State agency requests kick off budget process

New Hampshire’s process for crafting a new two-year state budget reached a milestone in October.

The state agency budget requests were made public, providing the most insight into state budget discussions to come in 2027 until the Governor’s budget is released in February.

The state agency requests come in two formats.

First, the “Efficiency Budget” request reflects continued funding for current services and priorities while remaining under the expenditure targets set by the Governor’s office in August. The Efficiency Budget can be used to understand the highest priorities of state agencies and the resources needed to maintain current activities. Second, the agencies identify “Additional Prioritized Needs,” which contain any expenditure requests that exceed the Governor’s expenditure targets.

These terms are often used later in the state budget process, when policymakers seek to understand changes to the amounts state agencies originally proposed.

For the two-year state budget due to start on July 1, 2027, the Efficiency Budget for all agencies combined was $17.8 billion, with an additional $628 million in Additional Prioritized Needs. In total, the Efficiency Budget’s first year would see a 6.3% increase relative to current funding. The increase reflects inflation, as well as accounting and policy changes that will likely be made before the final state budget is approved. Two years ago, state agencies requested $16.3 billion and $16.9 billion for the two levels of requests, respectively. The final budget appropriated about $15.9 billion.

The budget requests include some key changes.

About three-quarters of new spending under the Efficiency Budget would support the Department of Health and Human Services, the largest state agency, which faced significant reductions in the current budget. The Department of Corrections and the University System of New Hampshire are asking to restore at least some of the funding cut during the last state budget cycle. Meanwhile, both New Hampshire Employment Security and the Department of Business and Economic Affairs are proposing smaller budgets.

As the process unfolds in 2027, changes, additions and modifications to the baseline established by the state agencies this fall will lead to a final state budget. With education funding questions and the potential for other key service needs on the horizon, this upcoming state budget presents both a challenge and an opportunity to help enhance the well-being of Granite Staters.

Phil Sletten is research director and Emily Soule is a state policy fellow at the NH Fiscal Policy Institute. The NHFPI Policy Memo is a partnership of the NH Fiscal Policy Institute and NH Business Review.