N.H. Senate president floats $38M escrow account to help budget shortfall

  • New Hampshire Senate President Chuck Morse speaks to a reporter in the Executive Council chambers at the State House, Wednesday, Jan. 4, 2017, in Concord. AP file

Monitor staff
Published: 4/23/2018 9:21:22 PM

Senate President Chuck Morse has a plan to absorb a nearly $30 million budget shortfall created by a lawsuit over hospital payments. But it could come at the expense of a host of other legislative priorities, potentially putting spending bills in jeopardy, he said Monday.

An amendment sponsored by Morse and set to be introduced Tuesday would take out $38 million from the state’s General Fund and place it into escrow, covering any potentially necessary payments imposed by ongoing lawsuits. The money would be held in escrow until ongoing litigation between the federal government and hospitals – currently proceeding through multiple federal courts – is resolved.

The proposal is intended to protect the state from potential liability. But it also is poised to create a set of new headaches for state legislators, Morse said. As the Legislature nears the end of its 2017 session, the proposed $38 million transfer is likely to eat into other pieces of legislation in coming weeks, Morse said.

This week, Senate leadership is preparing to issue amendments to existing bills to reduce spending and make room for the escrow money, Morse said.

“You don’t take $38 million out of New Hampshire’s budget without it hurting something,” he said.

He declined to comment on which bills could be affected.

The budget crisis comes out of an ongoing dispute over hospital payments. Last year, the Legislature budgeted $166 million for uncompensated care payments to hospitals – $71 million less than what hospitals say they are owed. A March 6 ruling in a subsequent lawsuit in federal district court in Washington, D.C., found in favor of hospitals across the country, putting New Hampshire on the hook. Now, roughly half of the unbudgeted money – anywhere from $29 million to $38 million – could be due to the hospitals, officials say.

That March 6 decision is expected to be appealed to the D.C. Circuit Court by the Trump administration in coming weeks, opening the potential for a reversal. Morse’s amendment would put the money aside for New Hampshire’s obligation “until such litigation reaches a final resolution, which shall include the exhaustion of all potential appeals.” If the courts ultimately rule in the government’s favor, the state could return the money to the general fund.

State officials have been negotiating with New Hampshire’s hospitals for the past month, attempting to reach a compromise that doesn’t rely on the courts. But those negotiations are struggling after the hospitals declined the state’s latest offer, Morse said. He declined to provide further details.

Steve Norton, senior vice president of strategic planning and government relations at Elliot Hospital, confirmed that account, urging the state to keep working toward a compromise.

“The state and the hospitals have come to an impasse,” he said. “And we don’t have much time. And I don’t think it serves anyone’s interest to not come to the table.”

Regardless, Morse is proposing the state put the final outcome into the courts’ hands, setting aside the highest potential amount under New Hampshire’s present uncompensated care law – $38 million. Members of the Senate Finance Committee are set to hold a hearing on the proposal Tuesday afternoon.

It is unclear how the amendment will ultimately affect pending legislation. But Senate Finance Chairman Gary Daniels, R-Milford, said plugging the budget shortfall could potentially make any bill reliant on the state’s General Fund a collateral target.

“Any bill that says that the governor can take from funds not otherwise appropriated is part of the pool that can be hit by the $38 million,” he said. “We don’t know what those are.”

The state is also experiencing a revenue windfall; the state has received around $53 million more in taxes than budgeted as of March, according to the Department of Administrative Services. But some conservative legislators Monday balked at the idea of dipping into new revenues to fix the present budget crisis.

Sen. Dan Feltes, D-Concord, a member of Finance Committee, hailed Tuesday’s hearing as an opportunity to get answers into the negotiation process.

“The Sununu administration owes the public transparency on this, and this will certainly be a hearing with a lot of questions,” he said.

Meanwhile, the problem is hardly limited to this year. Relying on a funding formula from the federal government that the courts recently struck down, New Hampshire budgeted around $70 million less than hospitals were pressing for in both fiscal year 2018 and fiscal year 2019, potentially setting up the state for the same $30-40 million obligation 12 months from now.

One reason the state is digging in its heels over negotiations, Morse said, is to prevent setting any precedent for the payments down the line.

“This is not a one-time thing,” he said. “Once you start down this path, you’re going to be paying for this forever.”

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

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