Senate, House Democrats present budget ‘compromise’ without backing of governor

  • Republican Gov. Chris Sununu points to a poster featuring highlights from his proposed budget on Wednesday, June 12, 2009, in Concord, N.H. As lawmakers get ready to reconcile competing House and Senate versions of the budget, Sununu outlined areas where he believes all sides can find common ground. (AP Photo/Holly Ramer) Holly Ramer

Monitor staff
Published: 9/17/2019 6:18:47 PM

After months of loggerheads with Gov. Chris Sununu over the state’s budget, Democrats say they are bringing forward a compromise to the Legislature with targeted reductions in spending. 

But the proposal does not have the backing of the state’s Republican governor, who called it “not sustainable,” raising questions as to its success this week.

In an announcement Tuesday, top Democratic lawmakers said they have prepared two new budget bills – House Bill 3 and House Bill 4 – to be introduced Thursday. 

Those budget bills, which have not been made public, include a range of cuts to the previous Democratic budget in an attempt to appease Sununu’s long-running spending concerns, according to spokespeople for the House and Senate. 

This week’s two-day session was intended for lawmakers to hold votes on whether to override Sununu’s vetoes. But the Democratically-controlled Legislature is also facing a deadline: A three-month, stop-gap funding measure signed in late June will expire at the end of the month.

Top Democrats and the governor have been meeting sporadically throughout the summer to try to hammer out a budget agreement without success: Democrats continued to press for increases to health care and education funding, and Sununu insisted on the inclusion of scheduled cuts to state business taxes. 

Now, Democrats are hoping to bring forward a budget proposal that includes reductions in some spending and a “trigger” that sets a revenue target to allow business tax cuts to continue.

Range of cuts

Under the proposal, Democratic budget writers have sought to find savings from an eclectic range of sources. They would push back planned increases to Medicaid reimbursement rates to January, which would shave $20 million off a $60 million expenditure. 

The proposals would cut $25 million in appropriations to the Department of Health and Human Services, after the Department sent back to the Legislature more than $90 million in unused funds this year. They would eliminate a $1 million “Sunny Day Fund,” find $22 million in drug rebate revenue from Medicaid, and an additional $20 million in across-the-state savings from the last three months of stop-gap funding.

And they would institute a familiar mechanism to New Hampshire: the tax trigger. Most recently used during a 2015 budget deadlock under Democratic Gov. Maggie Hassan, the measure allows for certain business tax cuts to continue as long as they bring in a target amount of revenue.

In this year’s case, a previous Legislature has put into motion two reductions to the business profits tax rate: a drop from 7.9% to 7.7% that took effect this January, and a future drop to 7.5% scheduled for 2021. Sununu has insisted that a compromise budget include a rate freeze at 7.7%; Democrats have remained adamant in rolling the rate back to 7.9%.

The Democratic proposal being pushed before lawmakers this week would allow the business rate to stay at 7.7% only for the rest of the 2019 calendar year. At that point, if the state hauls in $2.725 billion by that point in the fiscal year, the 7.7% rate would continue; if the level is not cleared, the rate would jump back to 7.9%. 

The same arrangement would apply to the Business Enterprise Tax rate, which would only stay at 0.65% if the target is met; if not, it would jump up to 0.675%.

Recent projections from the Department of Revenue Administration indicate that the tax revenue would likely not clear that hurdle. 

Political headwinds

Overall, the Democrats’ gambit faces challenges. To get the bills considered on the House floor, lawmakers will need a two-thirds approval to suspend the rules, which will require Republican support. 

In a statement, House Finance Chairwoman Mary Jane Wallner, a Concord Democrat, called the proposal a compromise, painting it as “the only fiscally responsible course of action to take.” She added that it included “further reductions in spending” meant to “accommodate Governor Sununu’s concerns.”

“For the good of the state, we hope our Republican colleagues allow this budget compromise to come to the floor for thorough and thoughtful consideration,” Wallner said. 

But Sununu rejected the proposal, arguing in a statement shortly after its announcement that it did not do enough to meet his needs – particularly around business taxes. 

“I remain committed to working with Legislative leaders to get a budget done that represents the best interest of New Hampshire,” Sununu said. “Unfortunately, this budget proposal is not sustainable and raises taxes when we already have a $200 million surplus. As I’ve continuously stated since June, this is nothing that I, nor the people of New Hampshire would ever support.”

State House Republicans were less diplomatic, calling the proposal a “grandstanding” move that effectively put to an end any future discussions between sides. 

“This political stunt completely undercuts the good faith negotiations and is only intended to embarrass Governor Sununu who has tried all summer to reach bipartisan agreement,” said Senate minority leader Chuck Morse, of Salem.

The proposal could add political fire to the next two days of veto override votes – already anticipated to show sharp partisan divisions. And it increases pressure on lawmakers; if the House rejects the attempt to suspend the rules on Thursday, lawmakers may be stuck with pressing for another extension of the temporary funding deadline. 

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