The budget showdown appears to be over, with a compromise reached between Governor Sununu, the Democrat majorities, and Republican leadership. For months now the State has operated under a continuing resolution passed in late June, but when legislators meet tomorrow at 1pm in both the House and Senate the State could be one step further to a biennial budget. According to Kevin Landrigan, State House Bureau Chief for the Union Leader, budget negotiators met with the Governor until 11pm Monday night and passed on a tentative agreement to the Legislative Budget Assistant.
Remaining Question: Will Republicans approve a suspension of the rules in the House to introduce the compromise budget deal?
Last week, Democrats attempted a last minute hail mary to introduce an 800-page budget bill (would have been HB3 and HB4, were they introduced,) but Republicans in the House denied them the 2/3rds majority needed to suspend the rules. Despite Democrat Majority Leader Doug Ley claiming any amendment could have been introduced, House rules would have prohibited amendments that weren’t submitted before 4pm the previous day.
**Important Side Note: Last week, House Republicans rightly stood indignant at the idea of passing a huge budget bill on such short notice with no opportunity for amendment. This compromise comes in even later than that, giving them even less time to prepare. Talk about getting cut off at the kneecaps, quipped one (nameless) legislator***
That same 2/3rds majority of members present in the House tomorrow will be needed to introduce the new deal. The Governor’s office is signaling it would like support to get the compromise budget introduced and end this stalemate. Does the new compromise meet up to House GOP standards and will it sway the 20+ needed to get it introduced? Will House Democrats admit defeat by voting for a budget that doesn’t increase taxes like so desperately desire?
On June 20, 2019 Governor Sununu vetoed HB1 and HB2, the budget bills for fiscal years 2020 and 2021, citing the deficit created by those bills of nearly $100 million per year, or $200 million per biennium. The original budget would have erased our $260 million surplus, and raised taxes on business through the BPT and BET back to 2018 rates. The rates dropped for businesses with fiscal years beginning 1 Jan 2019 or after to 7.7% and 0.60% respectively. The BET increase back to 0.675 would have been a 12.5% increase.
The BET and BPT rates appeared to be one of Governor Sununu’s red-lines in the budget negotiations, refusing to consider any deal that would stop or increase employer tax relief, and for good reason. New Hampshire has the fastest growing economy in the Northeast and one of the lowest unemployment rates in the nation.
Latest Data from BLS shows our employment participation rate at 68.7%, higher than the Northeast rate of 63.1 and New England’s rate of 66.6%. Our unemployment rate stayed at a very healthy 2.5%, tied for 3rd nationwide currently with Iowa, both behind Vermont and North Dakota.
Other sticking points for many GOPers included funding for Planned Parenthood and other providers of abortion.
Victories for Sununu
BET/BPT Rates Stay
Dan Feltes and other Democrat Senators seemed dead-set on increasing tax rates that ‘businesses didn’t ask for,’ at least until last week when all their dreams got shred before their eyes by a unified minority GOP in the House and Senate. Perhaps they realized that without that vocal minority, they could pass absolutely nothing. The GOP held the High Hand, and the Democrats had to fold.
Sununu and the GOP can claim victory on BET and BPT rates. They will stay at their current rates until at least 12/31/2020. If tax revenue comes in at 106% or higher of projections, rates will fall as planned on 1/1/2021. If they come in below 94%, rates will increase to 7.9% and 0.675% (2018 levels.) So, your business revenues may decline in an eventual downturn, but don’t worry the Government will swoop in like vultures to take more of the money you have left, lest their revenue stream decline. Thank a Democrat (if that ever happens).
This is a significant win for Sununu’s office. Democrats don’t (and likely won’t) get their tax increases.
Sneaky, Underhanded Politics
The Democrats tried to reintroduce two bills that were vetoed, and SUSTAINED, into the new budget. Biomass subsidies and ‘Independent Redistricting’ were soundly defeated during veto day. Trying to slip these into a budget bill is irresponsible governance at best, and just proves why Democrats should never be near a majority in Concord again.
They tried to raise the tobacco age statewide to 21 as well. What that has to do with a budget is anyone’s guess.
DHHS Gets Gutted?
The compromise bill allows the Governor to reduce appropriations by $50 million to DHHS over the biennium. Maybe they’ll be forced to trim some fat.
Medicaid Expansion Can’t Raid General Fund
No general funds can go towards Medicaid Expansion, as agreed in 2014. This budget will preserve that standard.
Hyde Amendment – Intact
Most Democrats love abortion, and hate any attempt by the right to ‘infringe’ on their ‘right’ to kill their children. In fact, they want taxpayer funds to pay for abortions. Won’t happen, at least in this budget deal. New Hampshire’s ‘Hyde Amendment’ will remain intact. While this won’t be enough for some on the right, who want to see Planned Parenthood completely defunded, it’s better than the original budget’s provisions.
Another Assault on Personal Freedom
Though the Democrats wanted to raise the tobacco purchase age to 21, the Governor’s office settled on 19. We, as a society, need to collectively decide what age makes you an adult?! and stick with it. The hodgepodge of “freedoms” you gain based on your age level is ludicrous. At 18 you can serve your country and die in a third-world country but you can’t buy smokes, vapes, or alcohol in New Hampshire. But you can be on your parents health insurance until 26? Pick an age. Stick with it.
Structural Deficit Remains
Though they were able to beat the structural deficit down by 75%, $25 million remains. The Governor’s office calls this ‘very manageable,’ but is irresponsible budgeting more accurate? Keep in mind, it’s not a real deficit unless revenues are at or below projections. Over the previous biennium revenues were significantly above plan, which has led to a $260 million surplus. This deficit simply won’t erase that surplus (as fast.) The previous deficit of almost $200 million would have wiped out the surplus in one biennium, and left the next legislature with the need to ‘find’ hundreds of millions in new revenue (hello income tax!) Be ready for Democrats to take credit for any increase in the surplus, and they’ll definitely blame Republicans if the surplus shrinks. This deficit is theirs, and theirs alone.
The Governor has repeatedly said we should use our ‘one-time’ funds for ‘one-time’ projects, instead of growing government into deficit spending. This budget sends $40 million back to towns for ‘property tax relief’ as the Democrats claim. They want to ‘put property tax payers’ first. Democrats will run victory laps with this, claiming they lowered your property taxes. The fact is, towns spend irresponsibly, and low-turnout in municipal elections generally means everything passes. Those that do turn out are highly interested in whatever spending measures are on the ballot, and make sure they’re there to spend it. Rewarding the fiscal irresponsibility of towns is not a sustainable practice, and it’s what leads to broad-based taxes. Ask MA, or CT.
This appears to be headed for passage, and the messaging from the Governor’s office is that it will be signed. We shall see. Things certainly could have been a lot worse.