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Senate budget plans spends about $100 million more than House

State House Bureau

May 26. 2015 8:24PM

CONCORD — Along party lines, the Senate Finance committee voted 4-2 to delay business tax rate cuts for a year and an increase in research and development tax credits for two years.

Although the business tax cuts will reduce revenues by $14 million in fiscal 2017, the Senate Finance Committee budget would have a $296,000 surplus at the end of the biennium according to preliminary figures from the Legislative Budget Assistant’s office.

Total general fund spending under the plan would be $2.83 billion over the next biennium, a $99 million increase over the House approved budget, but $66 million less than Gov. Maggie Hassan’s proposed budget.

The Senate Finance Committee meets at 10 a.m. Wednesday to go over the final figures and to vote on its proposal which goes before the full Senate June 4.

The Senate’s proposed budget restored much of the social service programs reduced by the House while restoring several dedicated funds the House used to help balance its budget.

The Senate plan uses $34 million of a projected $45 million surplus for the current fiscal year, and with an additional $118 million in revenue estimates, has $152 million more in revenue than the House plan.

The Senate’s revenue estimates are about $3 million higher than Hassan’s over the biennium.

The Senate Republicans stated top priority will be included in the Senate budget plan, cuts in the tax rates for business taxes, but not until the second year of the biennium.

Under Senate Bills 1 and 2, the rates of the business profits and enterprise taxes would be lowered over the next three bienniums: the 8.5 percent business profits tax would be reduced by .2 percent a biennium and the .75 percent business enterprise tax by .025 percent.

The reduction in the two taxes in the second year of the upcoming biennium which begins July 1 lowers state revenue by $14 million.

Senate President Chuck Morse, R-Salem, who proposed the change in the Senate approved bills, said the business tax reductions would boost the state’s economy and are as important as the money the committee restored to social service programs such as developmentally disabled services.

“This will send the message that New Hampshire is open for business,” Morse said.

But Sen. Lou D’Allesandro, D-Manchester, who served on a commission studying business taxes said they are not the driving force for business decisions on where to locate or expand, rather the cost of energy and a skilled and educated workforce are the most important factors.

Lawmakers have done a number of things with tax credits and thresholds that have created a good strong business climate, he said, and they do not need to reduce the tax rates.

“I’m not sure (the rate cuts) make the game more playable,” D’Allesandro said.

Morse suggested the Senate-passed increase in the research and development tax credit from $2 million annually to $7 million be delayed until the 2018-2019 biennium.

Sen. Jeff Woodburn, D-Dalton, said the focus ought to be on building the economy from the bottom up, not tax credits. “The opportunity gap is a tremendous problem in this country and in this state,” Woodburn said in opposition to increase in credits.

The committee increased the lapses or money state agencies are directed to save in their budgets to 3.3 percent in each year of the biennium.

The lapse or money that is appropriated but agencies return to the general fund was 3 percent in fiscal 2016 and 2.8 percent in 2017 in the budget proposed by Hassan. The House budget projects a 3.1 percent lapse in 2016 and 3 percent in 2017.

The increased lapses provide about $9 million more in savings than the House and Hassan proposed in their budget plans.

After looking at the financial figures, the committee decided to give home and community-based care providers a 3 percent rate increase.

The providers have not had an increase since 2009 although state law calls for a yearly review and adjustment.

The increase is expected to cost about $1 million in general fund money over the biennium.

The budget increases funding for the higher education over the House plan by $13.5 million but is substantially less than Hassan proposed.

The budget does not include funding for the state’s Medicaid expansion program or the NH Health Care Protection Program, which will require the state to pay about 5 percent of the cost beginning Jan. 1, 2017 costing about $14.5 million.

Senate leadership wants to debate reauthorizing the program which ends Jan. 1, 2017 during the next legislative session.

A negotiated pay raise for state employees with the Hassan administration is not included in the budget proposal, but would cost $10 million.

Unlike past years, the Senate plan does not include across-the-board reductions in state spending for all agencies or in personnel costs.

Hassan avoided what are called back-of-the-budget cuts saying they are dishonest and lead citizens to believe state agencies have more money to spend on program than they do.

If the Senate passes its budget proposal, the House and Senate will then negotiate to reach a compromise budget, they would have to approve before it could go to Hassan.

Hassan has expressed concerns about both the House and Senate budgets, including not paying for Medicaid expansion.

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