Pay hikes, school funding, licensing reform highlight Sununu budget address

By ANNMARIE TIMMINS and ETHAN DeWITT

New Hampshire Bulletin

Published: 02-16-2023 6:47 PM

Gov. Chris Sununu has big plans for the state’s $330 million surplus and what he predicts will be ongoing strong tax revenue. 

He gave lawmakers a budget Tuesday that would give schools an additional $200 million a year and state employees a 10 percent raise, and put another $75 million into housing. He wants to put $50 million into the men’s prison and save $180 million for the rainy day fund. 

Sununu said he’d not only keep taxes and fees flat but also eliminate the state’s 7 percent communication tax on phone calls. His proposed budget is $14.9 billion, a 12 percent increase over the previous budget.

“Government is not here to guarantee a solution to your problems, but it is here to pave a pathway of opportunity, pathways for economic growth, pathways for educational opportunity, pathways for lower taxes, and pathways for more personal freedoms,” Sununu told lawmakers. 

We asked a half-dozen policy and budget experts to listen to Sununu’s budget address, the first step in what will be months of negotiations with the House and Senate, and share their takeaways. Here’s what they told us.

Mental health care

The state’s 10 community mental health centers, which rely heavily on Medicaid to treat thousands of low-income Granite Staters, didn’t get the 21.5 to 23 percent hike in Medicaid reimbursement rates they said is needed to fill nearly 340 clinical vacancies.

Sununu proposed a 3.1 percent increase for each of the next two years for all health care providers, such as hospitals, medical offices, and mental health centers. He said the $36 million investment is aimed at recruiting and retaining workers. 

The centers alone estimated they needed increases equaling $30 million to fill their vacancies and keep them filled. Still, Jim Monahan, president of the Dupont Group, which represents the nonprofit mental health centers, was optimistic Tuesday, in part because Sununu included the rate boost in his proposed budget. A similar increase in the last budget came as a late addition via a Senate bill. 

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Monahan hopes the Legislature will be open to increasing the rate even higher in its budget. 

“From the community mental health centers’ perspective, we’re really glad it’s part of the opening conversation,” Monahan said. “I feel like we are on the field and we’re advancing toward the goal line.”

A big, no-cost idea

Sununu wrapped up his address with what he jokingly called a “controversial” idea that has, in fact, been controversial: letting professionals practice here with an out-of-state license.

The state has more than 50 regulatory boards and requires licenses for dozens of professions, from hairdressers and medical providers to foresters and people who evaluate septic systems. Obtaining a license here often requires hundreds of hours of training, even if the person went through a similar process to be licensed in another state. 

“If you have a substantially similar license and you’re in good standing in another state, there’s no reason you should not have a license on day one in New Hampshire,” Sununu said. 

The governor proposed eliminating 14 boards, 34 licenses, and more than 700 licensing-related laws with a goal of encouraging more professionals to move to New Hampshire. Sununu acknowledged it will be a challenge, saying other efforts have faced a fight from in-state license holders concerned about competition.

“This state doesn’t license the contractor who frames your house, but for some reason we license the guy who is going to put a rose bush out front,” Sununu said. “Think about that. Not any more.”

Sununu did not include child care licensing – or the statewide child care workforce shortage – in his remarks. That license is handled by the Department of Health and Human Services and has been cited as overly burdensome and a barrier to expanding the child care field. 

Rep. Ross Berry, a Manchester Republican, chairs a new special committee on child care and runs his own child care center. 

“Hopefully when the governor speaks about cutting unnecessary regulations and costs on small businesses he will include child care centers so we can increase access to affordable, safe, and quality child care for New Hampshire’s working families,” Berry said in an email.

The big picture

When it comes to the economy, Sununu’s budget proposal rejects predictions of a coming recession. It paints a picture of stability and balances spending, saving, and tax cuts, analysts said. 

The budget assumes the last two years of higher-than-expected business, real estate, and rooms and meals tax revenue will continue at about the same levels.  

“In the aggregate, the economic picture these revenue estimates suggest is potentially a fairly static one,” said Phil Sletten, research director at the New Hampshire Fiscal Policy Institute. “A relatively limited revenue change presumably arising from an assumption of limited economic growth, but not clear signs of expecting a recession.”

That’s relatively good news for state budget writers, given the $330 million in surplus revenue the state is expected to have by the time the next budget takes effect in July. And it could be fueling the effort by Sununu to push for long-term funding items. 

While this budget continues the tradition of using millions in state surplus for one-time investments, such as housing, civics curriculum, and veteran services, Drew Cline, president of the Josiah Bartlett Center for Public Policy and chairman of the State Board of Education, noted Sununu is proposing significant ongoing increases in state spending. 

That includes the $100 million for state worker pay raises.

“That increases your baseline budget and legislators have to find money to fund that every year going forward,” he said. “So it’s just something to be aware of. The employee pay raises are a really interesting one. I think you can make a really strong case that there are a lot of positions that have pay rates that are well below market rates, so far below the market rate that even with the state benefits that you get, the generous benefits, it’s hard to recruit people.”

But he questioned whether an across-the-board raise is the right approach. “There are lots of positions that need to have their pay increased. But is it … every position and … every position at 10 percent? Maybe not.”

Cline said he would have liked to have seen Sununu do more to ease the burden on taxpayers. “I think the revenues are there to justify that, and it makes New Hampshire a more attractive place for entrepreneurs and investors.”

Cline sounded equally surprised and pleased to hear Sununu take on the licensing issue, calling it a huge workforce investment that costs nothing. 

“That is something that economists and free market advocates like myself have been pushing for, forever,” he said. “It is kind of a holy grail of licensing reform, to make sure that there’s no obstacle to people who are licensed in another state and want to move here. This, in theory, just makes it so much easier for licensed professionals anywhere in the country to move to New Hampshire.”

Education

The governor’s budget includes a number of education items, such as a request to double the amount of funding toward “education freedom accounts” and expand eligibility for certain kids from disadvantaged backgrounds, and a plan to spend $5 million to increase the number of computer science teachers. 

Among the biggest proposals is an attempt to change the state’s education funding formula. 

Sununu’s budget would increase some of the funds that go to school districts, raising the base amount given to districts per student – currently around $3,700 – by 25 percent. It would also increase the amount given for each student who qualifies for free or reduced price lunches by 30 percent. And it would ensure that the adequacy aid formula rises 2 percent every year after those increases, a number meant to account for inflation. 

But the budget would also phase out a key source of additional funding to towns: stabilization grants. Since 2011, those grants have given a boost to towns with high proportions of low-income students and low overall property values. Sununu’s budget would phase them out over five years and replace them with “extraordinary needs grants” – a different form of aid that would use a new formula to target the aid to towns with low property values and lower-income students. 

Christina Pretorius, policy director at Reaching Higher New Hampshire, an education research and advocacy organization, said she welcomed the attempt to shift to a more up-to-date aid formula that could better target funding to lower-income towns. But she said the effects and the tradeoffs will need to be studied. 

“Having a formula that is responsive to the current needs of the communities is really important,” she said. “What I’ll be looking at is the amount that districts are getting in stabilization currently and comparing that to the new formula.” 

Full details of the governor’s proposal will be available when the budget trailer bill, House Bill 2, is released to lawmakers in the coming weeks.

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