Column: Revenue silence in the New Hampshire governor’s race

Last week, NHPR reporter Josh Rogers flagged four “major issues” defining the governor’s race, each of which was based on the other candidate’s shortcomings. Craig’s campaign has focused on Ayotte’s waffling on abortion rights and her lucrative service on corporate boards. Ayotte’s campaign draws attention to Manchester’s struggles with crime, drugs and homelessness during Craig’s tenure as mayor and Craig’s efforts to raise taxes during her term of office.

Rogers concluded that even if these issues are not important to voters there was “little to suggest either campaign will pivot much from their core arguments” as Election Day nears. A drive along major thoroughfares in New Hampshire bears this out as one runs a gauntlet of signs proclaiming that Kelly Ayotte Cannot be Trusted and Craig Will Raise Taxes.

This focus on the deficiencies of each candidate is unavoidable given a dark cloud on the horizon: a revenue shortfall that could approach $1 billion. Because of this headwind, neither candidate can offer any solutions to the problems facing the state without having an answer to the obvious follow up question: “How will you pay for it?”

Neither candidate wants to bring education to the forefront because of a pending superior court decision on inequitable funding for public schools. New Hampshire currently provides a grant of $4,100 per regular education student and an additional $2,100 for each special education student. Both figures are preposterously low and unjustifiable. In a recent court hearing on a related case the state did not call a single witness to defend its adequacy calculation. They couldn’t do so given that the New Hampshire School Funding Fairness Project calculated the average cost per regular education pupil in the state as $18,419 in 2022-23 with each special education student costing an additional $11,000.

Those cost figures compelled New Hampshire Superior Court Judge Ruoff to set the basic grant for education at $7,356, a stunning 79% increase over the current level. This would require the state to raise an additional $500 million to $700 million a year.

Given this reality, neither Ayotte nor Craig wants to suggest anything that would add to the cost of public education. Instead, their debates on public school focus on Commissioner Frank Edelblut whose ouster will not help underfunded schools though it may placate many public school advocates.

The legal mandate to provide more funding for schools is hardly the only revenue challenge. Due to the loss of stimulus finds and tax cuts that are scheduled to go into effect in the coming year, the state potentially faces revenue shortfall of over $1 billion dollars. When state revenues fall, the next governor will be required to either cut services or raise taxes.

Neither candidate has recommended reductions in services.

When questioned on potential revenue increases, Joyce Craig suggests retaining the interest and dividends tax after April 2025 and explore generating revenue by legalizing and taxing cannabis. Unfortunately, even if both ideas were adopted, it wouldn’t begin to close the revenue gap. The New Hampshire Fiscal Policy Institute indicated the interest and dividends tax was forecast to generate $135 million in the last fiscal year and the Motley Fool financial news website estimated that New Hampshire would likely generate $36.7 million in revenue from cannabis sales. This $171.7 million in new revenue suggested by Craig is at least $800 million short of the potential billion-dollar funding gap.

But at least Craig is proposing some possible revenue sources. Kelly Ayotte has said she wants to retain the cuts to the interest and dividends tax, opposes the legalization of cannabis and is adamantly opposed to increasing taxes in any way shape or form. Ayotte contends that “growing the economy” will solve the revenue problem. Worse, for achieving equity in public education funding, she supports the continuation of Education Freedom Accounts, which siphon roughly $28 million away from the state grant fund, a fund that the courts deem insufficient.

Both candidates acknowledge that affordable housing is a problem, that child care is a major obstacle to employers finding workers and that additional revenues would be needed to provide equitable funding for schools. Both candidates also know that the budgets in the years ahead will require more state funds to sustain the services the state currently provides. Yet neither candidate wants to increase existing state taxes and neither has suggested what services they are willing to cut. So, what happens next?

As one who worked for over a decade as a New Hampshire school superintendent, I know the answer. Whenever there is a revenue shortfall at the state level, school districts and town and city governments are asked to fill the gap with local taxes or make the tough decisions on what services will to cut. The math for the next two years is clear and cold: if the funds to cover the pending revenue crises don’t come from the state, they will have to come from the property tax.

Blue signs along the highways proclaim that public education, housing, child care, and reproductive health are all on the ballot. This just in: teachers won’t work for less money. Neither will those who build affordable homes, those who provide care for children, or those who work in public health agencies. Neither will policemen, fire fighters, road crews, social workers, drug counselors or prison guards. The costs for existing services will increase.

The signs on the road don’t say it, but the ledgers in Concord do: revenue is on the ballot as well.

Where will it come from?

Unless New Hampshire’s candidates for Governor have a sudden epiphany, the answer is clear: property tax.

Wayne Gersen is a retired public school administrator. He lives in Etna.