Sununu: Crisis could slash state budget by $500 million; lawmakers disagree

Monitor staff
Published: 4/18/2020 12:40:43 PM

The coronavirus pandemic is poised to deal a severe blow to New Hampshire’s state budget, potentially necessitating up to $500 million in program cuts in the next year.

That’s according to Republican Gov. Chris Sununu, who said Thursday that the expected revenue losses that accompany business shutdowns will mean the state will need to scale back its ambitions.

“The level of budget impact that the state will see between now and the end of June is probably on the order of a couple hundred million dollars,” Sununu said. “And then from June of this year to do to next year, you could be looking at 250 to 500 million more dollars.”

It’s a reality that Sununu says will force deep reductions.

“There will be massive budget cuts across the state,” he said.

But Democrats have a different view. While the revenue losses are unavoidable, the state could avoid sweeping cuts by tapping into the $1.25 billion in expected federal stimulus funding to save New Hampshire programs, they argue.

The truth has been fiercely debated.

Sununu says the Democrats’ idea is illegal. The stimulus money is prohibited by federal law from being used to bolster state revenue losses, even if the result of the COVID-19 pandemic, he says.

His Democratic critics say the statute at hand, the federal CARES Act, is vague. And all sides are waiting to hear from the U.S. Treasury Department, which is set to deliver guidance to states by April 24.

It’s the biggest in a series of divides between the governor and the legislature over spending, and depending on who is right, the outcome could have major implications for state programs.

New Hampshire passed a $13.1 billion budget in 2019, its largest ever, after a flush year of business tax revenues opened doors to new programs. Democrats and Sununu locked in a number of spending priorities after a summer standoff, from Medicaid provider rates to school funding hikes to construction on a new forensic hospital to take in behavioral health patients.

Now, everything has changed. No matter how much aid New Hampshire gets federally, cuts to that budget are inevitable, Sununu warned Thursday. But he argued that because the budget jumped from $12 billion to $13 billion, that there is leeway to cut.

“So, there is room there,” he said.

State House Democrats say the governor is misinterpreting the limitations new spending package, and that the damage to state coffers could be less if he changed that interpretation.

The CARES Act states that the federal funds may only be used to cover costs necessary due to the COVID-19 emergency, and costs that “were not accounted for in the budget most recently approved.”

Democrats argue that a drop in revenue could be tied to the pandemic due to business closures and that it could count as an unaccountable cost. That would free the funds to make up for revenues, they say.

Sununu says that’s incorrect: the funds are meant for specific, COVID-19 expenditures, not conceptual losses in revenue, he says.

The governor is currently choosing to continue spending the CARES Act funds without the direct oversight of the Legislature; Democratic State House Democratic leaders are presently suing the governor to re-insert the Legislature in the process.

As officials wait for the federal money to flow, the crisis is already taxing existing programs. The Department of Health and Human Services has transferred $26 million away from existing programs in recent weeks.

That includes $8 million from an effort to boost Medicaid rates for substance use disorder treatment, the department told lawmakers Thursday.

DHHS also moved $8.7 million from the funds to build up the forensic hospital and replace the Secure Psychiatric Unit in the men’s prison, as well as $4 million from the State Loan Repayment Program for medical workers and $100,000 from a foster grandparents fund.

Those transfers have sparked attacks from Democrats. “Governor Sununu’s unilateral decision to cut these services is harmful to thousands of Granite Staters and is reckless mismanagement of the state budget,” Concord Sen. Dan Feltes, a Democratic candidate for governor and chairman of the Senate Ways and Means Committee, said Friday.

A spokesperson for Sununu said that those transfers are not intended to be permanent, but were made while the state waits for its federal stimulus money. Once the federal money arrives to reimburse the COVID-19 expenditures, the state will be able to transfer funds back into the department and re-fund the programs, the spokesman, Ben Vihstadt, said.

“The line item transfers such as those coming from the SPU were made for cash flow purposes to pay for COVID-19 expenses while we wait for the federal money to arrive to backfill those expenses,” Vihstadt said. “The Governor intends to preserve funding for critical programs like the SPU by backfilling those programs with federal funds.”

The big test will come down the line, when the Legislature has to decide what to cut to deal with an inevitable plummet of revenue. In contrast to the spending decisions on the stimulus funds, Sununu’s office said the budget-cutting decisions will involve Fiscal Committee input.

“When it comes to the actual budget cuts, we’ll be including the Legislature in that process, I can absolutely guarantee that,” he said.

Correction: An earlier version of this story misstated the committee membership of Sen. Dan Feltes. He is chairman of the Senate Ways and Committee but is not a member of the Fiscal Committee. 

(Ethan DeWitt can be reached at 369-3307, or on  Twitter at @edewittNH.)


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