Distant Dome: Compromise Budget Actually Spends More

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Nancy West photo

Garry Rayno is InDepthNH.org's State House Bureau Chief. He is pictured in the press room at the State House in Concord.


CONCORD – The never-ending political campaigns waged today at the national and state levels create gridlock, minority rule and make it impossible to actually govern.

The budget battle over the state’s two-year operating budget vetoed by Gov. Chris Sununu quickly became warring press conferences, partisan politics and sloganeering that had little to do with reality.

After three months of negotiations, the GOP governor and Democratic legislative leaders agreed on a budget higher in total spending than the one passed by the Democratically controlled House and Senate in June which totaled $13.3 billion versus House Bills 3 and 4 — the compromise budget — $13.48 billion.

The compromise reduces the amount of state money spent on the budget by about $83 million, but uses more of the education trust fund, and fish and game and highway fund money; recoups savings from limiting spending under the three-month continuing resolution; increases rebates from drug makers; garners additional federal money, and increases lapses to balance the budget with its estimated $64,000 surplus at the end of the biennium instead of the $20.8 million projected in House Bills 1 and 2.

Sununu and legislative leaders touted the compromise as they should because no one wants another continuing resolution as city and town property tax rates are set and the sticker shock that will occur without the new education and revenue sharing money in the budget.

Budget Signing

Sununu signed the compromise budget in Franklin, a community that is scheduled to receive about $1.9 million in additional state aid for education, but the city’s representatives and senator voted against that aid when it was before the legislature and several did not support the compromise.

The only representative to vote in favor of the budget when it passed the House and Senate earlier was Joyce Fulweiler, D-Northfield, while Sen. Harold French, R-Franklin, and Reps. Werner Horn, R-Franklin; Dave Testerman, R-Franklin; Gregory Hill, R-Northfield, and Harold Pearl, R-Loudon, voted against the budget every step of the way until the compromise last week.

The city’s mayor, Tony Giunta, was one of the few municipal officials who backed Sununu’s budget veto.

The delegation from other property poor communities who will benefit from the increased education and revenue sharing funding like Claremont and Berlin were much more supportive of the budget as it made its way through the legislature.

But this is about politics not governing, so it was Franklin where Sununu won handily over Molly Kelly in the 2018 contest and he rewarded his base with the signing ceremony.

Business Taxes

Everyone likes to look at compromises and see who wins and who loses, but compromises mean you get some of what you want, you give up some things you want, and this compromise is no exception.

Sununu went to the mat over business tax rates, saying returning to last year’s rates would hurt businesses and the state’s healthy economy.

He essentially did not have to give on business tax rates but may not see the rates for the business enterprise and profits taxes go down next year as they are scheduled to do.

Instead the rates are contingent on the state’s revenues for this fiscal year. If revenues are over 6 percent of estimates, then the rates will go down as scheduled, but if they are 6 percent less than estimates, then rates return to what they were last calendar year which would increase the rates, according to Sununu, but Democrats say would stabilize them.

The agreement also reduced business tax estimates by $65 million over the biennium compared to the vetoed budget, but increases revenue estimates by $24.8 million, $19 million from the governor’s estimates earlier this year for the interest and dividends, and communications taxes and liquor revenues.

There is a $15 million increase for lottery earnings and $1.2 million from adding two multi-state auditors.

The changes make it more likely the rates will either stay where they are now or go down, rather than up.

All sides claimed there are no tax increases in the compromise budget, but the business tax rates could potentially increase, and there are two other tax increases in the fine print.

There is now a tax on e-cigarettes and other vaping material, which is new. It is under the existing tobacco tax, but some people will be paying taxes who weren’t.

Similarly, people using voice over internet protocol or (VoIP) phone service such as Comcast’s will now pay the communications tax as will those who use prepaid phones or calling cards.

Again, it is added to the communications tax, but in this instance there will be a lot of people paying a new tax.

And then there is the spin on taxes. Sununu took a victory lap claiming he stopped an income tax, when he vetoed the paid family and medical leave program that was the Democrats’ top priority this session, but was eliminated before the Senate passed its version of the budget.

The payroll tax, which would have been paid by either the employer or the employee is like health insurance premiums. For a few fortunate people, employers pay the entire premium, but most people pay a portion.

The start-up funding for the program — $3.5 million —was in the legislature’s budget, but is not in the compromise.

Education Funding

While increased education funding was not a priority for the governor, it certainly was for House members and key Senators with the vetoed budget adding about $138 million in new state aid for education, including targeting a greater percentage to property poor communities struggling to provide their students with educational opportunities.

The compromise does not contain quite as much money as the vetoed budget but does come close, however it makes about $62.5 million a one-time appropriation from the education trust fund surplus that topped $140 million at the end of last fiscal year June 30.

Both the vetoed budget and the compromise return stabilization grants to their original levels before annual 4 percent reductions were instituted beginning in 2016 while state revenues were producing significant surpluses.

The vetoed budget reprieved disparity aid for property poor communities which ended with the last major change in the education funding formula in 2011.

The compromise reduces the disparity aid somewhat but adds more money for school districts with students on the free and reduced lunch program.

But that money is only for the second year of the biennium, meaning if it is to continue, the next legislature will have to determine how to pay for it.

The compromise retains $500,000 for a commission to study the current funding formula, determine the real cost of an adequate education and how best to pay for it.

Sununu proposed several plans to help pay for construction and rehabilitation projects, but lawmakers wanted the additional money to help with operating expense and property tax relief, not capital projects and they won on that point.


The compromise budget contains $127 million in reductions, but that is a little misleading because some of the biggest reductions are actually changes in funding.

The new plan assumes $22 million will come from increases in Medicaid drug rebates from the manufacturers. That allows $22 million in general fund money to be spent elsewhere.

Increasing general fund lapses or how much appropriated money departments are expected to save accounts for $20 million in reductions.

That savings has been obtained due to reduced spending under the continuing resolution, which in some cases is significantly less than this year’s appropriations.

The compromise also calls for the state’s largest agency, Health and Human Services, to lapse an additional $25 million but not in developmentally disabled programs, Medicaid rates or county programs, i.e. nursing homes.

Another reduction is for $29 million by delaying a 3.1 percent increase in Medicaid provider reimbursement rates for six months. The rate increase was to begin July 1 of each fiscal year but will now begin Jan. 1.

The rate increases were a long drawn out battle between the administration and the Senate Finance Committee which wanted the increases across the board while the administration wanted to pick and choose who would receive the increases needed in order to retain workers and service programs many addressing the state’s opioid epidemic.

Planning for, or even construction of a new secure psychiatric unit facility on state hospital grounds has not begun and already the project has been cut from $17.5 million to $8.75 million. While the governor touted an even larger facility to address a number of mental health needs, the House refused to fund any of it because the administration provided few details.

The Senate received a little more information so included the $17.5 million in the budget, but little real planning has been done to date and the reduced figure is probably more realistic for the next 20 months of work.

The compromise also reduces the amount of money going into the rainy day fund by $8.5 million, but on the other hand adds $5 million to the fund from last fiscal year’s surplus.


The compromise also adds $25 million in new spending, $9 million for the nursing program at the University of New Hampshire, touted by the governor but removed by lawmakers.

A new collective bargaining agreement with state workers has yet to be reached, but $6 million in additional spending is included for a new contract, and $3.25 million has been added to replace the state fishing pier in Portsmouth.

Other Changes

The compromise will prohibit spending general fund money on the Medicaid expansion program. Democrats had removed the prohibition in the vetoed budget as well as the state Hyde provision prohibiting spending state money for abortion, which will also remain in place.

The Democrats proposed raising the legal age to purchase tobacco to 21 years old but settled with the governor on 19 with the intent to prohibit high school students from purchasing tobacco products.

Sununu touted a college student debt relief program that lawmakers fine tuned into help for new graduates working in the human tissue regenerative program in Manchester’s Millyard.

The compromise will have a separate bill to address the debt relief program next session.

You win some, you lose some and some are just toss ups.

Garry Rayno may be reached at garry.rayno@yahoo.com

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