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Hassan identifies new funds to pay for state budget increases



Last modified: Saturday, February 14, 2015
Gov. Maggie Hassan urged lawmakers to invest in the state’s future through increased spending on education and health care as part of an $11.5 billion budget she presented yesterday.

Hassan’s two-year spending plan also includes money for many smaller initiatives, including $4 million for commuter rail, $2 million for an affordable housing fund, hiring new state troopers and a judge, and creating a new executive position to make government more efficient.

To pay for it all, Hassan came up with several new revenue sources, including a 21-cent raise in the cigarette tax, a 35 percent increase in vehicle registration fees and authorization of the gambling game keno.

Some of those elements came under fire from Republican lawmakers, who said any new fees or taxes will have a tough time getting through the GOP-controlled House and Senate.

Hassan’s two-year budget proposal is a 6.4 percent increase over the current $10.8 billion budget, and increases the state’s general fund spending by roughly 5 percent.

Under her plan, 22 state agencies would not see any increase in their budgets.

Hassan underscored her proposed increases in higher education funding, which she said would allow the community college system to reduce its tuition in the coming years. The Department of Corrections would see a budget increase to help open the new women’s prison. Hassan also plans to increase funding for mental health services, health care for veterans and substance abuse prevention.

A large chunk of spending relates to state lawsuit settlements.

“This budget increases investment in only a few key areas, recognizing that there is more that we would like to do but cannot given the revenue challenges that we face,” Hassan told members of the House and Senate yesterday. “It begins to move us away from governing by crisis and litigation, to stability.”

Her budget address kicks off a monthslong process. Lawmakers must reach a budget agreement by June 30. The two-year budget goes into effect July 1.

It must get through the House and Senate before coming back to her desk for final signature.

“I am concerned about questionable revenue . . . from the cigarette tax and keno,” said Republican Senate Majority Leader Jeb Bradley.

House Speaker Shawn Jasper questioned Hassan’s choice to focus state spending increases in higher education.

“When we look at the priorities and where to put the money given all the challenges we face, that’s probably not at the top of the list,” said Jasper, a Hudson Republican.

Revenue

Hassan’s budget plan is dependent upon increases in the state cigarette tax, money from keno and changes in state tax policies.

New Hampshire’s tobacco tax is the lowest in New England. Hassan proposes raising it by 21 cents and expanding it to cover e-cigarettes and cigars. That would bring in $39.2 million over the two-year budget, according to plan.

“Cigarette taxes have proven to be one of the most effective ways to prevent youth smoking,” Hassan said.

Hassan did not include revenue from a casino in her budget proposal, but she did include $26 million in revenue from keno, which would be overseen by the Lottery Commission and allowed in bars and restaurants.

The budget plan calls for changes in state tax policy that Hassan estimates would generate an additional $55.4 million in revenue over the biennium.

One proposal would close offshore tax loopholes, stopping companies from shielding taxable earnings overseas.

A second proposal would allow the state to audit personal compensation that businesses claim above a certain threshold. That would reverse a change the Legislature passed several years ago and help restore business revenues to what they were, Hassan said.

Hassan’s budget assumes state revenue will grow roughly 2.7 percent in the first budget year, and 2 percent in the next year.

That projection is at odds with revenue estimates produced by the House Ways and Means Committee, which show the state will bring in roughly $4.5 billion over the next two-year budget cycle. Hassan’s estimate puts that number at roughly $4.73 billion, a difference of $229 million.

“From the House’s point of view, (Hassan’s) budget is much larger than is sustainable,” said Republican Rep. Neal Kurk, chairman of the House Finance Committee.

Transportation

Hassan made clear the importance of maintaining the state’s road and bridges, and proposed a 35 percent increase in vehicle registration fees that would go into the state highway fund.

The fee increase would equate to an additional $23 to register every passenger car. Overall, it would bring in roughly $46 million over two years.

Hassan allotted $4 million in the capital budget to study the environmental and engineering implications of bringing a rail to Nashua and Manchester. A recent study showed the cost of that route would come in at $245.6 million, and New Hampshire would cover about $72 million.

Hassan’s plan would increase the Department of Corrections’s budget by roughly $25 million, in large part to cover the costs of opening a new women’s prison in Concord that is set to begin operations in fall 2016.

It would also allow the Fish and Game Department to set its own licensing fees to help close a funding gap.

Education

Hassan touted the benefits of investing in education and focused much of the state’s new spending in that area.

“This budget takes steps to ensure that we are providing our students with a rigorous public education at every step of the way,” Hassan said.

Under her proposal, the state’s community colleges would see an increase of $6.5 million over the two-year budget and allow them to decrease tuition.

The budget recommends the University System of New Hampshire get $181 million in funding over the next two-year period, less than the $205 million the university system had requested, and said was necessary to maintain a tuition freeze.

Charter schools would see an additional $19 million over the biennium to account for enrollment growth.

Hassan’s plan would make changes to education funding by raising a cap on the state money each district can get annually. To pay for that, Hassan would reduce state grant funding to schools that have fewer students on free and reduced lunch.

The budget does not include funding for full-day kindergarten or new school building aid projects. It would, however, fund a study to look at the facilities needed for schools to offer full-day kindergarten.

Heath care

Hassan focused many of her other policy goals on the health care arena.

She included $12 million in her budget plan to fund Medicaid expansion past 2016, when federal funding is set to decrease and the Legislature must vote on whether to reauthorize the program. About 34,000 New Hampshire residents have signed up for the state’s Medicaid expansion program, which covers people whose incomes fall within 138 percent of the federal poverty level.

“Allowing expansion to sunset would cause significant harm to the health and financial security of the thousands of men and women receiving coverage,” Hassan said. Republicans in the House have said they don’t plan to reauthorize Medicaid expansion when it comes up for a vote before 2016.

Health care makes up more than half of the growth in general fund spending in Hassan’s plan. The biggest chunk comes from lawsuits.

About $70 million will help cover the state’s settlement with New Hampshire hospitals over the Medicaid Enhancement Tax, which the state used for a time to boost the general fund.

A separate settlement, which the state reached recently over inadequate mental health services, will cost the state roughly $24 million over the biennium.

Hassan’s plan would fund a new mental health crisis unit at New Hampshire Hospital in Concord, add 25 more beds at the New Hampshire Veterans Home in Tilton and triple the funding for the governor’s Commission on Alcohol and Drug Abuse Prevention, Treatment and Recovery.

Drug overdose deaths in New Hampshire hit a record high last year of at least 284, the Telegraph of Nashua reported. That’s up from 193 deaths from drug overdoses in 2013.

Innovation

Hassan focused heavily on finding efficiencies in state government. She proposed hiring a new position to oversee operating performance and merging together several state boards and commissions.

The plan to hire a chief operating officer is based on a recommendation from a commission that Hassan convened in 2013 to come up with ways to make New Hampshire’s government more efficient, effective and transparent. Drawing from that report, she is also pitching the creation of a $1 million fund to pay for efficiency projects in state government.

She hopes to consolidate the Racing and Charitable Gaming Commission into the Lottery Commission and to merge the state’s 27 boards – from health care licensing to real estate – into one central office.

Those efficiency proposals, aimed at saving taxpayer dollars, earned the most praise from Republican lawmakers. Most of Hassan’s proposals still require legislative action.

Sen. Jeanie Forrester, who heads the Senate Finance Committee, said she is pleased the governor didn’t raid any of the state’s dedicated funds to balance the budget. But Forrester said she expected a larger focus on managing the state’s energy costs. “That is a big driver of not getting businesses to come here,” she said.

The plan now goes to the House Finance Committee, which will make revisions before the House votes on the plan. It will then go the Senate.



(Allie Morris can be reached at 369-3307 or amorris@cmonitor.com.)