Gov. Kelly Ayotte is bullish on business taxes to fund the next state budget.

In her newly released budget proposal, the governor and her administration’s revenue experts laid out rosy projections for the next two years. Ayotte said she expects business tax revenue to rebound despite its low performance in recent months.

“I’m optimistic about our business revenues and their resiliency and especially just some of the economic factors that we’re doing well on,” Ayotte told the Monitor on Thursday. She didn’t elaborate on further specifics.

Ayotte estimates business tax revenues will bounce back in the next two years, producing roughly $2.45 billion over the 2026-27 biennium.

The New Hampshire Fiscal Policy Institute paints a less favorable picture. The state is currently running $39 million, or about 2.8%, short on its planned revenues.

“The state has relied upon growth in business profits tax revenues to fund key expansion in public services in the last decade,” said Phil Sletten, the institute’s research director. “That growth is likely not going to be here this time around.”

Sletten added that, if business tax receipts continue to fall short for the next couple of months, that could mean “significant challenges” for the state budget. There is, however, a $126.4 million revenue surplus from the last fiscal year that could be used to offset those deficits.

Ayotte’s budget doesn’t rely solely on business taxes. She has also bet on the state’s transition away from historic horse racing toward slot machines to fund investments for law enforcement and education.

A bill in the Legislature, Senate Bill 83, seeks to legalize slot machines, which are cheaper to operate and could bring more state income.

In 2024, historic horse racing brought in just over $28 million. Should the Legislature approve that legalization, Ayotte projects an increase with slot machines: a total of $10 million for fiscal year 2026, which would balloon to $117 million in 2027. That revenue would be evenly split among the General Fund and Education Trust Fund.

“That transition will allow more production of more revenue,” Ayotte said. “Education will see an increase in funding there, and so will law enforcement from it … as well as the charities who benefit from it. They’ll see an increase in revenue.”

The governor hopes to use that newfound revenue stream to pay for $33 million in retirement for firefighters, nurses and police, correctional and parole officers. A group of workers sued the state last year alleging they never received the benefits they were promised — something Ayotte has pledged to rectify.

In her budget address to the Legislature on Thursday, Ayotte said she’s also curtailing state spending by $150 million, although she hasn’t been specific about what those cuts could affect.

Across the board, several departments may see slight decreases or flat state funding.

Ayotte said she is looking to sever ties to “bloated” out-of-state contracts without impacting the state’s ability to provide vital services.

“We looked across the board at some of our larger contracts and what we were spending on, what contracts were necessary, which ones we could dial back on, and there’s a lot of money in contracts,” Ayotte said. “I think it was important to focus on making sure that direct services were still going forward, but the management aspect of contracts – sort of the more consultant and management aspect – that’s where we dialed back and cut spending.”

Charlotte Matherly is the statehouse reporter for the Concord Monitor and Monadnock Ledger-Transcript in partnership with Report for America. Follow her on X at @charmatherly, subscribe to her Capital Beat newsletter and send her an email at cmatherly@cmonitor.com.