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Lawmakers go home but budget problems remain

State House Bureau

June 05. 2014 8:01PM

CONCORD — Lawmakers went home Wednesday after they finished their work for the 2014 session, but they may be back.

Gov. Maggie Hassan warned lawmakers last week that if state revenues continue their downward trend in June, they may have to return this summer to approve budget cuts that could total tens of millions.

But Senate President Chuck Morse, R-Salem, has said he has no intention of bringing back the Senate and said Hassan and her agency heads should manage the situation.

A significant shortfall in business taxes and interest and dividends revenue for April spurred Hassan to issue an executive order to freeze hiring, equipment purchases and out-of-state travel paid for with general fund money. Until April, the state had a $26 million surplus, but the shortfall nearly wiped it out.

“It looked like we would have extra money so they said ‘Let’s not talk about it and it will go away,’” said Charles Arlinghaus, President of the Josiah Bartlett Center for Public Policy Studies. “They punted for nine months and now they are in trouble.”

Arlinghaus and Senate Finance Committee Vice Chair Sen. Lou D’Allesandro, D-Manchester, said there are two things to watch in June, business taxes and how much money state agencies, particularly Health and Human Services, will be able to save from their appropriation — known as the “lapse.”

Budget writers counted on HHS to save $47 million of the money it is authorized to spend, but the department began the biennium with an estimated $36 million deficit from across-the-board, back-of-the-budget cuts.

“They aren’t going to make their lapse,” D’Allesandro said and Hassan implied last week when she met with budget writers.

Budget writers expect the state to take in $216 million in June, including $91.4 million in businesses taxes and $13.7 million in interest and dividends taxes, two closely watched sources of money.

Arlinghaus said June business tax returns should indicate whether there is a problem with falling revenues or if April was “a blip and everything is going to be fine.”

But he said if there are continued problems with business taxes and departments are not meeting their lapses, he expects the situation will force the governor to make spending cuts, probably by early fall.

He said politicians are not going to want to come back late in the election cycle to vote to cut spending or raise taxes.

“This should make for a very interesting election year,” Arlinghaus said. “Anyone who promises additional programs and spending obviously will have a problem when there is no additional money (available).”

The state had faced an even larger budget problem, but that was resolved when the state and hospitals reached an agreement on the Medicaid Enhancement Tax.

If hospitals had sought a refund and the Supreme Court affirmed the superior court ruling the MET was unconstitutional, the state would have had to find $185 million this fiscal year and would not have received $190 million in revenue next fiscal year.

The agreement does not affect this biennium’s budget, but will the next two bienniums.

“The next budget will be difficult because of the MET deal, but would have been more difficult without it,” Arlinghaus said. “But it is going to be difficult going forward. They don’t need any additional headwinds.”

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