Business tax cuts did not reduce state aid to local governments
Since New Hampshire began cutting business tax rates in 2015, state aid to municipalities and public school districts has fallen, according to a prominent political narrative.
That narrative is false.
Aid to local governments and local school districts rose by by $214 million (19%) from Fiscal Year 2015 to Fiscal Year 2025, an October report from the Office of Legislative Budget Assistant shows.
A related false narrative asserts that if state aid to localities is up, that’s only because of federal COVID relief spending.
This also is false.
The $214 million increase in state aid consists entirely of state tax revenue. Federal COVID relief money and all other federal spending are separate.
What about school districts?
The state has increased adequate education grants and total state aid to public school districts since 2015.
State adequate education aid rose by $139 million (15%).
Total state aid to public school districts rose by $148 million (15%).
While state aid to public schools increased by 15%, public school enrollment fell by 16,373 students, or 9%.
So although the total dollar increase might look relatively small, it is spread among fewer students, creating a larger per-pupil expenditure.
Looking only at state adequate education grants, the state government sent local public schools an average of $5,115 per pupil in 2015. That rose to an average of $6,469 per pupil in FY 2025 (the current school year), an increase of 26%.
Inflation over the last decade grew faster than the increase in state aid to local governments and school districts, eating away at the value of those increases.
But the claim from tax cut opponents is not that the hundreds of millions of dollars in additional aid was consumed by bad federal policies that sent inflation soaring. The claim is that the state cut local aid in absolute terms because state revenues fell following the tax cuts. This is entirely untrue.
Not only did legislators increase local aid, those increases were funded by soaring business tax revenues, which have more than doubled since 2015.
Local governments and public school districts received $214 million in additional state aid over the last decade, including a 26% increase in the per-pupil value of adequate education grants. If they raised property taxes during this time, the blame cannot be placed on state aid.
These increases do not include any of the $112 million in Local Fiscal Recovery Fund moneys distributed to towns, $994.5 million in American Rescue Plan and Coronavirus State Fiscal Recovery Funds allocated by the state, $486 million in ESSER funding for public schools, or other COVID relief funds sent directly from the federal government to cities.