The biennial state budget process is long, beginning with the governor’s proposed budget, which is amended by the House and then by the Senate before going to the governor for signature. During this process, many changes take place. The House passed its version of the budget on April 11.
A budget is a statement of priorities. The major priorities of the House budget were to provide property tax relief and to improve state funding for education. Though the state has a constitutional obligation to equitably fund an adequate education, as affirmed in the Claremont decisions, the state has failed to do so. The state’s share continues to shrink as the stabilization grants that began in 2012 have been gradually diminishing. Given the inadequate state funding, over two-thirds of school funding comes from property taxes, making school funding a major driver of our high property tax rate. Addressing the state adequacy funding will give much needed property tax relief.
The problem with this excessive reliance on property tax is that the property-rich towns can raise the money that they need for their schools with a low property tax rate while the property-poor towns need disproportionately higher tax rates to raise the same amount per pupil. This is a regressive tax system that forces poorer people to pay a higher percentage of their hard-earned dollars than more affluent people do for the same services.
The current House budget will restore the stabilization grants to 100 percent for the 2020 fiscal year, and then in 2021 it replaces the stabilization grants with a fiscal disparity funding formula that will provide additional aid to districts based on fiscal parameters of each town such that more support will go to the poorer towns. Districts will receive between $927 and $3,708 per free-and-reduced-lunch-eligible-pupil based on the percent of pupils on free and reduced lunch. The formula also provides aid of up to $6,000 per pupil based on the municipality’s equalized property valuation per pupil, a measure of town wealth. The source of this increased state education funding, and therefore increased property tax relief, is revenue gained by extending the existing 5 percent investment earnings tax on interest and dividends to apply to capital gains. Capital gains from primary residence sales or gains realized within pension plans will not be taxed and personal exemptions are raised 350 percent so that more than 80 percent of the new revenue will come from taxpayers whose income is above $200,000.
The impact of this increased school funding will be substantial in our area. The town of Conway will receive $229,142 more in 2020 and $886,086 more in 2021 with the new formula than it would under current law for a 12.5 percent increase in 2021. The four towns I represent, Madison, Tamworth, Albany and Freedom will receive $372,108 more in 2021 than would be expected under current law. The town of Tamworth specifically will be receiving $215,966 more in 2021, an increase of 12.7 percent over current law. This improvement in state funding for education will allow these towns significant property tax relief.
There has been some local concern about the House removing from the governor’s budget funding for various projects around the state, including some projects in our area. His budget proposed spending about $15 million from the surplus on these projects.
The problem with Gov. Chris Sununu’s plan is the way that the list was developed. Normally, spending priorities go through hearings and a process of vetting in order to prioritize projects and be fair to the whole state. Sununu’s projects were not subjected to this rigorous review process. The 69 projects involved only 24 towns. Sununu’s list had the appearance of picking winners and losers, potentially as political favors. Taxpayers need better transparency than that.
The House budget instead re-establishes revenue sharing to cities and towns for the first time in a decade, providing $12.5 million in direct state aid to cities and towns in the second year of the biennium. This allows local control to allocate those funds for projects the town deems important and includes all towns, not just a small number.
Chronic underfunding has led to a failure of our mental health system. The House budget appropriates funding for the highest priorities of the new 10-year mental health plan. These multi-pronged initiatives take swift action to address the emergency room boarding crisis for patients who are waiting for mental health services, a problem that we have seen in our area. The House budget funds a new mobile crisis unit, an intervention to prevent the need for emergency admission. It also increases crisis mental health bed capacity by funding step-down transitional beds that allow patients to be discharged from New Hampshire Hospital, a new inpatient psychiatric treatment facility for children to move them out of NHH and creating more acute treatment beds. Funding for suicide prevention is included. The House budget also appropriates $1.2 million to develop a thoughtful and comprehensive approach to end the effective incarceration of non-criminal mental health patients by designing a new or renovated forensic hospital for civilly-committed patients who are currently in the secure psychiatric unit because they are too dangerous to be at NHH.
The Senate will next modify the House version of the budget before we have a final budget to fund the needs of New Hampshire.
Jerry Knirk is the Democratic state representative from Freedom.