As she presented the cuts to the legislature’s joint fiscal committee, Governor Hassan told lawmakers there are two things driving New Hampshire’s growing budget shortfall.
"This is a challenge created by both tax law changes and increased demand and federal law changes in our Medicaid caseload."
These issues are familiar to budget watchers. Medicaid caseload are up – the publicity surrounding Medicaid expansion is one reason. Another are federal changes that have increased eligibility.
Tweaks to state business taxes – including upping the filing threshold for the business enterprise taxes from $100,000 to $200,000, and exempting certain trusts from the state’s interest and dividends tax -- also took effect this year.
Governor Hassan told the committee the changes are eating into a generally solid revenue picture.
"When you look at our current revenue level it is slightly ahead of plan, but when you look at what has happened to out business taxes, they are down seven percent though October, and when you look at our I and D taxes they are down, 24 percent through October."
Right now it’s hard to know exactly how bad this situation is.
Republicans on the fiscal committee complained to the governor that agencies haven’t always been quick to provide numbers.
The cuts announced today, though, span the executive branch.
The Department of Corrections and the Environmental Services both bear almost $2 million in cuts.
Another $3 million will come from the University System.
Top Republicans says the budget needs to be brought into balance.
"This definitely is a spending problem."
Senate President Chuck Morse says the question is exactly how big.
"In reality we know we are $48 million over in Health and Human Services, and now we are hearing numbers in other departments. If you add them all up we are now between $70 and 100 million a year over in spending, which is not what we planned for, and making cuts to the University System of N.H., should not have had to happen."
Republican leaders say they anticipate the Governor will get them a piece of legislation with specific proposals in the next few weeks.
Governor Hassan says any bill will likely envision cuts to judicial and legislative branch spending. Outside the hearing room, she told reporters layoffs are also possible.
Senate Majority Leader Jeb Bradley says the main thing right now is get a handle on the numbers, but he says he has little doubt about the basic architecture of the governor’s solution.
"Three legs: cuts, raiding dedicated funds, and raising business taxes. Raising business taxes is going to be a very hard sell."
Expect any fight over business taxes to be a difficult one, and one repeated when the Governor and lawmakers begin work on the next state budget, after the new legislature is sworn in.
