Biggest issues facing budget

Monitor staff
Published: 6/15/2019 8:18:05 PM

Midway through Wednesday, Republican and Democratic leaders were wearing brave faces. Gov. Chris Sununu had just delivered an animated press conference on areas of common ground in the budget, and Senate President Donna Soucy and House Speaker Steve Shurtleff were cheery.

But major differences remain in the weeks ahead. As House and Senate negotiators prepare to meet Monday for a four-day reconciliation process, here are the five biggest questions left to resolve.

What happens to the secure psychiatric hospital?

From the moment Sununu announced his support for a forensic hospital in February, the idea seemed to take on bipartisan wings. The proposed facility was intended to help house the state’s involuntarily committed mental health patients, currently held in the men’s prison. And it dovetailed with broader efforts in last year’s 10-year mental health plan to expand the number of mental health beds.

But over the months, a trio of crises – involuntarily committed patients in the prison; a backlog of patients stuck in emergency departments; and a general lack of outpatient and transitional mental health beds – has prompted widely different approaches amid the three negotiating parties.

Governor’s position: Sununu proposed a 60-bed psychiatric hospital that he said would help absorb the two dozen or so involuntarily committed in the Secure Psychiatric Unit. He also proposed expanding designated receiving facility beds – 10-day intake beds for mental health patient – and transitional beds for those discharged. But his budget didn’t include any money for operational costs for the hospital, pushing that funding off to the next biennium.

House position: The House scrapped the psychiatric hospital plan, arguing they needed more details. Instead, they proposed moving the 25 children in N.H. Hospital, and increasing DRF beds to 30 as well as transitional beds.

Senate position: The Senate sought to find a middle ground, proposing a 24-bed secure psychiatric hospital to specifically take in the SPU involuntary population. The Senate plan would also move the children out of New Hampshire Hospital and outfit that hospital to carry more acute care beds, freeing up to 80 beds that could then be used to alleviate the emergency department backlog. But the Senate would include far fewer DRF beds, targeting them specifically to hospitals in the western area of the state like Cheshire County, which have low access to psychiatric care.

What they’re saying: Sununu has pushed for a 36-bed facility as a middle ground between the Senate Democrats’ 24 and his original 60, which he argued would “provide the real flexibility that the system needs.” Democrats are wary of making that hospital too big, citing operational costs and argung the beds can be found elsewhere. But on this topic, the negotiating parties seem close enough to agreement.

Who wins out on education funding?

Perhaps no issue divides the three negotiating parties more than how to address deep-set funding inequities for New Hampshire’s schools.

With a Superior Court judge in Cheshire County ruling two weeks ago that New Hampshire’s education funding formula is unconstitutional and that strides have not been sufficiently made since the Claremont Supreme Court decision 20 years ago, the stakes are high.

Governor’s position: Sununu did not propose a change to the education funding formula in his budget, nor did he propose changing stabilization grants for property-poor schools, which have been declining every year. Instead, he proposed almost $64 million in building aid to those property-poor schools, which he said would be a more responsible use of one-time funds.

House position: The House took the most expansive approach of all chambers on education funding: an increase in the per pupil base adequacy grants for all students and a generous supplement to that based on property valuations called “fiscal capacity disparity aid.” Fueling that plan was a controversial mechanism: a 5% capital gains tax targeted to upper-income Granite Staters.

Senate position: The Senate abandoned the capital gains tax and instead used an expected $50 million revenue through changes to the business tax code to help fund something of a middle ground: a full restoration of stabilization grants and a modest supplement via fiscal capacity disparity aid.

What they’re saying: This one will be hard to resolve. Sununu says the funding formula should not be changed, particularly given the pending lawsuit. Democrats strongly disagree.

One thing that’s not likely on the table: the capital gains tax. House Democrats had relied on that approach to bring in more revenue, but to D’Allesandro – and Sununu – it’s a nonstarter.

“In the second year, they want to give (the schools) $130 million more,” the senator said of his House counterparts. “That’s a wonderful gesture, but it’s not sustainable without a tax. We’re not going to have another tax.”

Does the Legislature accept Sununu’s rate increase proposal?

Nearly as fundamental to the Senate budget approach as education is health care funding. New Hampshire health care providers have been struggling with low Medicaid payouts for years; the state has some of the lowest in the country.

Senate Democrats say the rates should be increased across the board, which requires a state investment to get a federal match. Not all agree.

Governor’s position: The governor did not include rate increases in his budget, arguing that they should be set through the contracting process with the state’s three managed care companies, which will take over the Medicaid program in September.

House position: The House did not include rate increases either, choosing instead to prioritize education funding. Part of that, some Democrats have said, was to await the Senate’s moves.

Senate position: Sen. Cindy Rosenwald championed legislation, Senate Bill 308, to dramatically increase rates by 12% over two years, at a cost of over $100 million in state dollars. By the time the budget was passed, that proposed rate dropped to 6% and around $60 million.

What they’re saying: By now, all sides have agreed that rates should be increased. But a last-minute proposal from Sununu and Department of Health and Human Services Commissioner Jeffrey Meyers has thrown a wrinkle into hope of compromise. Sununu wants the Senate’s appropriation cut in half – to $30 million.

And he wants to give DHHS the authority to determine where the money goes, rather than increasing rates by the same percentage across the board. Democrats, meanwhile, say that goes against providers’ wishes and could encourage favoritism.

Do Democrats give up paid family leave?

It’s been debated ad nauseam, through a gubernatorial race, two legislative sessions, and now a budget negotiation. But Democrats’ determination to get a mandatory paid family and medical leave program across the finish line has long clashed with Sununu’s objections to a mandate on employers, and the fight doesn’t look any closer to resolution than before.

Governor’s position: The governor wants a paid family leave program to be done through a voluntary model in which the state contracts with private insurers and employees and businesses can opt in. To bolster the market, he would court state employees through their contract.

House and Senate position: House and Senate lawmakers want a mandatory program that requires businesses to adopt a program, whether by providing the program themselves or by buying into a state plan via a third party insurer. To “buy in,” employers could either pay the premiums themselves or deduct them from employees wages; the latter has invited charges of a de facto “income tax.”

What they’re saying: On this, the governor is intractable. Allowing for employers to choose to deduct premiums from wages only means one thing: “Our program doesn’t have an income tax; their program came with an income tax,” he said Wednesday.

Sununu has also indicated he is comfortable vetoing a budget over the paid family leave plan. The only question is whether Democrats are willing to give it up as a concession.

Sen. Lou D’Allesandro gave a slight hint Thursday. “I think it’s a negotiable item,” he said.

What about the taxes?

And then there’s the taxes. Under a Republican Legislature in 2017, Sununu set in motion cuts to the two main business taxes by 2021: lowering the business profits tax from 8.2% to 7.5% and the business enterprise tax from 0.72% to 0.5%.

Whether those cuts continue is a major point of contention.

Governor’s position: Sununu wants to allow the scheduled tax reductions to continue.

House and Senate position: The House and Senate both passed budgets that would raise this year’s BPT rate from the currently scheduled 7.7% to 7.9% and keep it there moving forward – and do the same to the BET.

What they’re saying: It’s hard to see compromise here. Both D’Allesandro and Sununu have taken a clear position.

“We’re giving him legitimate tax reform, and I think that’s a wonderful benefit that he wants and business wants,” D’Allesandro said. “I hope that he will at least think about just stabilizing the taxes.”

Sununu was even more adamant. “We’ve been really clear about certain lines that not only will we not cross, but we just don’t need to cross,” he said Wednesday, adding that the budget had hundreds  of millions of dollars of surplus without stopping the tax cuts.

“To tell the people of   this state that we have to ra ise their taxes is just irresponsible,” he added.

For all the optimism, it’s that divide that could spell out a budget-less July.

(Ethan DeWitt can be reached at edewitt@cmonitor.com, at (603) 369-3307, or on Twitter at @edewittNH.)




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