Budget Committee of Conference – Negotiations

The House budget would generate close to $50 million over the next two years by setting the cigarette tax rate at $1.98 per pack and by suspending several business tax cuts. The Senate would forego those options and instead carve out a new exemption for tipped wages under the Business Enterprise Tax.

[By the time the committee of conference met: with the benefit of additional new data, the House Ways & Means Committee increased revenue estimates by nearly $50 MM as a result of the rebounding economy.  The House increased estimates based on strong growth in Real Estate, and modest growth in Business and Meals & Rooms where the Senate projections were essentially flat.]

The House would appropriate $4.55 billion in General and Education Funds over the next two years; the Senate would provide $4.59 billion.

The Senate would spend $11 million over the next four years on Voter ID.

Both plans would restore funds critical to New Hampshire’s university and community college systems as well as to programs designed to serve the developmentally disabled and the mentally ill (?).

The Two Biggest Areas of Disagreement

General Personnel Reductions: Spread over the budget as a whole, the Senate seeks a $50 million reduction in salary and benefit expenditures over the biennium, of which $20 million must be cut from General Fund.

      • Harms critical state services and may cost the loss of up to 700 jobs.
      • Third such cut in three consecutive budgets, for a six-year total of $150 million. The workforce has already been downsized by 17-30%,
        but is still mandated to provide all authorized services. Critical services aren’t being delivered on time or as effectively as citizens were promised.
      • Each $50 million cut to personnel is worth approximately 700 jobs, or 2,100 jobs in whole.
      • Because of state and federal funding formulas, each $50 million cut to personnel saves the state budget only about $20 million, for a total of $60 million over six years.
      • So not only are New Hampshire citizens losing more than 2,000 good jobs, they are essentially forfeiting about $90 million in federal matching funds just to save $60 million in the state budget.
      • The Senate’s strategy behind the newly proposed $50 million in personnel cuts is unknown to all of us right now. It came just a few hours after the casino bill was killed by the House; the only rationale given for it was that “we had to make the numbers work,” according to Sen. Chuck Morse, R-Salem, and Senate President Peter Bragdon, R-Milford.
      • Since ordering them, these senators are questioning why there is such concern over the cuts. They claim the cuts were fine with everyone in 2009 and 2011, when then-Gov. John Lynch included the cuts in his budget. There are two key differences between now and then.
        • Those cuts were in response to the most serious financial downturn since the Great Depression. Today, New Hampshire’s economy is improving and job and wage growth are returning.
        • Those cuts also were announced at the governor’s stage of the budget process, four months earlier than the Senate’s stage in 2013.
          • Neither the governor, the House nor the Senate has done any planning for large-scale layoffs; no analysis exists as to how difficult it will be to achieve the cuts due to the fact that more than 1,700 positions already have been eliminated.
          • With a workforce approximately 20 percent smaller than it was when the recession began, continuing the delivery of services while also finding the required savings is likely to result in severe hardship all around.

Medicaid Expansion: As part of the Affordable Care Act, (ACA), states have the option to expand Medicaid eligibility, with the increased costs borne largely in the early years by the Federal taxpayers, with cost to the state increasing in later years. The House added Medicaid Expansion into their budget trailer (HB 2) but did not include either the revenue or expenditures in HB 1. The Senate instead supports the creation of a commission to study the issue.

      •  Delaying the implementation of Med Ex by just one year (to study what already has been the subject of extensive analysis) means that NH would be turning its back on up to $340 million in federal funds for health coverage of hard-working NH residents and for our state’s economy.

General Government:

LCHIP: Under the Senate budget, the Land Conservation and Heritage Improvement Program, (LCHIP) now receives all of the proceeds from the registry of deed surcharge, rather than only a portion. In past years this revenue has been diverted from this program into the General Fund to pay for other state expenses. The House added some of the money back in, while the Senate returned all of the funds. This change increases the money destined to the program by $3 million over the biennium.

The UNIQUE Program: This program that grants income based scholarships to college students. The House budget continued to practice of using program revenue to help fund the Community College and University Systems directly, rather than issuing the scholarships. The Senate pulled the money from the two systems and replaced it with General Fund money, returning the UNIQUE program to full funding. This move results in $22.6 million for scholarships over the biennium.

Office of Innovation and Efficiency: This new office was proposed by Governor Hassan. The House budget pared back some of the funding for the office, while the Senate eliminated it entirely, a savings of $532,697 in General Fund money.

Back of the Budget:

      • The Senate reduces the General Fund appropriations reduction proposed by the House for the Legislative Branch by $500,000 in FY 2015.
      • The Senate adds a General Fund reduction of $1 million for the Department of Revenue Administration.

Administration of Justice and Public Protection:

FEMA: Though it appears from the bottom line that there is a cut of $18.5 million, it is not actually a cut. Rather, Federal Emergency Management Administration (FEMA) funds are removed from the operating budget.

Green Launch Pad: The Senate eliminates the Green Launch Pad proposed by the Governor, and passed by the House, reducing expenditures by $500,000 over the biennium.

Human Rights Commission: The Senate deletes the additional new anti-discrimination investigator added by the House while retaining the one added in the Governor’s budget.

Back of the Budget:

      • The Senate increases the General Fund appropriations reduction for the Judicial Branch by an additional $424,500 over what the House proposed.

Resources and Economic Development:

Department of Environmental Services State Aid Grants: The Senate increased State Aid Grants by $4.4 million over the House, thereby fully funding the program in FY2014. These are grants given to the municipalities to help pay for water treatment projects.

Clean Water State Revolving Fund (CWSRF): The Senate reduced Loans and Repayments to the fund by $20 million and $10 million respectively from the House budget. While the DES hopes to receive these Federal grants, that are not guaranteed to receive them. Rather than put uncertain money in the budget, the Senate opted to reduce the line items.

Transportation:

Federal Local Projects: The only difference in the Transportation budget is the reduction of just shy of $24 million in Federal money available for local projects. This cut, like the one for CWSRF is based on the uncertainty of the Federal grants in question.

Health and Human Services:

As discussed in an earlier piece, Governor, House and Senate Largely the Same in HHS Spending, the both the House and Senate budgets for HHS are quite similar in key areas. There are two major differences however:

Uncompensated Care: This program makes payments to hospitals to help defray the cost of charity care, is one of the areas of greatest disagreement between the House and Senate. The Senate budget spends $174 million less (half of which is a Federal match) than the House on this program. This is entirely due to the large discrepancy in revenue estimates for the Medicaid Enhancement Tax.

Medicaid Quality Incentive Pay (MQIP): Much like the UNIQUE program, MQIP money is removed from the operations of Nursing Services and replaced with General Funds. The MQIP money then receives a Federal match and is returned to the nursing homes.

Back of the Budget:

      • General Fund Appropriation Reduction: The Senate budget cuts $7 million while the House budget cuts $4.5 million.

Education:

UNIQUE: As detailed above, the Senate remove UNIQUE funding from the Higher Education Commission as well as for the University and Community College Systems. This money is replaced with General Fund money and the UNIQUE fund revenue is returned to the UNIQUE Program.

Charter Schools: The Senate adds an additional $3.5 million for charter schools, most of which is funding for four new charter schools.

[Sources: http://www.jbartlett.org/battle-lines-a-guide-to-the-budget-committee-of-conference; NH Fiscal Policy Institutue; and Diana Lacey, president of the State Employees’ Association of New Hampshire; and others]

[See http://www.nhfpi.org/research/state-budget/the-senates-proposed-fy-2014-2015-budget.html for more detailed information.]

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