Capital Beat: When it comes to a budget fix, lawmakers take their time

Monitor staff
Published: 7/6/2019 10:30:37 PM

For weeks, the State House offices roared with life.
Budget writers crammed in back-to-back negotiations; legislative employees rushed out copies of amendments and spending spreadsheets; backbencher lawmakers gave fervent floor speeches on fiscal responsibility and vital investment.

Then came the veto of the budget by Gov. Chris Sununu, a burst of pre-written press releases from both sides, and – suddenly – silence. New Hampshire is now nine days into the 2020 fiscal year without a new budget and the wick has been lit on a three-month fuse – an agreement to keep departments temporarily funded. But you wouldn’t know it from the State House’s quiet halls.

Most lawmakers have not returned since the budget vote last month, their offices and hearing rooms dark. House Speaker Steve Shurtleff has been on vacation in Greece this week; others are consumed with trips, Fourth of July family time, or their jobs outside the Legislature.

The most eventful disruption this week came in the form of a chicken that got loose in the State House.

Negotiations, meanwhile, have not returned to roost.

“It seems like it’s a little early to really get together,” Rep. Mary Jane Wallner, the Concord Democrat who heads the 20-member House Finance Committee, said at an event on Tuesday. “I think next week, we’ll probably see a difference.”

It isn’t that state leaders aren’t aware of the implications of putting the breaks on $13 billion in spending initiatives – the majority of it bipartisan. In past days, leaders have made the rounds to underscore the effects, from a stop by Democrats at a reproductive health clinic to digital fundraising pitches from Gov. Sununu’s re-election campaign centered on the budget, and those are likely to continue.

But when it comes to heading back to the drawing board to strike a compromise, many appear content to take a breather.

“I think in all these kinds of negotiations sometimes you need to have a little bit of time to kind of think things through, talk to the people that you’re working with and kind of make a path forward,” Wallner added.

One potential reason: When it comes to the remaining sticking points, there isn’t much they agree on. On taxes, paid family leave, spending levels and health care reimbursement rates, plenty of daylight remains.

And another wrinkle: The veto puts everything back on the negotiating table – including what might have previously been conceded.

“When you veto a budget, you veto the entire state budget,” said Sen. Dan Feltes, the Democratic Senate Majority Leader, somewhat ominously. “And the entire state budget gets reopened.”

Three-month holding pattern

If lawmakers have been slow to spring to compromise, that’s partly by design. When lawmakers passed the budget June 27 on partisan lines, they also passed a backup: a continuing resolution through to Oct. 1. That resolution set up a three-month period in which departments would continue to receive funding at the rates set in last year’s appropriations – pro-rated to the three out of twelve months.

The resolution means no new hires, no new programs, and no major overhauls from department heads. But it does allow them to coast forward until lawmakers and the governor eke out a compromise.

It’s a common tactic in Congress and statehouses across the country. Less common? Passing the backup measure before the budget is actually vetoed or negotiations stall. By doing that, New Hampshire lawmakers took the risk of a shut down out of Sununu’s hands, lowering the stakes for an eventual veto. And they bought three months for themselves.

Well, in theory. While the continuing resolution extends through September, some have already raised the prospect that three-twelfths of last year’s budget may not neatly meet the needs of every department for three months. And there are other natural deadlines – any additional school funding would need to be in place by mid-September at the absolute latest to adequately affect the school year, for instance.

Based on the issues that separate lawmakers, they may need every day.

Spate of obstacles

To hear Feltes tell it, the Legislature and governor were as close as ever to reaching an agreement before Sununu carried out the veto. House Democrats had abandoned hopes for a capital gains tax to help fund education, Senate Democrats had backed down on a paid family leave program, and the governor only needed to step away from previously-passed business tax cuts to get to “yes,” Feltes said.

“At the eleventh hour, assuming that the governor would give up his top priority, because we all gave up our top priorities, the governor said ‘no’...” Feltes said. That, he said, came as a surprise.

But others say the divide was too broad to cross.

In his veto message, Sununu pointed to two triggers to his decision: the business tax cuts and the use of $90 million in surplus funds toward ongoing expenses, which Sununu and others have called a structural deficit.

To Sen. Chuck Morse, the gulfs between the sides are much more comprehensive than business tax cut disagreements alone.

Democrats have vehemently rejected the “structural deficit” charge, arguing that the ongoing expenses cited by Republicans are more than balanced out by one-off spending initiatives elsewhere in the budget, which they say will still lead to a surplus for the next biennium. But however the accounting breaks down, the dispute seems intractable, and combined with the business tax cuts the hangup represents about a $180 million difference between what Democrats and Republicans find acceptable.

Meanwhile, there are bigger challenges. Feltes and other Democrats say they’re ready to use the opportunity to bring back options that might have appeared defeated. One of those could include a mandatory paid family leave program, a Democratic darling sacrificed at the last possible moment during final negotiations last month.

“Everything’s on the table, including paid family leave,” Feltes said Tuesday.

A way forward

This is hardly New Hampshire’s first year with divided control of government – and it’s hardly the first budget veto either. But how this one gets resolved is a question of what each party fundamentally wants.

In an interview with New Hampshire Public Radio last week, Sununu indicated that his qualms are chiefly structural: He cares less, he said, about where the spending itself goes than on whether the tax cuts move ahead and the surplus revenue stays separate from the ongoing expenditures.

But with talk of opening the wounds of prior policy battles, Feltes may be opting to gambling for a bigger prize. Morse, for one, says he welcomes that challenge.

“I look forward to debating Dan in public,” Morse said. “If he wants a dramatic change in New Hampshire, by putting in a capital gains and an income tax,” there should be a debate, he said.

When it comes to budget negotiations, there’s more than one way to pluck a chicken. In 2015, Gov. Maggie Hassan vetoed the budget and former Speaker Shawn Jasper and then-Senate President Morse navigated to a resolution. But that standoff ultimately led to Republicans courting Democrats for a veto override.

This time, he said, that wasn’t as easy an option. The money will eventually run out for departments, necessitating some kind of action. But Morse made a darker prediction.

“We’ll be coming back to another continuing resolution, because you’re not going to get a veto override on this budget,” he said.

Either way, Wallner argued the damage through a continuing resolution – whether three months or longer – is already taking a toll.

“I’m really concerned about what’s going to happen,” she said. “It’s services to health care providers but also education, all the social services, mental health. For three months it doesn’t sound like much, but it can have a huge impact.”

Mitigating that is up to the lawmakers.

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