Democratic Senate and House leaders have reached a budget agreement with Gov. Chris Sununu, capping three months of partisan jockeying and weeks of intensive meetings, officials announced Tuesday.
With hours to spare ahead of a session of the full House and Senate on Wednesday, top officials released a blueprint of a budget agreement they say they’ll bring before lawmakers tomorrow.
Negotiators on both sides claimed victory.
“We can all be proud of the compromise reached today on a balanced budget that moves New Hampshire forward,” said House Speaker Steve Shurtleff.
The proposed budget would keep the current business profits tax rate at 7.7% through the 2020 calendar year – a concession from Democrats who wanted to return it to 7.9%. But it establishes a trigger system by which that rate might rise and fall.
And it imposes a series of spending reductions on state agencies to bring the budget in line with the Republican governor’s concerns.
The agreement comes after Gov. Sununu vetoed an earlier version of the budget in June – which Democrats had loaded with school funding increases, hikes to Medicaid rates and town revenue sharing. Sununu vetoed those two bills in protest of the Democrats’ proposed reversal of a series of business tax cuts, and on spending levels.
And it slides in just ahead of an unforgiving deadline: Under a spending agreement reached in June, the Legislature gave three months of short term funding to keep state agencies running – funding that will run out at the end of this month.
Under the proposal – released at 5 p.m. Tuesday after a day of last minute tweaking – Democrats secured some key priorities. They locked in a 3.1% increase to the state’s Medicaid reimbursement rate, starting in 2020, as well as $40 million in revenue sharing that sends money to cities and towns in an attempt to lower property taxes.
But they also conceded some territory on educational funding. Rather than their preferred infusion of ongoing funding to a new per-student funding formula to schools, Democrats allowed $62.5 million to go towards one-time funds – a priority for Sununu who has railed against ongoing spending commitments.
And to get to those spending levels, negotiators on all sides had to get creative with reductions from their earlier plans. Under the proposal, $29 million would come from a delay in Medicaid provider rate increases; $20 million from the additional savings from the three-month temporary spending agreement; and $25 million out of clawbacks from the Department of Health and Human Services, for example.
Meanwhile, the parties were able to string together a compromise on business taxes – using a tried and true tactic.
The business profits tax would stay at 7.7% through 2021 if revenue projections from the Department of Revenue Administration stay the same for 2020.
That’s a concession for both parties. Democrats had wanted to reverse the rate back to 7.9%; Sununu had wanted to lower it down to 7.5% in 2021, as currently.
But the proposal would include a trigger. If tax revenues exceed expectations in 2020 by 6% – a good year – the tax rate for busineses would drop to 7.5%: the governor’s preferred approach. If the state were to have a bad year for business tax payments, and revenues were 6% lower than planned, the business profits tax rate would default
The business enterprise tax – a separate rate – would follow the same structure.
Overall, the arrangement in the compromise budget pulls in $80 million less in revenue than the one passed by Democrats in June, according to figures released Tuesday.
The structure is reminiscent of a revenue trigger passed by the Legislature in 2015 during a similar impasse with Gov. Maggie Hassan. That trigger was met, allowing the tax cut to proceed.
Now, with weeks of sporadic talks and a late night session Monday in the past, Senate and House leaders – and Sununu himself – will have to work to convince backbenchers in both chambers to take up the bill. Both sides insisted the deal was the best they could secure.
“The people of New Hampshire won today,” Sununu said in a statement. “This compromise budget does not increase taxes and ensures financial promises can be kept to the people of New Hampshire.”
“This budget maintains vital investments that the Democratic legislature made in mental health, substance use disorder treatment, and child protection and ensures meaningful raises for providers who deliver critical care to our loved ones by implementing long overdue Medicaid reimbursement rate increases,” Senate President Donna Soucy, a Manchester Democrat, said in her own statement.
Lawmakers in the House will meet at 1 p.m. Wednesday to take up the proposed bills, House Bill 3 and House Bill 4, in a special session. But first, they will need to suspend the rules to take up the bills at all.
That will require a two thirds vote – a threshold Democrats will not be able to meet on their own.