Government budgets reflect a set of choices made collectively through democratic processes. Through these budgets, we pool resources as a society to use for purposes that we either cannot or choose not to pay for individually. Examples include education, police, the social safety net, and public parks. Budgets set priorities and show what we value as a society. They are compromises—no one is ever completely pleased with a government budget—and the number of stakeholders involved in the budget process ensures that almost everyone can point to expenditures they believe to be a waste of money or areas they believe are underfunded. Similarly, we have yet to meet a person who thinks our tax system is perfect in the amount it collects, the way taxes are collected, or from whom.
Compared to other states, New Hampshire has chosen to raise less revenue and spend less on public investments and services. State and local government spending make up a smaller share of the state’s economy than they do in all but one other state, and spending is low at both the state and local levels. Regarding taxes as a share of the economy, at the state level only two states rank lower than New Hampshire. Because low state taxes are somewhat offset by high local taxes and other revenue sources, however, the state ranks somewhat higher—forty-third—in combined state and local revenue as a share of its economy. Nevertheless, New Hampshire local governments have fewer resources than those in other states despite high local taxes, largely because they receive less from their state government than do local governments in all but three other states.
Overall levels of state and local spending and revenue, however, do not tell the entire story. There are also important choices, within overall spending and revenue, on what categories of spending to prioritize and what revenue sources to most or least heavily rely on. Localities vary significantly in the fiscal circumstances in which they find themselves.
The choice to be a low-revenue, low-spending state has both positive and negative impacts—as do the choices about what to spend public money on and how to tax. This section of What is New Hampshire? does not assess the impact of those choices but describes the major features of the budgets of the governments of the state, including current spending and taxes, recent trends, and some potential challenges we may face moving ahead.
As with all parts of What is New Hampshire? we welcome feedback on how this section may be improved. Are there areas of the budget that you’d like us to cover in more detail or other challenges that we should highlight? Please let us know by emailing Carsey.WINH@unh.edu.
Throughout this section supplemental information can be accessed by clicking on the gray boxes indicating further data are available. Additional explanatory text can be accessed by clicking on the "+" next to its description.
New Hampshire Now
Granite Staters rely on their state and local governments to provide infrastructure, social insurance programs, education, fire and police services, and more. The budget choices made at the state and local levels in New Hampshire are highly intertwined, as is true of all states, and of course all states differ in the amount of revenue collected, investments made, and services provided at the state versus the local levels. For example, Hawaii uniquely has a single statewide school district, while K-12 education is a local function in every other state, albeit with varying levels of state support.
Because of the interconnectedness of state and local budgets, we start this section by comparing New Hampshire to other states in combined level of state and local spending and revenue, and then examine the state and local levels individually. Our budget section uses data collected by the U.S. Census Bureau’s Annual Surveys of State and Local Government Finances and data provided by the state of New Hampshire. Census data are used when comparing across states or when local governments are included in the analysis, while data from the state of New Hampshire are used only when examining state government in isolation.1
As more fully explained in the box below, in this section we measure government spending and revenues as a share of the state's economy and per-capita. Spending and revenue relative to the size of the economy are good indicators of the state's choices in providing public services and investments relative to its resources and capacity to provide them. The per capita measure tells us the amount per resident in the state.
When comparing spending and revenue between states, simply looking at total dollar amounts rarely provides useful insights. The fact that the state and local governments of Texas spend $254.4 billion and New Hampshire governments spend only $12.6 billion doesn’t tell us that Texas spends extravagantly while New Hampshire is frugal. Texas has a $1.6 trillion economy and nearly 28 million people, while New Hampshire has a $78 billion economy and 1.3 million people.2 For that reason we scale the spending and revenue numbers we use to compare states in two ways: as a share of state gross domestic product (GDP) and per capita.
State GDP is a measure of the size of the economy (see the What is New Hampshire? Economy section for a fuller description). Spending and revenue as a share of a state’s economy tell us how much a state is choosing to spend and collect relative to what is available to spend and collect. Poor states inevitably spend less in dollars per resident than rich states on many public services because they lack resources, not necessarily because they have decided that lower spending is best for their community. Thus, scaling spending by the size of a state’s economy is a better indicator of the policy choices the state is making. Similarly, when comparing revenues to assess the burden that taxes and fees are imposing, share of the economy is the superior metric. Measuring simply by the dollar amount—either per capita or in total—distorts the analysis because two states, one rich and one poor, with the exact same revenue/tax system would look very different by that measure even though identical people or businesses in each state would face identical burdens. Measuring revenues as a share of the economy effectively measures the overall burden on the economic fortunes of people and businesses in the state regardless of the details of the revenue system.
The people of states with higher spending and revenue as a share of GDP are choosing to collect and allocate a higher share of the resources available in the state to public purchases and investments—in education, parks, infrastructure, etc. States with lower spending and revenue as a share of GDP are making the opposite choice. Comparing specific spending categories or revenue sources as a share of GDP gives us an indication of the relative benefits and burdens of those particular spending categories and revenue sources among states.
Comparing state spending and revenue per person is a useful complement to the share-of-GDP measure for comparing government spending levels because it gives us a sense of the relative level of service or investment being provided. A rich state might spend a smaller share of its economy on parks and recreation than a poor state, but with its greater GDP per person it may spend more per person and offer superior parks and recreation. Thus, comparing state revenues and expenditures by both share of GDP and per capita allows for nuanced and meaningful comparisons.
State and Local Spending
In total, New Hampshire state and local governments spent $12.6 billion in 2016.3 This amounted to 16.1 percent of the state’s economy, placing New Hampshire forty-ninth of the fifty states in spending as a share of GDP, ahead of only Georgia. As a relatively wealthy state, New Hampshire nevertheless ranked thirty-fifth in per capita spending. Figure 1 shows New Hampshire’s expenditures relative to the rest of the United States by percent of GDP and per capita, with comparisons available for different spending categories through a drop-down menu. New Hampshire ranks below the national median in all types of spending as a share of the state’s economy except liquor store expenditures, debt interest payments, and “other” general expenditures.
Figure 1. Combined state and local expenditures by category as a share of state economy and per capita, 2016
Overall, New Hampshire spends less as a share of its economy than the other New England states, in large part due to lower spending on social services/income maintenance and public transportation combined with just average education spending.
Figure 2 shows how much New Hampshire state and local governments combined spend in each category, while Figure 3 shows separately the levels of spending at the combined, state, and local levels. The largest two categories for New Hampshire’s overall state and local spending are education and social services/income maintenance (which includes health spending), which accounted for a combined 55.5 percent of total spending in New Hampshire in 2016.
Figure 2. New Hampshire state and local expenditures by category, 2016
Figure 3. New Hampshire expenditures by category and level of government, 2016
Note: The category of "Other" includes governmental administration (.7% of GDP), interest on the general debt (.6% of GDP), liquor store (.7% of GDP), utility (.2% of GDP), and insurance trust expenditures (1.0% of GDP), and other general expenditures not classified elsewhere (1.0% of GDP).
Figure 3 shows combined state and local spending, state spending alone, and local spending alone for various spending categories. Spending at the state level that passes to local governments (and vice versa) is included in the state “intergovernmental” category, not in the category which the expense relates to. For example, state assistance to school districts is not included in the state column under education but instead is included in the state intergovernmental column. To continue with this example, the local column in education includes all local spending on education including the spending of funds school districts receive from the state. The state and local combined column also includes this spending as education spending.4
Overall, 58 percent of government spending in New Hampshire is by the state government and 42 percent is by local governments (counting as state spending the state aid to local governments that local governments directly spend). The largest single area of spending is education, which makes up 32 percent of the total and is primarily the domain of local governments, although the state has some K-12 costs and spends in higher education. Social services/income maintenance, the second largest category, is primarly the domain of state government.
New Hampshire State Government Spending
New Hampshire’s state government spent $7.6 billion in 2016, which was 9.7 percent of the state economy. The state ranks in the bottom ten, and lowest in New England, in both its state spending as a share of the economy and per-person spending. Figure 4 compares all 50 states along both metrics, with specific spending categories available through the drop-down menu. The state spends less than most states in the largest spending categories. Of particular note is the state’s low level of aid to local governments: intergovernmental spending in New Hampshire is lower than in all but three states (one of which is Hawaii, where the state runs the schools) and less than a quarter of the national average as a share of GDP.
Figure 4. State-level expenditures as a percent of state economy and per capita, 2016
New Hampshire’s state government uses somewhat different classifications of spending than does the Census Bureau, as seen in Figure 5. We use New Hampshire’s categories here as more recent data are available and the categories are more familiar to those who follow the state budget.
The state government divides spending into six major categories:9
- General government comprises the costs of running most administrative and non-direct-service government functions, including the executive and legislative branches. General government spending represents the costs of having and organizing a functioning state government.
- Administration of justice and public protection is spending to ensure that the criminal justice system is functioning, that New Hampshire residents can receive unemployment insurance when they are laid off, and that our labor laws are fairly enforced. The Liquor Commission, which runs the state-owned liquor stores, falls within this category.
- Resource protection and development includes the state’s economic development agencies as well as its natural resource departments. Spending in this category is used to develop New Hampshire’s economy as well as maintain its natural and cultural resources for economic growth and quality of life.
- Transportation includes spending on roads, bridges, and dams; plowing in the winter; and any other services falling under the purview of the New Hampshire Transportation Department.
- Health and social services includes state spending on Medicaid, New Hampshire’s efforts to combat the opioid crisis, services provided to veterans, and other social services.
- Education covers all levels of education spending, including the K-12 system, the Education Department, and the Community College and University Systems of New Hampshire as well as the Lottery Commission (whose profits are earmarked for state education funding) and training for police.
Figure 5. New Hampshire state budget expenditures by state category, FY19
Health and social services make up the largest portion of the state budget, at 41 percent of total spending in fiscal year 2019. Within that category, roughly two-thirds goes to health care, including Medicaid and efforts to combat the opioid crisis. While this spending is included in the state budget, much of the funding for this category comes from the federal government; federal Medicaid dollars totaled almost 60 percent of New Hampshire’s Medicaid spending in 2016, for instance.5
Education is the next largest category, at 23.6 percent of the state budget, but unlike health and social services federal dollars play less of a role in education funding. Moreover, some of the funding in this category—$363 million that the state government spent in support of K-12 education in FY19—came from the Statewide Education Property Tax (SWEPT), which is collected and spent at the local level but which New Hampshire counts as state revenue.6 The state of New Hampshire supports higher education as well, although at a lower rate than any other state,7 and most K-12 funding comes from localities.
Transportation is also a significant portion of state spending, at 10.2 percent. Administration of justice and public protection, which includes the state court system and police force, accounts for 8.8 percent of the state budget, but local governments spend more on public safety than does the state.
The New Hampshire state budget is passed every two years and covers a biennium that runs from July 1 in the first calendar year to June 30 two years hence (July 1, 2017 through June 30, 2019, for example). The process that creates these budgets consists of three stages that begin at about the midpoint of a biennium.8
The first budget stage is the agency phase, in which state agencies submit requests for funding. In the next phase, the governor’s phase, the governor reviews requests and creates a comprehensive budget proposal. That proposal moves to the legislature, where the House and the Senate each create their own versions of the budget.
If the two chambers’ budgets differ, the budget goes to a conference committee, where a consolidated budget is created prior to presenting it to the governor for signature. A key part of the budget process is reconciling the different revenue projections that can come from the executive and legislative branches. Revenue projections for both the status quo and proposed revenue changes are developed separately by the governor’s office as well as each legislative chamber.
New Hampshire Local Government Spending
At the local level, New Hampshire again spends less than most other states as a percent of state GDP (7 percent, ranking forty-seventh); in New England it is second lowest, after Massachusetts. On a per capita basis New Hampshire spent the second least among New England states after Maine. Figure 6 compares New Hampshire to the other states in local spending in total and by category.
Figure 6. Local-level expenditures by category as a share of state economy and per capita, 2016
At the local level, the greatest expenditure by far is for education, which accounted for 54.1 percent of local spending in New Hampshire in 2016. It is also the one major area where, statewide, local governments spend more than the national average. New Hampshire’s municipalities take a large role in providing funds for public safety, a category that reflects spending on services provided locally such as police, fire, local welfare, and emergency medical services. Housing and environmental expenditures are also primarily the responsibility of New Hampshire local governments.
Figure 7. New Hampshire local-level expenditures by category, 2016
. State-level data from the Census Bureau are a complete survey of state governments, but note that local-level data are drawn from samples and are therefore subject to margins of error.
. As of 2016, the most recent year for which the Census Bureau’s State and Local Government Finances data are available.
. Note that combined state and local spending measures net out intergovernmental transfers to keep spending from being double counted, whereas state and local spending individually reflects spending done at those levels including intergovernmental transfers from the state or local level.
. Intergovernmental expenditures can be for education or social services, for example, but are not counted in those categories if spending is classified as an intergovernmental transfer.
. Kaiser Family Foundation, “Federal and State Share of Medicaid Spending,” 2019, https://www.kff.org/medicaid/state-indicator/federalstate-share-of-spending/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D.
. Reaching Higher NH, “State Education Property Tax: Locally raised, locally kept,” 2019, http://reachinghighernh.org/2019/02/01/state-education-property-tax-locally-raised-locally-kept/. Note that the Census Bureau counts SWEPT as local spending, given that it is collected locally and distributed to local districts.
. State Higher Education Executive Officers Association, “State Higher Education Finance: FY 2017,” 2018, https://htv-prod-media.s3.amazonaws.com/files/sheeo-shef-fy2017-final-1527806131.pdf