funding for the Council on the Arts, family planning, the Human Rights Commission, and the Office of the Child Advocate, though generally at lower levels than the governor proposed.
In short, the Senate recast the budget as a partial restoration of Ayotte’s priorities, using somewhat rosier revenue estimates and a willingness to adopt some, but not all, of the House’s structural changes.
7. From proposal to law: The final compromise package
After negotiations in a House–Senate conference committee and a dramatic series of votes, lawmakers sent Ayotte a final budget (House Bills 1 and 2) and a separate compromise bill, HB 282, aimed at addressing her concerns over education funding and Group II retirement benefits.
The final package:
- Totals $15.9 billion over the biennium, slightly below the governor’s original $16.0 billion proposal but well above the House’s $15.4 billion plan.
- Leaves the Rainy Day Fund with an estimated $203.7 million in FY 2026 and $228.4 million in FY 2027, according to NASBO.
- Legalizes slot machines and broadens gambling revenue.
- Expands Education Freedom Accounts through separate legislation (SB 295) beyond even what Ayotte originally proposed.
- Partially restores Group II retirement benefits, with additional tweaks in HB 282 after Ayotte threatened a veto over the issue.
New Hampshire Bulletin described the final deal as closing a “turbulent final chapter” to Ayotte’s first budget fight, with the governor securing enough of her priorities to declare victory while legislative leaders highlighted concessions they wrested from the corner office.
8. Winners and losers in the new budget landscape
Even in a no-new-taxes environment, budgets create winners and losers. Ayotte’s proposal and the final compromise tilt the playing field in ways that will matter for years.
8.1 Likely winners
Education Freedom Account families and private schools.
EFA funding grows sharply, and eligibility expands, particularly through separate legislation Ayotte later signed. That means more public money flowing to private and home-school settings.
Special education students and districts—somewhat.
The significant increase in Special Education Aid is a clear win for districts struggling with high-cost placements. But because state support still covers only part of total expenses, property-tax pressure is reduced, not eliminated.
Community colleges and workforce programs.
Additional dollars and a continued tuition freeze at community colleges strengthen the state’s lower-cost, job-focused education track.
Law enforcement and some public safety retirees.
Investments in the Northern Border Alliance, bail changes, and partial restoration of Group II retirement benefits signal that police and fire priorities carry real weight in the new budget order.
8.2 Likely losers
The University System of New Hampshire.
Even after the Senate softened the House’s deeper cuts, the University System faces reduced state support compared with both current law and the governor’s original request. In a state already near the bottom nationally in public higher-ed funding, that could mean higher tuition or fewer academic options.
Hospitals, Medicaid providers, and long-term care services.
While the Senate reversed some of the House’s most severe health care cuts, the overall budget still leans on cost containment for hospitals and certain Medicaid programs, including co-pays or premiums for some Granite Advantage enrollees and decreased support for uncompensated care.
Arts, oversight, and civil-rights infrastructure.
Funding for the Council on the Arts, the Human Rights Commission, and the Office of the Child Advocate survives, but at lower levels than the governor initially proposed, and after a clear signal from the House that these functions are politically vulnerable.
Local property taxpayers.
This budget does nothing to alter New Hampshire’s long-standing reliance on local property taxes to fund education and many local services. In fact, by shifting more state dollars toward EFAs and away from some traditional school funding streams and university aid, it may increase pressure on local budgets over time.
9. The structural questions the budget doesn’t answer
Beneath the line-items and political skirmishes, several structural issues remain unresolved.
9.1 Business tax volatility
New Hampshire has leaned heavily on business taxes instead of a broad-based income or sales tax. That strategy works well in boom years but creates headaches when profits slip. House budget writers cited recent business tax declines as a central reason for their deeper cuts.
Ayotte’s proposal assumes a rebound, while the House assumed a flatter trajectory. Neither approach changes the underlying reality: state finances rise and fall on a narrow revenue base.
9.2 Lawsuits over school funding and pensions
Active lawsuits challenge both school funding equity and prior changes to public employee pensions. If courts rule against the state, future budgets could face hundreds of millions in new obligations—dwarfing many of the cuts and increases now being debated.
The 2026–27 budget sets aside money for some retirement fixes and modest increases in education aid but stops well short of a systemic solution. It is, at best, a down payment.
9.3 Housing and cost of living
Every major business group and many local officials list housing affordability as a top constraint on growth. Ayotte’s budget includes targeted shelter funding and faster permitting timelines but no large-scale housing investment comparable to what some neighboring states have attempted.
That leaves much of the heavy lifting to local zoning battles, private developers, and the federal government.
10. Human stories behind the line-items
Budgets can read like spreadsheets, but their consequences are felt in daily life.
- A special-education director in a property-poor district may use increased state aid to hire another paraprofessional instead of cutting services or raising local taxes.
- A single parent considering an EFA might see new options for their child—but their local district could lose funding as students depart.
- A nurse at a community mental health center might keep her job thanks to the Senate’s restoration of House cuts, averting yet another provider shortage.
- A first-generation student at the University of New Hampshire may face higher tuition if state appropriations shrink relative to costs, nudging college further out of reach.
None of these outcomes is predetermined, but they illustrate how seemingly abstract decisions—3% here, $32.9 million there—shape the lived experience of Granite Staters.
11. Visual and video context for readers
For readers who want to see and hear the debate for themselves, several public videos add valuable context:
- Gov. Kelly Ayotte’s 2025 Budget Address – Full video from WMUR and the National Governors Association.
- House and Senate budget hearings – Several hours of testimony from providers, advocates, and citizens are archived by the Legislature and local media.
Conclusion: A recalibration with unresolved trade-offs
New Hampshire’s new 2026–27 budget began life as Ayotte’s promise of recalibration without new taxes and emerged from the legislative grinder as a compromise reflecting three competing instincts:
- The governor’s desire to preserve core priorities—special education, EFAs, community colleges, law enforcement, and some social services—while holding the line on taxes.
- The House’s drive for deeper cuts, rooted in pessimistic revenue forecasts and a philosophy of smaller state government.
- The Senate’s impulse to soften the harshest reductions and steer the budget closer to the governor’s original proposal.
The result is a budget that does not dramatically shrink or expand state government in aggregate but does make consequential shifts in who benefits and who bears risk:
- Families using EFAs, community college students, and certain retirees see tangible gains.
- Public universities, some health and human services providers, and oversight institutions face leaner resources and continued uncertainty.
- Local property taxpayers remain the unacknowledged backstop, especially for education and infrastructure.
Whether this constitutes a successful “recalibration” or a missed opportunity depends largely on one’s view of the state’s role. What is clear from the numbers and testimony is that the budget does not fully confront long-term structural issues—business tax volatility, housing costs, and court-driven mandates—that could force far tougher choices in the next biennium.
For now, New Hampshire continues its experiment in governing without broad-based taxes, relying on careful balancing, federal dollars, and periodic cuts around the edges. The new budget proposal—and the fight it sparked—offers a preview of how hard that model will be to sustain as the state’s needs grow more complex and its residents demand not just lean government, but effective and equitable government as well.
References:
Ayotte, K. (2025, February 13). 2025 Budget address [Speech transcript]. Office of the Governor.
Citizens Count. (2025, September 18). Budget 2026–2027 [Issue brief]. Live Free or Die Alliance.
InDepthNH.org. (2025, March 12). NHFPI releases analysis of Governor’s State Budget Proposal [News release].
InDepthNH.org. (2025, April 3). NH House Committee approves $15.6 billion two-year budget plan.
National Association of State Budget Officers. (2025). New Hampshire budget: Proposed budget – fiscal years 2026–2027; Enacted budget – fiscal years 2026–2027.
New Hampshire Bulletin. (2025, April 4). The House has finalized its budget. Here’s what’s in it.
New Hampshire Bulletin. (2025, May 12). Senate committee recommends restoring health care funding cuts in House budget.
New Hampshire Bulletin. (2025, June 27). Ayotte signs two-year state budget, closing turbulent final chapter.
New Hampshire Fiscal Policy Institute. (2025, March). The Governor’s State Budget Proposal for Fiscal Years 2026 and 2027 [Report].
New Hampshire Fiscal Policy Institute. (2025, April 5). House Finance Committee State Budget reduces funding by about $643 million from Governor’s proposal, leaves $113 million for Rainy Day Fund [Blog].
New Hampshire Fiscal Policy Institute. (2025, April 21). The House of Representatives State Budget Proposal for Fiscal Years 2026 and 2027 [Report].
New Hampshire Fiscal Policy Institute. (2025, April 5). Differences between the Governor’s Budget Proposal and the House Finance Committee’s recommendations [Fact sheet].
New Hampshire Public Radio. (2025, April 10). NH House passes budget plan that includes deep spending cuts, eliminates state jobs.
New Hampshire Public Radio. (2025, February 12). Gov. Kelly Ayotte to deliver New Hampshire budget address [Broadcast advisory].
Sununu, C., & Ayotte, K. (Referenced). New Hampshire Governor’s operating budgets and executive summaries for FY 2024–25 and FY 2026–27. New Hampshire Department of Administrative Services & Legislative Budget Assistant.
The Associated Press. (2025, January 9). Republican former U.S. Sen. Kelly Ayotte sworn in as 83rd governor of New Hampshire.
WMUR & National Governors Association. (2025, February). Gov. Kelly Ayotte delivers 2025 state budget address [Video]. YouTube.
