Teacher pay in New Hampshire is a casualty of high school staffing levels

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It’s Teacher Appreciation Week and Granite Staters are again being subjected to the claim that teachers here earn less than they should because legislators are stingy. Given current market conditions, average teacher pay in New Hampshire is lower than it should be to recruit the best candidates. But the state’s contribution isn’t the reason. 

The National Education Association puts New Hampshire’s average teacher salary at $67,170, $4,860 below the national average (not accounting for cost of living or benefits).

If we look at the two decades before the pandemic, total spending on district public schools in New Hampshire increased by 40% from 2001-2019, adjusted for inflation. Removing expenses such as capital and debt service, current spending per pupil rose by 74%, again adjusting for inflation. 

That’s the kind of increase that should lead to large leaps in teacher pay. But it didn’t. Average teacher pay in New Hampshire from 2001-2019 rose by only 12%.

Where did the rest of that money go?

The largest chunk was spent on hiring staff, particularly non-teaching staff. From 1994-2022, New Hampshire district public schools had the nation’s largest increase in staffing relative to enrollment, as we reported here.

District K-12 public school staffing in New Hampshire increased by 55% from the 1994 to 2022 fiscal years even as student enrollment fell by 11.2%. New Hampshire’s gap between staffing growth and enrollment—66.2 percentage points—was by far the largest margin among all 50 states and the District of Columbia. Seven states had larger percentage increases in staffing, but they all had large increases in enrollment as well, which produced smaller gaps between enrollment and staffing than New Hampshire’s.

We just have to look next door to Massachusetts to see how this preference for more staff can affect district budgets.

As of 2019 (before schools received any pandemic funding), New Hampshire public schools had 18.2 full-time equivalent (FTE) staff per 100 students vs. 13.9 per 100 students in Massachusetts public schools.  For a school of 500 students, New Hampshire would have about 21.5 more FTE staff than a school of the same size in the Bay State.

Comparing New Hampshire to the national average as of 2019, a 500-student school in the Granite State would have 26 more FTE staff.

Despite large increases in total K-12 expenditures this century, even before COVID funding, districts have chosen to prioritize hiring, particularly in non-teaching positions, over instructor compensation.

New Hampshire schools are also staff-heavy on the instructional side. New Hampshire public schools employ more teachers per student than those in almost every other state. This also helps to suppress teacher pay. 

The NEA’s own report shows that New Hampshire has the second lowest student-teacher ratio in the nation at 10.5 students per teacher. Vermont is lowest at 10.4. Massachusetts is has 11.8 students per teacher, Maine 11.6, Connecticut 12.1 and Rhode Island 12.7. The national average is 15.1. 

Looking at these numbers, the media missed probably the biggest story in the NEA’s report: New Hampshire employs 44% more teachers per student than the national average.

With 4.6 more teachers per student, New Hampshire public schools spread their labor costs among many more teachers. That benefits teachers unions, which have more dues-paying members per school. But it leaves less money for each teacher.

Though teacher pay in New Hampshire has risen in the last decade, including through the pandemic years, inflation has consumed the value of those raises.

According to the NEA’s report, from 2014-15 school year to 2024-25 school year the number of teachers fell by 4.8% while enrollment fell by 11.4%. In that time, teacher pay rose by 24%. 

Again we see that enrollment declines far outpace staffing reductions. Maintaining high staffing levels can eat into pay rates. We also see that New Hampshire teacher pay raises, on average, have not kept up with inflation, though overall revenue for public schools has surpassed inflation this century. 

All of these data points indicate that school districts have received enough revenue to fund more generous teacher pay increases, but they’ve prioritized higher staffing levels instead.

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Shifting education funding to the state probably wouldn’t lead to higher spending

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The movement to shift public school funding from local governments to the state is driven by a core belief that the shift will bring more funding. But that assumption is almost certainly wrong.

The National Education Association’s latest annual report on public school data drew media coverage this week for its finding that New Hampshire’s state contribution to K-12 public school funding ranked the lowest nationwide. 

The implication, pushed by the union’s own advocacy, is that New Hampshire’s system of primarily locally funded education shortchanges students. (Less hyped was the report’s finding that states on average contribute the largest share but still less than half—47.6%—of K-12 public school funding.)

Always downplayed in the coverage of this issue is that New Hampshire’s total combined (state, local. And federal) spending is higher than all but a handful of other states. 

The NEA report pegged New Hampshire’s K-12 public school spending from all sources at $22,252 in the 2023-24 school year. That ranked sixth nationwide and was $5,262 (31%) higher than the national average of $16,990. 

When New Hampshire contributes such a small share relative to other states, how do we spend 31% more per pupil than the national average? If larger state contributions led to higher spending, New Hampshire should be at the bottom in per-pupil expenditures, not near the top. 

Counting all K-12 public school expenditures, including capital and interest, New Hampshire students received on average $26,320 each this year. Counting just operating expenses, it’s $21,545. That’s on par with the average private school tuition in the state, which is $21,935, according to Private School Review.

Many believe that these already high public school expenditures would increase substantially if the state picked up a larger share of the tab. But that ignores the reasons why New Hampshire’s public education spending is so high. 

The Josiah Bartlett Center for Public Policy has tracked public education spending in New Hampshire for decades. We’ve found that regardless of enrollment, local spending on K-12 district schools steadily increases year after year even after adjusting for inflation. 

State spending, which is tied to enrollment and fluctuating state revenues, does not. 

From 2001-2019, total state taxpayer funding to district public schools increased in nominal dollars from about $878 million in 2001 to approximately $1 billion in 2019. However, much of that increase was consumed by inflation. When adjusted for inflation, total state appropriations to district public schools shrank from an inflation-adjusted $1.2 billion in 2001 to $1 billion in 2019—a decline of 17 percent.

Most of that decline (83.9%) was caused by falling student enrollments. State spending is tied to enrollment, so a decline in enrollment means a decline in state funding. The remaining 16.1 percent was due to actual increases in state appropriations coming close to, but not quite keeping up with, inflation.

By contrast, total local appropriations, adjusted for inflation, doubled, going from $1.09 billion in 2001 to $2.19 billion in 2019. That’s a 101% increase in spending as the number of students served fell by 14%.

Supporters of higher state spending claim that local governments spend more because the state spends so little. If that were the case, we’d expect to see local spending rise and fall with enrollment. That would indicate that voters adjust their spending based on need.

Instead, even when enrollment falls significantly, local voters typically approve large increases in public school budgets. Local K-12 public education funding appears driven primarily by voters’ desire to spend money on their own children and their own communities.

For decades, local voters in New Hampshire have demonstrated a pattern of approving larger increases in school budgets than town budgets, even when school populations have shrunk and town populations have grown. 

This dynamic is not evident at the state level. 

The state budget, including the Education Trust Fund, is heavily affected by economic conditions. When those conditions are bad, legislators tighten spending. Local budgets, by contrast, come from property taxes, which are much more stable and reliable. 

Shifting public education funding entirely to the state would divorce it from the two factors that drive most of its increases: the stability of property tax revenues and parents’ desire to invest in their own children. 

The same is true, though to a lesser extent, if a larger portion of education funding is shifted to the state. 

At the national level, K-12 public education spending also has trended up even as enrollment has fallen, as the NEA’s own data show. The teachers union’s report finds that enrollment fell by 2.5% and average daily attendance fell by 4.2% from the fall of 2015 to the fall of 2024 but, adjusted for inflation, current expenditures per student rose by 9.4% and current expenditures per student in average daily attendance rose by 11.4%.

As enrollment fell, the number of instructional staff increased by 5.4%.

Our research found that New Hampshire’s increase in per-pupil spending in the first two decades of this century grew much faster than the national average. That’s likely because local voters here control a larger portion of public education spending. 

Some hope that shifting all public school spending to the state will cause legislators to adopt an income tax. But Granite Staters don’t want an income tax. The more likely outcome is that lawmakers would cobble together funding from other sources and impose the sort of fiscal discipline on K-12 spending that local voters have chosen to avoid. 

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It’s hard to restrain education spending when increases are ‘cuts’

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K-12 public school spending rises every year, whether enrollment increases or decreases. In this century, K-12 district public school enrollment in New Hampshire has fallen by more than 50,000 students, but spending is up by more than $1 billion, adjusted for inflation. 

How does this happen? The short answer is that local voters prefer to spend more on public schools, regardless of enrollment trends, tax rates or anything else. Contributing to these decisions, however, is an often overlooked annual ritual. 

Any and every measure of spending restraint, even those that increase school budgets but at a slower rate than proposed by a district administration, is portrayed as a “cut” that will devastate public education. It’s a rite of spring, and the media too often participate.

The current debate over Manchester’s school budget proposal offers a perfect example. 

The city school district has proposed a 2025-26 budget of $246 million, endorsed by the school board. Mayor Jay Ruais has proposed a budget of $236.5 million. 

School board members have attacked the mayor, saying his budget results in a “$9.5 million cut.” 

“If you actually cut the school district budget by $9.5 million, it’s going to be really painful,” one school board member said.

A resident who showed up at at a recent Board of Mayor and Aldermen meeting said the mayor’s proposal contained “cuts will have a yearslong negative impact on the quality of education and supports our students will receive.”

The Union Leader story that includes these quotes contains the word “cut” 10 times. The story itself describes the mayor’s proposal as a “reduction” in proposed spending. 

Nowhere does the story explain that the mayor’s proposal represents a $2 million increase in school district spending. 

Manchester’s enrollment is 11,851, according to its state district profile. The district projects an additional 14 students next year along with an additional $11.7 million in state adequate education aid.

It’s reasonable to ask why a total budget increase of $2 million to cover an increase of 14 students ($143,000 per student) would devastate the school system. But that conversation can’t happen amid all of the name calling and attacks. 

The school board vice chairman said the mayor’s budget could lead to class sizes of 30-35 students. But the district’s average class size is 20 now. How would a $2 million increase in spending cause a 50% increase in class sizes?

This question, among many others, goes unasked.  

The Boston Globe’s story leads with this sentence: “Some school officials are warning Manchester Mayor Jay Ruais’ proposed $9.5 million in cuts to the city’s school budget could lead to layoffs, the reduction of services, or even school closures.”

It’s a $2 million budget increase, not a $9.5 million cut. But that’s how the reporting goes.

To its credit, the Globe acknowledges three paragraphs later that Ruais’ budget increases city school spending. It even reports the growth of the city school budget since 2023, something most stories on school spending never do. But the inaccuracy of the lead sentence, which matches the narrative of the school board members, creates confusion and misunderstanding. 

Even when news stories correctly report that a budget increases spending, they can still confuse readers. A WMUR story this week reported that Nashua’s proposed school district budget represents a 3.5% spending increase. But in reporting on the claims that it would cause large reductions in teaching positions, the story adopted the rhetoric of opponents, using the phrase “the proposed budget cut.”

Over in the Jaffrey-Ringe Cooperative School District, voters last month approved a genuine cut to the school district budget, voting for a $3 million reduction from the current year’s spending. 

The school board chairman there followed the customary script of insulting and demeaning the voters, just as Manchester’s school board members insulted and attacked the mayor. It’s standard practice, and it’s effective.

Any level of spending that does not match or exceed a school district’s proposal is met with attacks, invective and predictions of devastating educational outcomes. All proposals that total less than the district’s proposal are labeled “cuts,” even if they increase spending over the current budget. 

The messaging is so good that it usually tricks the press into portraying spending increases as budget cuts. Amid all of the shouting, not even the media, which ought to be scrutinizing elected officials’ claims, questions the budget math or the use of the term “cut” to describe spending increases, even ones that will lead to tax increases. How would a spending cut cause a tax increase? No one ever asks.

Districts might have perfectly good reasons for increasing spending. Those reasons should be given to voters and elected officials as part of a discussion that balances the interests of students and taxpayers. Those kinds of conversations are where savings, efficiencies and improvements can be found. Getting more for less should be a permanent objective, not an annual fight. But it’s hard to get there when even spending increases are called “cuts” and the press just goes along with the narrative instead of asking hard questions about spending.

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Legislature moves 15 housing bills in one day

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New Hampshire’s housing shortage, and the price spike that it created, has made housing the No. 1 problem facing the state, according to University of New Hampshire polling. Fixing the state’s housing shortage is such a priority for voters that a 2024 UNH poll found more than 1/3 of voters rating it as the top problem, with the No. 2 problem a full 29 points behind. In response, the state House of Representatives has created a standing Committee on Housing to deal with the issue. 

Forty-eight housing-related bills have been introduced to the House Housing Committee (22) and Senate Commerce Committee (26) this session. Nearly 1/3 of those bills were considered by the House and Senate on Thursday, March 20. 

Below is a brief summary of each of those 15 bills. Eight were placed on the consent calendar, which means they received unanimous votes out of committee. (One was pulled off the House consent calendar Thursday morning.) To give the reader a sense of how the committees prioritized each bill, we list them by their position on the calendars. We also include how each chamber voted on each bill.

Thursday’s action suggests that legislators have gotten the message that voters want action to increase the supply of housing, and they want it now. 

 

SENATE

Consent Calendar

  • Senate Bill 90, allowing high-density residential development on land zoned for commercial use. Re-referred to committee. 

SB 90 defines a “high density residential zone” as one that allows at least 20 residential units per acre, and it adds to RSA 674 the requirement that “municipalities shall allow high-density residential development on land zoned for commercial use, provided that adequate infrastructure, including roads, water, and sewage systems, shall be available or provided to support the development.” 

  • Senate Bill 170, relative to development and related requirements in cities, towns, and municipalities. Passed by voice vote. 

SB 170 incorporates multiple proposals into a single bill. It:

  1. Prohibits municipalities from mandating that occupants of housing units be related by blood or marriage;
  2. Prohibits cities, towns, municipalities, and counties with unincorporated places from mandating more stringent test-pitting requirements for septic systems and more stringent well-siting requirements than the Department of Environmental Services does;
  3. Prohibits municipalities from imposing maximum road lengths to impede development, provided that the proposed roadway or extension complies with the state fire code;
  4. Prohibits municipalities from capping the number of housing lots on dead-end streets; 
  5. Requires municipalities to permit utilities (including septic systems, wells, electric systems, drainage structures, and other utilities) to be placed in open spaces or perimeter buffers of subdivisions as applicable; provided that such open spaces or perimeter buffers are not wetlands or shoreland areas protected by RSA 483-B;
  6. Requires municipalities to stamp and accept changes to plans within three days, after an initial review, when requested by that city, town, or municipality, provided the developer has made the requested alterations based on the initial planning board review; 
  7. limits road frontage requirements and setbacks for lot lines to no more than 50 feet.
  • Senate Bill 173, relative to residential property subject to housing covenants under the low income housing tax credit program. Passed by voice vote.

Rent-restricted residential housing enrolled in the Low-Income Housing Tax Credit Program can be assessed under state law in one of two ways. It is either taxed at 10 percent of income generated by the property, or subject to the following formula:

“The assessed value shall be calculated using an income approach whereby the net operating income is divided by the overall capitalization rate and, except when the municipality has updated its assessment values to equate to market values, multiplying that value by the previous year’s equalization ratio.”

SB 173 eliminates the formula so that the simpler 10% tax will be used. Because it eliminates a complicated formula inconsistently applied by municipalities, it has the support of assessors, municipalities and developers. 

  • Senate Bill 175, relative to the use of covenants by municipalities. Re-referred to committee.

SB 175 would prohibit municipalities from “requiring or encouraging the establishment of covenants as a condition of any zoning or land use approval.” Existing covenants created by landowners or homeowners associations would be grandfathered. The Senate Commerce Committee concluded that the bill needed more work and recommended that it be sent back to committee.

  • Senate Bill 281, relative to property adjacent to Class VI roads. Passed by voice vote.

SB 281 allows homes on class VI roads if the property owner signs a waiver acknowledging that the road is not maintained and the municipality is not responsible for damages. Buildings on the property also must be insurable. A Class VI road is an unmaintained road.

  • Senate Bill 282, relative to stairway requirements in certain residential buildings. Passed by voice vote.

SB 282 allows multifamily buildings of up to six stories to be built with a single staircase, provided certain safety requirements are met.  Mandates for dual staircases increase building footprints and costs. Single staircase designs are common in most of the rest of the world, at heights considerably taller than six stories. 

  • Senate Bill 283, relative to the calculation of floor-area-ratios under local building ordinances. Passed by voice vote.

SB 283 exempts below-grade ares from the calculation of floor area ratios. Floor area ratios are the portion of floor area of a building relative to the size of the parcel of land. Municipalities use floor area ratios to limit how large a building can be relative to its lot size.

Regular Calendar

  • Senate Bill 84, relative to zoning procedures concerning residential housing. Passed 13-10. 

SB 84 caps minimum lot sizes at 2 acres in areas not served by water or sewer, 1.5 acres in areas served by water only, and half an acre in areas served by both water and sewer. 

  • Senate Bill 163, repealing the temporary moratoria and limitation on building permits and the approval of subdivisions and site plans. Passed by voice vote.

SB 163 repeals the portion of state law allowing municipalities to impose temporary moratoria on the issuing of building permits or on the approval of subdivisions and site plans.

  • Senate Bill 174, prohibiting planning boards from considering the number of bedrooms a given unit or development has during the hearing and approval process. Passed by voice vote.

SB 174 prohibits planning boards from favoring or disfavoring housing proposals based on the number of bedrooms per unit.

  • Senate Bill 284, relative to the required maximum number of residential parking spaces. Passed by voice vote.

SB 284 prohibits municipalities from requiring more than one parking space per housing unit, with one exception. Workforce housing developments with studio and one-bedroom units of fewer than 1,000 square feet can be required to have 1.5 parking spaces.

 

HOUSE

Regular Calendar

  • House Bill 351, requiring landlords to give tenants of at-will tenancies at least 60-days notice to evict. Tabled.

HB 351 would require landlords to give tenants who are on at-will leases at least 60 days notice before eviction. 

  • House Bill 558, creating a public county registry of the monthly rent charged by landlords for each owned unit and prohibiting landlords from using algorithms or software to determine rental rates. Voted inexpedient to legislate on voice vote.

HB 558 would require county registers of deeds to create an annual registry of rents charged in the county and prohibit landlords from using algorithms or software to determine rental rates.

  • House Bill 628, prohibiting landlords from discriminating against prospective tenants holding certain vouchers under the housing choice voucher program. Voted inexpedient to legislate on a 213-152 vote.

HB 628 requires landlords to rent to anyone enrolled in the Housing Choice Voucher Program (federal Section 8 vouchers).

  • House Bill 631, permitting residential building in commercial zoning. Passed 204-134.

HB 631 would allow multi-family housing on commercially zoned land, provided the infrastructure (such as water and sewer) is available.

Download this policy brief here: JBC Policy Brief 15 Housing Bills in One Day

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Legalizing residential uses in commercial zones can strengthen N.H. communities

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In many areas of New Hampshire it is literally illegal for shop owners, employees and customers to live in an apartment above or next to a business. Yet places that do allow such mixed uses are among the most vibrant and desired areas in the state, for both businesses and residents. 

As state and local officials consider ways to create more housing and improve the economic and social life of New Hampshire communities, legalizing residential housing in existing commercial zones offers an easy and harmless way to do both. 

Portsmouth regularly shows up on lists of New Hampshire’s and America’s most beautiful towns. In 2016, National Geographic speculated that it “might be America’s greatest small town.” It isn’t just the colonial architecture. It’s the vibrancy. In Portsmouth, living above or adjacent to shops, restaurants, taverns and coffee houses has been common for much of the community’s four centuries. 

Before the rise of automobiles and industrialization, towns and cities generally weren’t separated into residential and commercial areas. Almost everyone worked within walking distance of their homes, and many operated shops from their homes. Cities and towns as old as Portsmouth and Exeter offer a window into this pre-zoning past. And they  offer insights into the value of allowing residential development in commercial zones. 

No tourists, shoppers or diners come to Portsmouth—or any other town— to marvel at the residential subdivisions created by 20th century zoning ordinances. Strip malls in exclusively commercial zones attract shoppers who pop quickly in and out, but not tourists and residents seeking to experience the charm of an old New England town. People flock to mixed-use zones to enjoy a thriving community, a place brought alive by the mix of residential and commercial activity in one compact area. 

Municipal bans on residential uses in commercial zones outlawed the creation of new communities like those found in downtown Portsmouth or Exeter. Only by lifting those bans can New Hampshire towns and cities recreate these lost places. 

Instead of protecting homeowners from encroaching businesses, these bans “protect” businesses from encroaching residents. Yet this “protection” actually harms businesses, residents and communities. Ending these misguided municipal bans would provide much-needed infill housing while reinvigorating communities.

Property values

A major misconception commonly used in defense of banning residences in commercial zones is that the strict separation increases property values. The opposite is true. Commercial real estate professionals have recognized for years that commercial properties close to residential properties tend to be more valuable, not less.  

Residential properties also tend to command higher prices when located closer to economically active commercial areas. Contrary to popular belief, housing built near an economic activity center is significantly more valuable. (A 2022 study found a 26% price premium for housing built near activity centers in 2/3 of cities studied, and a 50% premium in a few high-growth cities.) 

As a general rule, mixing residential uses into commercial zones increases the value of both types of properties. These higher values are a result of higher demand. Many people want to live close to shops, restaurants, nightlife and other “third places” where they can build social and economic connections.

Safety

Half a century ago, author Jane Jacobs noticed that crime in U.S. cities seemed to be lower in neighborhoods that enjoyed more activity in public spaces. Her “eyes on the street” theory held that more people on the streets, or watching from shops and homes, deterred crime. 

This is a widely accepted view, though research is limited. But some researchers have found the theory to hold up under testing. 

A 2013 study of crime in Los Angeles found that “single-use commercially zoned blocks in Los Angeles have crime rates that are 45 percent higher than similar blocks that include residential uses.”

A 2017 study of zoning and crime in Chicago found that commercial areas with higher-density housing were associated with lower crime rates. “Zoning which allows for mixed use structures may be preferable to more restrictive rules that aim for solely residential or commercial use,” the author concluded.

Opposition to legalizing housing in commercial zones often comes from the assumption that new residential units will be high density developments aimed at low-income renters, and will therefore reduce property values and increase crime. On the contrary, because this type of housing is in high demand, it is typically not targeted at low-income renters. That doesn’t mean it will raise overall rents. Mid-range and higher-priced rentals attract people who leave lower-priced units, freeing those units for people with smaller budgets. This filtering effect is why the construction of additional housing units, even at the luxury end of the market, brings down overall rents over time. More supply lowers prices.

Community 

The American Planning Association recommends mixed-use zoning as a way of improving community health and vibrancy. “Mixed-use development provides a variety of environmental, economic, social, and health benefits that can align with existing community priorities, including increasing physical activity,” the association writes.

Far from harming communities, mixed-use development brings numerous benefits. Legalizing residential uses in commercial zones is a way to generate those benefits without imposing costs on existing residential neighborhoods. Because housing is being added to commercial areas, not vice versa, there are no concerns about bringing commercial activities into residential neighborhoods. 

When the Ioka Theater in downtown Exeter closed, it left a void on Water Street. This year, the renovated building is back to life as a mixed-use space anchored by eight condominiums. With demand for office and commercial space still down after the pandemic, the housing portion of the redevelopment was important. All but one of condos sold before the coffee house opened in December, according to the Union Leader. The restaurant and retail space were unfilled at the start of this year. Had the town not allowed housing above the shop and restaurant space, the redevelopment might never have happened. 

By giving property owners multiple streams of revenue, mixed-use zoning serves as a hedge against downturns in commercial and office markets. A building zoned exclusively commercial is at a higher risk of becoming completely vacant than one zoned for both commercial and residential uses. Vacant buildings bring down property values, increase crime rates and fracture communities. Mixed-use zones reduce the risk of building vacancies while bringing people closer together. 

Mixing residential uses into commercial zones also creates more walkable places where businesses and customers mutually benefit from their close proximity to each other. It can reduce traffic congestion, commute times and feelings of isolation.

Conclusion

The colonial downtowns that make Portsmouth and Exeter iconic New England towns were once common throughout New Hampshire. Downtown Concord and Manchester also represent attractive, popular mixed-use districts that developed before zoning separated residential and commercial activities. These are the kinds of vibrant community centers that zoning made it difficult to recreate elsewhere. 

A century after New Hampshire gave local governments the power to separate land by use, it’s clear that municipalities took that authority too far. A power created to keep industrial activities out of residential neighborhoods has been used to keep neighborhoods from popping up in commercial areas. That makes no sense.

There simply is no public health or safety justification for creating commercial-only zones. As long as adequate infrastructure exists to support housing, its inclusion in commercial areas harms no one while creating numerous benefits. 

The benefits of legalizing residential uses in commercial zones include strengthening property values, providing additional housing, increasing economic activity, lowering crime rates, creating a hedge against contractions in the commercial and office markets, and building stronger communities. These are all things elected officials say they want. If they really do, adding residential uses to commercial zones would help.

Download this policy brief here: JBC Policy Brief Residential in Commercial

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Business tax cuts did not reduce state aid to local governments

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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. 

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Innovation means bulldozing places like Steeplegate Mall

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Steeplegate Mall in Concord is coming down. The city granted approval this month for the building’s demolition. 

Yes, the owners of a mostly vacant large building that has become a magnet for crime (181 police calls in the last two years) needed the government’s approval to take it down and replace it with infrastructure people will actually use, like homes and a Costco.

The mall’s been largely empty since 2022. The redevelopment proposal (mixed use, retail and residential) has been moving along relatively quickly, as these things go. There haven’t been the usual disruptive community meetings with protests and long delays to get multiple variances just to replace an eyesore with something the city actually needs and people actually want.

That’s because the city rezoned the mall property years ago. It sits in a Gateway Performance District, which allows multiple uses and is designed to attract development. That’s made all the difference.

The city loosened land use restrictions to encourage economic development, and guess what happened? Economic development. 

Concord officials anticipated that the land where a huge suburban shopping mall sat might one day be put to a different, better use if market conditions changed. Because they had that foresight, a mammoth commercial structure no longer in demand will be converted relatively easily into buildings that are in very high demand.

A lot of the news stories about the mall in the past two years have focused on what Concord is losing. An outdated movie theater, a pickleball club, a community theater. An NHPR story mused about what the evictions from the mall would mean for Concord’s arts scene. 

It takes a stupefying lack of imagination to see a defunct shopping mall and lament what is lost rather than celebrate the possibilities of its transformation. 

Humans, left to their own devices, will build. They’ll create vibrant communities in which entrepreneurs devise ingenious ways of making their fellow citizens happy. Unless government forbids it. 

Governments forbid behaviors for one reason. People would otherwise do the forbidden things.

Hurting people and taking people’s stuff ought to be forbidden. But building a residence beside (or on top of) a store? Building a tiny house on a half-acre lot? Placing your home 46 feet instead of 50 feet away from the curb? These are not behaviors that harm others. 

Yet governments all across New Hampshire ban perfectly reasonable property uses like these. Why? Because some people prefer them. Without a government prohibition, people would build the kinds of mixed-use residential and commercial properties the market demands. And that just can’t be allowed, even in the “live free or die” state.  

Tuscan Village in Salem was once a horse track. When Tuscan Village was proposed, it was illegal. Salem had to change its regulations to make it legal for an entrepreneur to turn an abandoned dog track into a beautiful mixed-use residential and retail village.  

If New Hampshire wants to live up to its motto, it must repeal or relax many of the regulations that make it illegal for entrepreneurs to unleash their creativity. Local governments have to stop worrying so much about preserving the past and let entrepreneurs imagine the future. Preservation has its place. But innovation does too. And right now too many of our development rules are focused on preservation at the expense of innovation.

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On housing, Granite Staters want more development, less gov’t interference

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On housing, a consensus has settled in among Granite State voters. It can be summarized in four main points:

  1. New Hampshire desperately needs more housing.
  2. Local governments should lift regulatory barriers to the construction of new housing.
  3. The state government should act to prompt local regulatory changes.
  4. Multifamily housing is acceptable in suburbs and rural areas.

The St. Anselm College Center for Ethics in Society has polled New Hampshire voters on housing since 2020. The 2024 poll, released this week, shows that voters’ views have solidified into a strongly pro-construction, anti-regulatory, pro multi-family majority. 

A supermajority (75%) agrees with the statement, “my community needs more affordable housing to be built.” 

Roughly 60% (59%-62%) welcome the construction of affordable housing in their own neighborhoods, the relaxation of local land use regulations to allow that construction, the building of multifamily housing in suburban and rural zones, and state intervention to make all of this happen. 

In the 2020 poll, just 28.7% agreed that local governments should relax their planning and zoning regulations to allow the construction of more housing. 

In the spring of 2021, the poll found a 10% increase, to 39%, of voters saying local governments should relax planning and zoning regulations. 

In the fall of 2021, the Josiah Bartlett Center for Public Policy released our landmark study showing that local land use regulations were the primary cause of the state’s housing shortage.

The next year, the percentage of N.H. voters who agreed that local planning and zoning regulations should be relaxed to allow for more housing shot up to 52%. It now stands at 61%.

High-profile conversations about specific policy problems matter. By 2021, Granite Staters were becoming more receptive to the idea that local land use regulations were a problem. A push by the Bartlett Center and others to identify the root cause of the housing shortage and propose solutions helped more people understand the problem and demand the right fix, rather than continue to falsely blame developers or the market.

Today, a strong majority of voters understands the problem and demands that it be fixed. Yet local voters and boards have not gotten the message. 

A few recent examples:

“Hampton Falls rejects proposed 88-unit condo project on Route 1”

“Owner: McIntyre building still a parking lot due to Portsmouth zoning rules”

“Stratham select board sues town zoning board over 59-unit condo approval”

“Exeter 120-plus apartment project faces opposition”

“Portsmouth board rejects plan to raze 1900-era home for four new houses”

“Board nixes variance for North Newport senior housing project.”

New residential developments are being approved in New Hampshire. But boards continue to reject housing proposals simply because pre-existing regulations don’t allow the type of housing the market now demands. 

In the Hampton Falls and Stratham stories linked above, boards rejected variance requests because members didn’t want to contradict old, outdated rules.

In the Newport example, the rural zone doesn’t allow multifamily housing. Since the developer could conceivably propose a different use for the property than its highest, best, most in-demand use (multifamily housing), the board rejected the proposal. 

Though Granite Staters now say overwhelmingly that they welcome multi-family housing in suburban and rural zones, local boards continue to reject such proposals simply because old rules don’t allow them.

This discrepancy between voter and market demand on one side and inflexible regulations on the other cannot continue indefinitely.

The Center for Ethics in Society polling shows that on questions of housing, large majorities of New Hampshire voters are on the side of developers, not local regulators. And they want the state to act if local governments won’t. 

Voters say housing is the “most important problem facing New Hampshire,” the UNH Survey Center found last month. Thirty-six percent of voters named housing as the state’s top problem. In second place was education, with only 7% of voters naming it the top problem. 

In the most recent legislative session, the House Education Committee dealt with 156 bills. 

The number of bills referred to the Special Committee on Housing? Nine.

Housing beats education as the top concern of voters by 29 percentage points. But legislators, like local land use boards, are operating on outdated beliefs. They’ve yet to adapt to the changing voter preferences. 

But there’s an election this fall, and we’re already seeing candidates campaign on pro-housing agendas. 

Given the firmly solidified pro-housing position of most voters, hardened each month by news of rising home prices, and the slow pace of change at the local level, it would be political malpractice for lawmakers not to make significant regulatory reform a top priority next year.

For years, we’ve predicted exactly this development. The slow pace of change at the local level has voters turning to the state for solutions. So far, legislators have been reluctant to act. That won’t be the case much longer. The pressure to act is too great.

It’s a safe bet that we’ll see a significant increase in legislative proposals to address the housing shortage in 2025. People are tired of waiting for government to get out of the way and let developers solve the housing shortage government created in the first place. 

 

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Housing bills seek to restore some limited property rights while maintaining local control

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There’s a growing consensus that New Hampshire’s overly restrictive land-use regulations need to be addressed to reverse the state’s housing shortage. Whether changes should be made at the state or local level, though, remains a major point of contention.

State-level solutions generate reflexive opposition from people who view local land-use regulation as an entirely local issue. Yet some of this opposition, maybe most, is based on an important misconception.

Opponents of state action commonly assert that bills to address the housing shortage are an effort by legislators to take for themselves powers that belong at the local level. This is mistaken. 

Decisions about land use will continue to be made locally. Under many of the bills working their way through the Legislature this session, those decisions will be made by individuals at the local level rather than by local governments—boards and bureaucrats—or voters.

Changes in Manchester

Realizing the desperate need for housing, some local governments are changing their ordinances to allow more development. In Manchester, for example, several proposed amendments to the city’s zoning ordinance would represent small but important steps to relax land-use regulations in the Queen City. 

The amendments would permit four-unit housing to be built on lots currently zoned for three-unit housing, drop the required number of parking spaces for multifamily housing from 1.5 spaces per unit to one space per unit, and no longer require property owners to petition the city’s planning board for a conditional use permit before building accessory dwelling units (ADUs).

These steps are the beginning of a bigger set of reforms being studied in the city. Not every municipality is moving in this direction, though, prompting state lawmakers to intervene in limited but meaningful ways. 

But these interventions don’t amount to the creation of statewide zoning. They just return some decision-making authority to property owners, from whom it was taken in the first place.

Legislation to restore limited rights to property owners

Consider the following bills: allowing one ADU, attached or detached, by right and allowing up to two per lot under certain conditions (HB 1291), forbidding municipalities from banning manufactured housing (HB 1361), allowing the expansion of a single-family residence within an urban residential zone to no more than two residential units without review if it meets certain requirements (HB 1399), and preventing local zoning regulations from requiring more than one residential parking space per unit (HB 1400).

Yes, these would be state laws, albeit modest ones. No, they would not amount to a uniform state zoning code. They would restore some limited rights to property owners while retaining local authority to regulate in each of these areas.

Currently, if a property owner wants to add a second ADU or convert a single-family home into a duplex within an urban residential zoning district—even if the developments wouldn’t encroach on neighboring property, disturb anyone, or change the outward appearance of the property whatsoever—local ordinances can prohibit them from doing so. 

Contrary to popular belief, local governments do not hold that power by right. The power to regulate private property is, under New Hampshire’s Constitution, granted to local governments by the state. 

With each of the bills above, lawmakers are not proposing to impose a single uniform ordinance statewide. They are proposing to reduce the regulation of property in these very limited areas altogether, thus restoring a small measure of rights originally held by property owners. 

Manufactured housing—prefabricated homes that are transported to sites—is an easy, quick, and often inexpensive way to put more people into homes. Under HB 1361, municipalities can still regulate manufactured housing but not to the extent that it is effectively banned. 

Parking space requirements are a pernicious roadblock to creating more multifamily housing. In zoning districts that require 1.5 parking spaces per housing unit, that means every duplex, three-family, and four-family building needs enough land set aside for three, 4.5, and six spaces, respectively. Where municipalities require two parking spaces per housing unit, that means every duplex, three-family, and four-family building must have four, six, and eight spaces, respectively. 

Often these stringent requirements keep a lot of multifamily housing from being created, either through development or single-family expansions. By preventing local governments from requiring more than one space per residential unit, HB 1400 would restore to property owners the authority to decide whether a unit needs more than one parking space on site. 

Because these kinds of state proposals would supersede local ordinances, they rub some the wrong way. Local control has long been a very important principle in New Hampshire.

The state’s historical adherence to local control, however, shouldn’t justify unlimited local control. Local governments are still governments, and as a result, their ordinances can be fundamentally oppressive.  

At the same time, we shouldn’t always assume that the state government overruling some local ordinances automatically represents state overreach. In the case of these four bills, such actions seek to pull back the centralized planning powers of local governments and protect Granite Staters’ property rights. 

Isn’t that what governments are instituted to do, to secure our rights? If so, then private property rights are chief among them.

When you consider that these state laws would be superseding some of the most overly restrictive local regulations that limit property rights throughout the state, and that state lawmakers have only resorted to these very modest steps because of inaction on the part of municipalities, then such proposals look less like top-down state government control and more like state government doing the bare minimum to protect Granite Staters’ property rights and address the state’s housing shortage.



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Legislators vote to strengthen local tax caps, especially for school districts

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While crime stories, campus protests and political drama captured much of the media attention this week, a bill with tremendous potential consequences for taxpayers quietly passed the House on Thursday.

Senate Bill 383, which has passed both chambers in slightly different versions, would strengthen local tax caps and allow school district caps to be tied to enrollment. 

Under current state law, town and school district tax caps can apply to estimated taxes “as shown on the budget.” That excludes off-budget warrant articles that might also have a tax impact. SB 383 would cover the budget and “all other warrant articles with a tax impact.”

RSA 32:5-b II mandates that a town or district “tax cap shall be either a fixed dollar amount or a fixed percentage applied to the amount of local taxes raised by the town or district for the prior fiscal year…”

SB 383 authorizes voters to use “a multiplication factor” that would cap tax increases at the inflation rate times population growth. That’s been the general idea behind tax caps from the start. The bill lets towns use this more precise formula rather than a fixed amount or rate. Those fixed numbers were always basically a proxy for the multiplier anyway.

Perhaps most consequentially, SB 383 creates a new formula for school district tax caps. The school district formula would be a combination of inflation times enrollment, rather than municipal population growth. That’s an important change. School budgets can be the largest portion of local budgets and the largest driver of local spending and tax increases.

Our 2023 analysis of district school spending in New Hampshire found that there generally wasn’t a strong correlation between school enrollments and local school spending. New Hampshire public school districts lost 29,946 students from 2001-2019, but increased spending by an inflation-adjusted $937 million. School district budgets tend to grow faster than the inflation rate, and faster than all other areas of government spending, even when enrollment is falling, we found. 

In Manchester, for example, school district enrollment fell by 13% from 1995-2018. During those same years, city school district spending grew by a remarkable 68%. 

This year, the Manchester school district’s proposed budget was 7.9% higher than the 2020-21 school budget—after adjusting for inflation—though enrollment was 4.3% lower than in the 2020-21 school year.

Now, Manchester has a tax cap, and that cap applies to the school district’s proposed budget. Neither the city nor the school district is allowed to propose a budget that exceeds the average inflation rate of the prior three years. 

(City tax caps are regulated in a separate section of state law (RSA 49) than are town tax caps. Manchester’s cap, like Nashua’s, is tied to the inflation rate.)

Though SB 383 doesn’t apply to cities, and thus wouldn’t affect Manchester’s school district tax cap, Manchester’s experience shows how the formula in the bill would put a further constraint on spending.

Manchester’s school district taxes have been restrained by this cap for more than a decade, but spending still grew rapidly despite falling enrollment. The formula Manchester uses does not take into account district enrollment. If it had, the cap would’ve been lower, and therefore might have prompted some efficiencies in district budgeting.

The city school district accounts for about 52% of Manchester’s budget, which shows how consequential the new caps allowed in SB 383 could be. 

The formulas allowed in SB 383 are more flexible than the fixed number or rate caps towns and districts can adopt now. That could weaken some of the opposition to tax caps, leading to their more widespread adoption. At the same time, the bill lets voters strengthen caps by covering warrant articles that have tax impacts and by tying school district tax changes to enrollment. On the whole, the bill would turn tax caps into a more powerful and more appealing tool for taxpayers.

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