State House at dawn

The New Hampshire State House in Concord.

CONCORD — The final horse trading over a compromise two-year state budget will start soon as Senate Democratic leaders just after midnight Friday approved a $13 billion spending proposal that suspends the next round of business tax cuts and uses proceeds to dramatically increase state aid to local communities.

After more than 10 hours of debate, the Senate approved the plan, 14-9, with Sen. John Reagan, R-Deerfield, having had to leave the Senate chamber around 11 p.m. Thursday and missing the final tally.

Senate Republicans time and again failed in attempts to change the plan as the Democratic majority beat back on 20 identical, 14-10 votes moves to retain business tax cuts, to get rid of a mandatory family and medical leave program, to build a larger secure psychiatric unit and to prevent using state money to pay for abortion services.

Sen. Lou D’Allesandro, D-Manchester, said in response to the opposition of Gov. Chris Sununu this Senate plan made many changes to the budget the Democratically-led House of Representatives endorsed earlier this spring.

“I am not saying we did it all but we did our very very best and this budget reflects our values,” D’Allesandro said.

But Sununu said the Senate plan with its 12 percent increase in state spending was too excessive and would put the state on course for deficits in future years.

“I continue to have concerns with the Senate’s budget; namely the income tax, the increase to business taxes, and the $76 million structural deficit. I am hopeful the House and Senate can come together in a committee of conference to put forward a viable, balanced budget that does not raise taxes,” Sununu said in a statement.

“The people of New Hampshire sent us to Concord to deliver a responsible budget and I am committed to doing just that.”

The House and Senate-passed budgets each spent about $5.5 billion in state spending with federal grants, fees, and private dollars making for the total.

Sununu’s budget would spend $5.2 billion in state dollars. He called for spending more than $240 million of that in one-time spending for municipal and school construction projects, a process that both House and Senate budgets rejected.

The Senate budget did remove a House-passed capital gains tax.

The Senate budget still contains more than $134 million in higher taxes and fees by ending business tax cuts, by lining state taxes up with the 2017 federal tax cut treatment of corporate profits and by changing the tax structure to make firms pay more if they have sales here but not employees or offices in state.

“We negated the capital gains tax. It is out. But what is in? Tax reform; it’s the kind of quality tax reform that makes this state economically sound,” D’Allesandro said.

“We don’t need additional taxes.”

Sen. Chuck Morse, R-Salem, said this plan raises business taxes by $90 million over the next two years because like the House budget it would repeal tax cuts that were on the books for 2019 and 2021.

“I’m a country guy from Salem but $90 million more is a tax increase in my book,” Morse said.

Sen. Jeb Bradley, R-Wolfeboro, offered the final amendment to keep in place those tax cuts on corporate profits (Business Profits Tax) and business activity (Business Enterprise Tax) that without change will be cut this July and in 2021.

“We are at a crossroads,” Bradley said predicting the Senate-passed budget will lead to a “standoff” with Sununu and a summer without a compromise budget if these tax cuts aren’t retained.

Sen. Jeanne Dietsch, D-Peterbough, said spending more on innovation and not granting business tax cuts would make New Hampshire more attractive for companies to come here. The average state spends $4.20 per person to subsidize research, she said.

“What does New Hampshire spend? Ten cents,” Dietsch said.

The Senate plan would give communities $20 million a year in grants towns could use for any purpose from lowering property taxes to new program costs. It would also increase aid to local school districts by $100 million.

The family and medical leave plan contained in the so-called House budget trailer bill (HB 2) sparked some of the sharpest rhetoric.

Sununu has called the proposal an income tax and vowed to veto it.

The governor backed a voluntary leave program for state workers in this state and in Vermont but the Vermont Legislature adjourned for the year without taking it up.

“Now we get to the family leave tax. It’s an income tax, a tax on payrolls on businesses like mine. I will make the decision whether to pay it for my business so it’s a tax,” Morse said.

Senate Majority Leader Dan Feltes, D-Concord, said employers with at least 15 workers can on their own pay for this requirement of 12 weeks of paid leave without making workers pay a payroll tax of one-half of 1 percent.

“It is a little tiring to hear this talking point over and over again. I can understand people outside here making this unsubstantiated claim but the people in this chamber are smart enough to know this operates like unemployment insurance with more flexibility for business including an optional payroll assessment to pay for it,” Feltes said.

He said Sununu’s voluntary plan would not work.

“The governor’s plan doesn’t exist. It was a press conference at a brewery. Vermont did nothing,” Feltes said.

Senate Republicans also protested a provision that in 2020 would permit spending more state dollars to support Medicaid expansion that provides health care coverage to more than 50,000 people.

Morse said this would break the promise lawmakers and then-Gov. Maggie Hassan, a Democrat, made that the state wouldn’t spend more than 10 percent for this program or Medicaid expansion for low-income adults would be abandoned.

“Today we are going to throw that out the window and open up New Hampshire to payments into an account that isn’t even in our budget. It actually is the wrong thing to be doing,” Morse said.

Sen. Cindy Rosenwald, D-Nashua, said senators recently learned the program by July 2020 could face a deficit of $2 million and this would allow Health and Human Services Commissioner Jeffrey Meyers to ask a legislative budget oversight committee to close the gap by transferring money within his own budget.

“We are not trying to sneak general funds into this program; we are trying to be responsible,” Rosenwald said.

Sen. Tom Sherman, D-Rye, said this would make sure New Hampshire keeps in place this expansion that is one of the best ways for New Hampshire to fight the opioid epidemic because it includes coverage for substance abuse services.

“The notion that shoring up or providing some stabilization should we be unable to meet the obligations of the trust fund and that would be some kind of breach of an agreement. A breach would be to allow people to go uninsured,” Sherman said.

The debate turned to abortion when Senate Democrats added language to allow state spending for abortion in response to the Trump administration’s “gag rule” that threatens to reduce federal grants for family planning.

Sen. Regina Birdsell, R-Hampstead, said she only wanted to ban state spending for “optional abortion services” and not in cases of rape and incest.

But Rosenwald said lawmakers need to be prepared to use state dollars to replace federal grants if Trump’s plan goes forward.