Joyce Craig and Kelly Ayotte made many economic differences clear during a debate Tuesday. Ayotte, the Republican gubernatorial nominee, applauded the elimination of the interest and dividends tax next year, while Craig, the Democratic nominee, said the cut, passed by lawmakers, amounted to a tax cut for the wealthy. 

But the candidates were less forthcoming on one key question: How should the next governor handle a potential significant decline in revenues next year?

“Do you have any contingency plan for dealing with a billion dollar shortfall in our budget?” asked Jac Cuddy, the council’s executive director and the moderator of the debate.

Despite multiple prompts during the Mt. Washington Valley Economic Council gubernatorial debate, neither contender fully answered that question. The candidates instead clung to familiar territory, falling back on the policy disagreements that have defined their campaigns.

But the budget question could be unavoidable for the next governor. 

After multiple years of flush state revenues spurred by historic federal stimulus during the COVID-19 pandemic, as well as strong revenues from the state’s business taxes, the flow of money is likely to decrease. 

New Hampshire’s share of American Rescue Plan Act funds is near an end, with most of the remaining share required to be spent by 2026. And future revenue projections are lower, in part because of the reduction of the interest and dividends tax, according to a monthly revenue report by the Department of Administrative Services.

That means the next governor might face an unpalatable choice when she crafts her first budget: raise taxes to make up revenues or find ways to cut some state programs.

Neither candidate appeared interested in detailing their preferred response to that situation Tuesday.

Instead, the two sparred over the state’s 2022 abortion law barring most abortions after six months of pregnancy, the value of the state’s education freedom account program, and the best approach to diversifying energy sources and lowering costs. 

When it came to the interest and dividends tax, which is due to be phased out after April 2025, Craig painted the tax cut as a handout to wealthier Granite Staters. Research shows that higher income households were much more likely to pay the tax than lower-income households. Craig said she would restore the tax but change the threshold to make sure it would not affect middle class families.

Ayotte said that proposal was tantamount to a tax increase to Granite Staters and used it to bolster her argument that Craig would usher in higher taxes as governor. Craig pledged not to introduce an income or sales tax.

Addressing education funding in the state, Ayotte repeated her opposition to a November Superior Court ruling in which Judge David Ruoff found the state’s $4,100 per pupil base grant for public schools to be unconstitutionally low, and held that it should be at least $7,356.01. 

Ayotte said it was inappropriate for the court to have weighed in, arguing the funding level is a question that should be put to the Legislature and the governor. But she did agree that the state should put more money into targeted funds for school districts in which property taxes are inordinately high 

Craig, who supports the ruling, said the current level of state education funding is woefully inadequate and has helped keep property taxes high. She also criticized the education freedom account program, which she said could “decimate” public schools if allowed to grow.

Ayotte countered that the program, which allows low income families to use state education funds toward private school and home school expenses, provides educational opportunities for children who aren’t succeeding in their public school.

The two agreed that they would not support overriding local zoning codes using state statutes in order to facilitate more housing. But both candidates do support some of those zoning overhauls, and both have endorsed legislation to require towns to allow more accessory dwelling units to be developed by property owners.

On energy policy, Ayotte argued that Craig’s positions in favor of expanding clean energy would prove too costly and were too aligned with other New England states. Craig countered that the reforms are necessary to reduce the state’s carbon footprint and that they would ultimately lower costs.

And on many answers, the two candidates returned to familiar attack lines – Ayotte accusing Craig of adopting progressive policies akin to Massachusetts and failing to lead Manchester through a drug and homelessness crisis, and Craig hammering Ayotte over her past votes as U.S. Senator to defund Planned Parenthood and her support for the overturning of Roe v. Wade in 2022. 

After about an hour, the state budget question remained largely unaddressed. 

“I’m just cranky and old at this point, and I haven’t done very well as far as getting you to answer questions about the huge potential budget deficit that we have,” Cuddy said. “So as we get closer to finishing up, the more specific you can be, the more I’d appreciate it.”