By GARRY RAYNO, InDepthNH.org

CONCORD — The House and Senate budget writers Thursday signed off on a $13 billion two-year operating budget that eliminated most of Gov. Chris Sununu’s objections but not all.

The House and Senate are expected to approve the compromise agreement June 27, and then wait to see if the governor vetoes or signs it, or lets it become law without his signature.

Negotiators removed two of Sununu’s biggest objections Wednesday, a mandatory paid family and medical leave plan and a capital gains tax from the two-year budget, but not a freeze on business tax rates the governor opposes.

Budget writers left $3.5 million in the budget for start-up money for the paid leave program if lawmakers can find a way forward in the next two fiscal years.

The budget spends $5.5 billion in state general funds, which is approximately $500 million more than the budget proposed by Sununu.

Sununu criticized the budget plan saying Democrats turned a surplus into a deficit.

“Today in New Hampshire there is a $260 million surplus and the Democrats have put forward a budget that contains a nearly $100 million deficit,” said Sununu. “This is irresponsible, and the people of New Hampshire will never support that approach.”

The Democratically controlled legislature’s budget uses a projected $158 million surplus to offset spending that is more than state revenue raised during the two years of the biennium to end with a $20 million surplus.

Democrats said the two-year budget responsibly addresses the critical needs of the state: the opioid epidemic, protecting children, the mental health system, education funding and additional property tax relief.

“This budget does more things for people than any budget I have seen in a long time,” said Senate Finance Committee Chair Lou D’Allesandro, D-Manchester.  “As we move forward in public life, our job is to make the lives of people better and that is what we tried to do in this budget.”

Senate Majority Leader Dan Feltes, D-Concord, called the budget “the crisis resolution and property tax relief act.”

He noted no budget conference committee member got everything he or she wanted, and hopes the governor recognizes that.

Letting the business tax rate cuts go forward would reduce revenues by $90 million with over two-thirds of those benefits going to out-of-state corporations, he said.

“Two-hundred-fifty million dollars in property tax relief versus $30 million under the governor,” Feltes said. “(Our budget) benefits property taxpayers, small businesses, working families, communities and the economy.”

House Finance Committee Chair Mary Jane Wallner, D-Concord, said the budget addresses the state’s long underfunded critical needs instead of prioritizing handouts to a small group of out-of-state businesses.

She said the budget deserves the support of the House, the Senate and the governor.

But Republicans say the budget spends beyond its means and will bankrupt the state by using surplus money to increase program spending that will require a continued investment for years to come.

Senate Majority Leader Chuck Morse, R-Salem, said he will support Sununu’s budget veto.

“The budget being proposed increases business taxes threatening an economy with the second lowest unemployment rate in the nation and the highest per capita income,” Morse said in a statement. “The spending decisions in other parts of the budget make the increase in education funding unsustainable and will only lead to an income tax or capital gains tax.”

House Minority Leader Dick Hinch, R-Merrimack, said the budget will have implications in the future.

“This budget is built on inflated revenues that will lead us into structural deficits in the short term,” Hinch maintains. “It spends on-time money on the growth of government, which will hurt us now and in future budgets.”

The budget includes $136 million new state aid for education, much of it for property poor communities, $40 million in municipal revenue sharing, $60 million for rate increases for Medicaid providers, and $17.5 million for a new 25-bed, secure psychiatric unit.

The budget includes money to move children out of the New Hampshire Hospital into a facility in Hampstead, and renovates the space to provide 32 to 48 new adult beds that would help alleviate mental health patients waiting in hospital emergency rooms for rooms to open at the New Hampshire Hospital and provide room for community mental health patients. 

The major area of concern for the governor and fellow Republicans is business tax rates.

Business Taxes

The budget depends on $90 million in revenue raised by freezing business tax rates at the 2018 rate instead of reducing the rates as required by a law passed two years ago as part of that budget plan.

Sununu says he cannot support tax increases which he calls the freeze but said Wednesday he could live with freezing the rates in the second year of the biennium.

The budget also contains business tax reforms to bring them in line with surrounding states and the recent federal tax cut. The changes will result in increased revenues, but through increased taxes on out-of-state businesses while decreasing in-state businesses’ liabilities.

Many of the changes do not occur until the next biennium.

The reforms stalled deliberations as the House was uncomfortable with Rep. Patricia Lovejoy, D-Stratham, saying significant changes in tax policy done in the budget have not worked well in the past, citing the LLC, campground and gambling taxes.

“There was a lot of adverse impact and we had to do away with those,” she said.

Education Funding

The $138 million for additional education aid to school districts is between the $160 million in the House budget paid for largely by a new capital gains tax dropped from the budget, and the slightly less than $100 million approved by the House.

The additional money will be distributed in the second year of the biennium by reestablishing disparity aid to help property poor communities with a higher percentage of residents in poverty.

Both the Senate and House restored stabilization grants to their original levels after three years of 4 percent cuts that sent some districts into crisis, and a commission to determine the cost of an adequate education and how best to distribute state aid.

Under the approved agreement, Berlin would receive about $4.2 million in additional state aid; Claremont, $5.6 million; Derry, $7 million; Manchester, $15 million; Newport, $2.7 million; Pittsfield, $1.8 million; Rochester, $8 million, and Franklin, $1.4 million.

Other Elements

Lawmakers put additional money into child protection services, children’s health services, rate increases for substance abuse treatment and recovery service providers and housing for those they help, and a new scholarship program to help attract recent college graduates to the new regenerative tissue program in Manchester’s Millyard.

Under the agreement, the University System of New Hampshire would receive $173.5 million in state funding, and the Community College System of New Hampshire $109 million. Both are higher than the governor proposed.

The budget adds 10 new designated receiving facility beds that would serve a statewide need to go along with the 44 beds currently in existence, all in southern New Hampshire, creates a $2 million program to help low-income seniors with the “donut hole” when Medicaid Part D drug benefits no longer cover prescription costs, and begins an adult dental benefit under the Medicaid program.

The House and Senate vote on the compromise budget package June 27 but cannot change it from what was approved Thursday.

Sununu will have to decide what he will do with the two-year budget.

A veto override would require a two-thirds vote of both houses, but Democrats do not have enough members to override a veto on their own.

The conference committee on the budget began on Monday and finished early Wednesday afternoon.

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