The Stalled State Budget: What's In It, Areas of Disagreement, & Prospects for Compromise

Jul 21, 2019

Credit Dan Tuohy for NHPR

In the three weeks since Governor Sununu vetoed a $13 billion state budget passed by Democrats in the Legislature, the state has been operating on a three-month "continuing resolution" and political leaders have  gone back and forth between pointing fingers and signaling progress on reaching agreement, as negotiations and meetings have continued. Governor Sununu recently met privately with municipal leaders who have expressed concern over the veto's impact on essential programs and services. We take a close look at what the budget right now contains, key areas of disagreement, and prospects for compromise. 

GUESTS:

 

 

We will also hear from:

 

  • Barbara Reid- Government Finance Advisor for the N.H. Municipal Association.
  • Peter Evers -  CEO of Riverbend Community Mental Health and President of the N.H. Community Behavioral Health Association.  
  • David Juvet - Senior Vice President of Public Policy for the N.H. Business and Industry Association.

Transcript:

This is a computer-generated transcript, and may contain errors. 

Laura Knoy:
From New Hampshire Public Radio, I'm Laura Knoy and this is The Exchange.

Laura Knoy:
Leaders need to reach agreement on a state budget in less than 90 days. Normally, the governor, House and Senate take turns producing their versions of a two year tax and spending plan for the state. Then the three entities are supposed to find a compromise at the end of the fiscal year on June 30th. But occasionally that doesn't happen. And this year is one of those occasions. Governor Chris Sununu vetoed the Democratic legislature's budget a few weeks ago, and since then, the state's been operating under a three month continuing resolution. Today, in The Exchange, the impact of that fiscal stalemate. What common ground might look like and how close it might be. Let's get your questions into our e-mail exchange. At NHPR.org once again exchange. NHPR.org use Facebook or Twitter at any HP exchange or call in 1 800 8 9 2 6 4 7 7.

Laura Knoy:
With me in studio, Jackie Benson, content editor for Citizens Count. Jackie, nice to see you. Welcome.

Jacqueline Benson:
Thanks. I'm glad to be here, Laura.

Laura Knoy:
Also with us, Phillip Sletten, policy analyst for the Hampshire Fiscal Policy Institute, former performance auditor for the New Hampshire Office of the Legislative Budget Assistant. And Phil, welcome back. Good to see you, too.

Phil Sletten:
It's great to be here, Laura. Thanks for having us.

Laura Knoy:
And we'll hear later in the area from others involved in this as well. But just to start off with you, Jackie, please.

Laura Knoy:
When Congress and the president can't agree on a budget, we've seen government shutdowns, lots of drama, workers not getting paid, airport screeners not getting paid, national parks being closed, no stopping people not getting their taxes or passports processed, etc.. What about at the state level? What does it mean when there's no budget?

Jacqueline Benson:
So it's not going to be as dramatic here in New Hampshire because the legislature went ahead and passed what we call a continuing resolution. And this is essentially like a three month extension of the current budget, the one that they passed for 2018, 2019. We've been operating on for the last two years. It extends the same levels of funding. Basically, every agency gets a quarter of a year's worth of funding that they can use to keep the lights on, keep things going. Now, that is going to be less money than they would have gotten had this 2020 21 budget that the legislature passed had that gone through. And so you will hear that there are certain agencies and certain certain places in New Hampshire that are feeling a pinch. And we can talk a little bit about some of those people and who they are. But that's why you're not going to see you're not going see state parks closing. Everybody can still. Everybody can still go cool off at Pittock away. Yes. But that's that's why because we we've extended our current budget.

Laura Knoy:
Ok, so some agencies or organizations that had been excited to get more under this budget won't get that right now.

Laura Knoy:
They'll get just what they had been getting.

Jacqueline Benson:
Yeah, I'd say excited might not be the right. Okay. Some for some of these agencies.

Jacqueline Benson:
There are some really critical issues with funding and where the money is. And there's bipartisan agreement that that money needs to go there. But now it's going to be held up for a couple of months here while we while we negotiate some of these sticking points that we have in the budget.

Phil Sletten:
Phil, what do you think? What impact have we seen so far of no budget where about three weeks out from that veto?

Phil Sletten:
Right. So there's there's going to be probably more impacts as we get close to that September 30th, end of this continuing resolution that that covers this three month period. And the reason I say that is because some of the some of the impacts that that stem from the last operating budget, you know, being a two year plan, but then not necessarily looking forward beyond that or when she get to the end of that two year plan. You know, things have changed a little bit on the ground. Perhaps that's that's something that the legislature does throughout the process.

Phil Sletten:
They do have a process for managing the budget, moving dollars between budget lines if they need to during a budget period. But that only then only goes so far or it only is usually taken so far. I guess I should say. And when we get to. So that means when we get to this end of fiscal year period or even here beyond the end of the fiscal year and we're extending it another 90 days, that's the agency sort of have less flexibility in their budget lines to move dollars in between to cover the unexpected need.

Phil Sletten:
So that's sort of a high level way to say we'll probably see more of those more of those issues as we get closer to the end of September. But there are other ones that are very real, tangible issues for a lot of people on the ground. For example, the developmental disability waitlist and fully funding, the developmental disability waitlist. The governor's version of the budget that he introduced back in February sought to fully fund the development of the waitlist for those who are ones needing developmental disability services. And every version of the budget produced since then by the House, by the Senate, by the committee of conference included that fully funding for the waitlist.

Phil Sletten:
Everybody agrees on that. So if everybody agreed on that, it was a very a considering how much money it is. One hundred eight hundred twenty eight million dollars over the prior biennium. That's a significant amount of money in this budget process that everyone agreed on. But now those folks who would have been receiving new services are not waiting to receive. Services, I'm assuming, again, that everyone agreed on that point in the budget.

Laura Knoy:
Jackie.

Jacqueline Benson:
I think it's worth noting with that point in particular, it's actually a legal obligation. The state has a pass, a law a few years ago saying that they would completely fund these disability services and we haven't done it so far. So that's another factor that would be we're talking about here. Is there? There are in it. In addition to political issues at play in this budget, there are some legal issues that play in this budget. There are a couple different funding points that are in here that also have, you know, lawsuits attached to them right now that the courts could end up weighing in and saying, you know, let's get let's get some action on this.

Laura Knoy:
Well, and of course, a budget is about dollars, but it's also about one's political philosophy about how government should be run. What's the philosophical difference, do you think, Jackie, between the governor and legislative Democrats when it comes to this budget?

Jacqueline Benson:
Right. So a lot of it can come down to if we look at one of the big sticking points here. One of the big reasons Sununu gave for vetoing the budget was that business taxes. So we've had this scheduled reduction in business taxes for the last couple of years. They were set to go down at the end of 2018. So 2019. Our business taxes here are a little lower, but nobody's really paid them yet because we don't pay our taxes, obviously, until the end of a tax year. You'll have some businesses that have been paying estimates, you know, their estimated amounts, but their actual their actual bill hasn't come due yet. Now the legislature saying we want to drop those tax levels. We want to. We want to put them back where they were in 2018. So we want to bring them you know, it's about two point two percent for the business profits tax. So bringing it from its would be seven point seven this year. They want to bring it back to seven point nine.

Jacqueline Benson:
So Sununu saying that this is a tax increase and the business taxes are helping to create jobs in New Hampshire. They're attracting businesses to New Hampshire, having these lower rates. The Democrats, on the other hand, are saying, listen, most of the businesses, you know, the businesses to pay the majority of this tax are these big companies. They're large businesses. And there are numbers that do back that up to some extent. So the philosophical difference becomes to lower business taxes, benefit New Hampshire's economy, which ultimately creates more revenue for the state, allows you to fund more services services, or is this just a tax break, as Dan Dan Feltes has been saying a tax break for big out-of-state corporations.

Laura Knoy:
Well, let's hear Senator Feltes talk about that. Here he is on I Heart Radio explaining why Democrats want to roll back these tax cuts.

News Clip:
Governor Sununu, look again is focused singularly on additional tax breaks, primarily benefiting big corporations, many of which with headquarters out of state, just where tax code works. And so that has been his focus. And he hasn't provided or produced what he wants to cut in order to fund those additional tax breaks for the state corporation.

Laura Knoy:
Again, that Senator Dan Feltes, a Democrat of Concord. So, Phil Sletten, we've seen this movie before, haven't we? Governor Hassan vetoed a budget over business taxes. Not that long ago.

Phil Sletten:
Yes. So the last time a budget was vetoed was 2015. And the disagreement there was over a business tax rates. The Senate wanted to reduce business tax rates at that time. The governor was more hesitant to. What they ended up doing is reaching an agreement where there would be one business tax rate reduction that was set in law in a second that was triggered based on the amount of revenue brought in. So if a certain amount of revenue was collected at that lower business tax rate, then another business tax rate reduction would go into effect under the current rate reductions that are being debated in the legislature now. Is not there's not any sort of trigger effect. Those two tax rates are set to go down to seven point seven and seven point five for the business profits tax and corresponding decreases for the business enterprise tax regardless of what revenue comes in.

Laura Knoy:
And this is really important, especially here in New Hampshire, right, Phil, because we get so much money from business taxes, because we don't have a statewide sales or income tax.

Phil Sletten:
Our business profits tax is our largest single tax revenue source. The business enterprise tax is the fourth largest tax revenue source for the state. So these are two very important revenue sources for the state when it comes to funding. General fund operations end when it comes to funding local education, they contribute to that as well.

Laura Knoy:
Well, speaking of business taxes, let's bring in Dave Juvet, senior vice president of public policy for the New Hampshire Business and Industry Association. And Dave, welcome back. Good to have you.

David Juvet:
Thank you.

What's the impact, Dave, on businesses so far of not having a budget? How much does it matter right now?

David Juvet:
Well, I if if you are a business like a hospital and you were anticipating a increase in Medicaid reimbursement, which was included in the budget. Obviously that's not happening. If you're a business that interacts with the state in some way and you were anticipating some type of increased business or increased profit because of something in the budget, clearly that's not happening.

David Juvet:
There are other things in the budget, though, that have an indirect impact on the economy. One would be the creation of a new state level housing appeals board. One was increased funding to the university system in the community college system to avoid tuition increases. So there was a lot in the budget that could have direct impacts or certainly had indirect impacts on businesses and the economy.

Laura Knoy:
And as someone, Dave, with the state's leading business organization, how do you feel about the fact that this budget process seems to have broken down over business Texas?

David Juvet:
Well, it's important to point out. I say in the spirit of full transparency, we are in strong support of the business tax reductions that have taken effect in 2019 and an additional reduction scheduled for 2021. So we supported those tax reductions and. You know, I think those are obviously going to be a negotiating point between the legislature and the governor as to to what happens to them.

Laura Knoy:
Governor Sununu seems to want a compromise on these business tax cuts. Maybe meeting in the middle of what both sides want to. What are you seeing there, Dave? What what feels like a reasonable middle ground for you on this, if anything?

David Juvet:
Well, I'm you know, we're not really involved in the negotiations between the legislature and the governor, where we're advocating for for what our positions are, which is to continue those reductions. And I guess I'd like to point out a couple of things. I think Senator Feltes was a little disingenuous in a number of ways. First of all, when he says most of these taxes are paid for out of state corporations, he forgets that the business enterprise taxes paid by every business and especially on small business. So to characterize this as something that is just designed to benefit an out-of-state corporation is completely inaccurate. And I would also point out that to the extent that those corporations are in-state or out-of-state is irrelevant, the fact is that they're being taxed on business and economic activity that takes place within New Hampshire and that means New Hampshire jobs. So I think he's trying to position a position this in a way to make it sound like the state is doing some favor for the business community and we don't see that at all.

Laura Knoy:
Let's hear from another Democratic leader, Dave, and I'd love to get your thoughts, please. This is Democratic Senate President Donna Soucy speaking on WMUR. She said Democrats don't think a freeze on business tax reductions should be a cause to trigger a budgetary standoff.

Laura Knoy:
Let's here.

News Clip:
What we believe businesses truly want is business tax reform. And this budget package contains those significant reforms that will do far more for business than a point two percent reduction.

Laura Knoy:
So what do you think, Dave?

David Juvet:
Well, first of all, she is she is absolutely correct. There were thing that were built into the budget in the Senate that the conference committee agreed to. That will have a positive impact on on business taxes. And this relates to not getting too far into the weeds, even in two ways business, multi-state businesses apportion their taxes. There were changes made to benefit businesses that have clients in New Hampshire, but their business operations are in. I have clients in Massachusetts or other neighboring states. But their business operations are in there. And she she's absolutely right. There were positive changes that were made. We didn't request that the governor veto the budget over this. This is a decision he came to on his own. Our approach has been to advocate for the things in the budget that we supported and oppose things that we oppose. So we were supportive of many things in the budget that I've already listed, but we were opposed to eliminating the business tax reductions that are currently in state law and we're scheduled to take place.

Laura Knoy:
You touched on this earlier, Dave, but I just want you to hit it again, please. What do you think beyond the business tax reductions that you talked about? What else do you think from the business perspective is really important to include in this budget?

David Juvet:
Well, I see that there was a lot in the budget.

Laura Knoy:
A lot that you like. It sounds like.

David Juvet:
Yes. Yes. The increases to the university system and the community college system, I think were critical. Both of those educational systems are the primary place where New Hampshire employers get their their workforce. And the cost of education in the state has been a problem for for many, many years. And this this helps Medicaid reimbursements. New Hampshire has been fiftieth in terms of Medicaid reimbursements. And the effect on business is that that hospitals will will cost shift those costs that they aren't being reimbursed for to to other payers, primarily the business community in the form of higher health insurance. So that was very important. Workforce housing has been documented to be a critical economic development issue and it has a critical impact on businesses that they can't hire or retain employees because they can't find affordable available housing. So the establishment of that state level housing appeals board I think was critically important. There was there was there was a lot in there that that the BIA specifically supported. But there were things in there that the BIA opposed to.

Laura Knoy:
So all this good stuff, if I can put it that way, that you like the housing board, the university system, workforce training. Is it worth holding up the budget over these business tax rollback reduction rollbacks?

David Juvet:
We did. We as an advocacy group, we don't make that decision. That's that's coming from the governor. And we have not in any way communicated that that we are supporting his veto or asking him to the cave. We focus on the issues that we support and the issues we oppose. And it's really his decision. He weighs all of that information with information he gets from other advocacy groups and citizens and makes his decisions.

Laura Knoy:
All right. It's. Really good to talk to Dave, as always. Thank you. Thank you.

Laura Knoy:
That's Dave Juvet, senior vice president of public policy for the New Hampshire Business and Industry Association. And since he mentioned other advocacy groups later on in the show, we'll talk to the New Hampshire Municipal Association and the New Hampshire Community Behavioral Health Association. You know what? I'm struck by Jackie from that call out to Dave Juvet, who's been watching state politics for a long time. There was a lot of bipartisan agreement with this budget.

Jacqueline Benson:
Oh, yeah. Well, we have to remember that what impacts the business, the business economy, New Hampshire, the world in which businesses operate. New Hampshire is so much more than just taxes on their profits or they're being at their enterprise, affordable housing, the ability to it to attract workers. I mean, we have a really low unemployment rate in this state. It's great, but it makes it tough for businesses. They've been really screaming for for needing to find qualified workers and get them here in the cost of housing, the cost of higher education.

Jacqueline Benson:
These are two big things you hear about that that that are potentially impeding people from coming to New Hampshire to work. All right.

Laura Knoy:
Well, coming up, we will talk more about the state budget will hit on that Medicaid issue that Dave Juvet mentioned and school funding. And we'll hear how city and town officials are reacting. Stay with us. This is The Exchange on an HP.

Laura Knoy:
This is The Exchange. I'm Laura Knoy. Today, New Hampshire's lack of a state budget. Why we're in this situation and what it means. Your questions and comments, of course, are always welcome. Send us an e-mail exchange at NHPR.org. Your thoughts on this lack of a budget right now or just your questions about how the whole process works? Exchange at NHPR.org is the e-mail. Use Facebook or Twitter at an HP exchange or give us a call 1 800 8 9 2 6 4 7 7. With me in studio, Jackie Benson, content editor for Citizens Count. And Phil Slaton, policy analyst for the New Hampshire Fiscal Policy Institute. And both of you, we talked earlier with Dave Juvet at the Business and Industry Association about the business taxes and how Democrats want to change those. Governor Sununu wants those tax cuts to continue. A key sticking point the governor has said for him with this budget is that he feels it is not sustainable in a long term way. Here he is. After a meeting late last week with municipal leaders, he says he's willing to be flexible on how state moneys are spent. But he said not in a way that he worries will set the state up for later fiscal trouble.

News Clip:
We do have to live within within our means without pushing taxes higher and even income tax and broad based tax. And also creating that structural deficit in year three and four that undoubtedly will be there. We have to make sure we don't do that because long term it would put us in a tough situation. I think everybody in the room got it. It was great to hear their comments. I thought it went wonderfully.

Laura Knoy:
Again, that clip was from a video produced by in-depth New Hampshire's Paula Tracy. And Phil, can you untangle this us for a little bit? We've heard Governor Sununu say this a lot over the past three weeks, that the fiscal path that the Democratic budget would put the state on is not sustainable.

Phil Sletten:
Sure. So part of the reason why the math is a little unique for this budget negotiation relative to prior budget negotiations is that all the sets of revenue projections that have been produced over the course of this budget development have shown revenue going down over the next several years. And the reason for that is closely tied to the business taxes like we were talking about before the break. The business tax receipts have been very high in the last year and a half or so following the passage at the federal level of the Tax Cuts and Jobs Act. Now, the federal government has brought in less corporate tax revenue, but the state government has brought in more because some of the changes, particularly repatriating dollars from overseas businesses, moving their dollars back to the United States that have been captured, that have included in our business tax base in New Hampshire. So we've seen this burst of revenue, this burst of surplus that was caused by that by that federal tax overhaul that is now fading over time. So the economy is growing, the economy is catching up to that. But we've seen both in the in the last round, in the last budget, we saw a rise in business taxes with the economic growth. And in this budget and in this last budget that passed, we saw a rise in business taxes beyond expectations following the federal tax overhaul. Neither were caused by rate reductions here in New Hampshire, it appears, as far as we can tell. So there's we've seen now that with business taxes dropping off in terms of what's expected for revenue, economic growth will catch some of that, but probably not all, which means that those business tax rate changes further out in the budget matter quite a bit in terms of how much revenue comes in at the tail end, because we have a lot of surplus revenue now, but it's not likely to continue going forward.

Laura Knoy:
So his point correct me if I'm wrong, please fill his point is use some of these moneys now that we have for these needs investments, whatever you want to call them, but don't create whole new programs they have to fund year after year after year because the money might not be there year after year after year that. That's the point. Yes.

Phil Sletten:
And the governor structured his budget proposal so that a lot of those dollars would be deployed in a onetime fashion. The legislature did that to a certain extent as well. So there's questions then around what is and what is an acceptable amount of within your deficits, if you will, in the state budget and what is an excess acceptable amount of carrying the surplus forward, given that the economy is growing? You know, we are in this longest economic expansion in recorded U.S. history going back to 1850. Is that as far as we have estimates for? So there's you know, there's some question about what happens in the economy in the out years, but also what are the service needs that we can fund now that we haven't been able to fund in the past? And that's part of the balance of the state budget process.

Laura Knoy:
Well, and Democrats have hit back and saying the governor is, you know, not willing to compromise over this issue. Here's the governor speaking on WMur in late June saying he has compromised.

News Clip:
We've met them on the middle on education funding. We've met them on the middle on provider rates. We met them out on the middle on how they want to fund the university system, go down the list. But they've known that there are certain red lines that they can't cross.

Laura Knoy:
So red line that you can't cross. This gets to this fiscal sustainability and how you budget four years out. Jackie, this. It's back to what we talked about earlier, it's a philosophical difference on how you fund government.

Jacqueline Benson:
Yeah, well, and to some extent it is. I think that part of what's going on here and Phil can probably speak to this a little more than I do is this is almost gets a little more political. This gets a little more about spin. So Sununu made it really, really clear in his budget what the one these onetime projects he was going to spend this surplus on money on and that they were onetime projects. You had fixing red listed dams, you know, giving more money to those FDR and Ponzi scheme victims, replacing traffic lights, rebuilding boardwalks, things like this one time expense. He put a lot of money for education into school building aid because again, it's a one time it's a one time bill.

Laura Knoy:
You can fix the roof, but it's not long term.

Jacqueline Benson:
Right. Yearly funding. So this was his way of trying to just really make it clear that this extra money, you know, this this this surplus that we don't know is going to sustain year after year, that he was going to put it in a one time thing so we wouldn't be on the hook for, you know, paying for these programs down the road when maybe we didn't have as much money. Now, the Democrats are saying they they're saying they've done the same thing. Right. They're saying it's in there, that if you look at the budget, you will find that there are enough onetime expenses in there that they that they equal this surplus money, this and this 93 million number. That's Sununu's been citing. I haven't gone through all, you know, 800 pages line by line yet to identify that. So I can't speak to its accuracy, you know, but but that's the argument. So so in a way, they're in a way they're saying they've done it. And the question becomes a little bit more about politics.

Laura Knoy:
Again, our number here in The Exchange for you to join us is 1 889 2 6 4 7 7. Send us an email exchange at an HP yard dot org. Use Facebook or Twitter at an age PR exchange. Again, you can give us a call at 1 800 8 9 2. And HP Ja Mara sent us an email from Concord. She says there is no excuse for not fully funding public education. The governor's being very shortsighted when he compromises on this issue.

Laura Knoy:
Jackie, do you want to jump in on that or fill the idea what this budget does on public education and what it does not do? Education. There's a whole almost separate issue is a lawsuit and.

Jacqueline Benson:
This is The elephant in the room in New Hampshire right now, this is huge.

Jacqueline Benson:
Yes. So we just had a major court case, a ruling in the convent case, where the court basically came down and said New Hampshire is not meeting its obligations to fund education at the state level.

Jacqueline Benson:
There's going to be implications of that that are going to play out over the next couple years. One thing that's in this budget that there is bipartisan agreement about is a commission to study this issue, a commission versus a study committee. So in the past, we've had groups of legislators that got together to look at this. Now they're bringing in outside experts to really sit down and come up with, you know, what does it mean? What is inadequate education in New Hampshire? What does that entail? You know, and then and then what does that cost? Right. So the state has to figure that out.

Jacqueline Benson:
In the meantime, we've got school districts that are just screaming for money that, you know, that are really struggling, especially in towns that have passed tax caps. You hear a lot I've been hearing a lot about Franklin as an example of this state tax cap. And Franklin, the school board, when tried to get, you know, the budget passed that I think was around 17 million dollars. They couldn't get that. They couldn't get it through. It would have involved breaking the tax cap. So they ended up getting approved first for a couple million less than that, which means they're cutting jobs. And a lot of school districts have been cutting jobs. And they were relying on, you know, the the compromise budget from the legislature put significantly more money into education. And Phil can maybe give us some numbers over what the governor gave. And the towns have basically raised their hands are saying, look, we were counting on this money coming through, particularly these stabilization grants, but more per pupil funding for schools with lower property values or more kids that were getting free and reduced lunches. That was a big, big deal. And right now, right now, that's all on hold.

Laura Knoy:
Well, the governor has heard from school officials complaints relating to what you said, Jackie. Here's the governor. In early July, saying he is willing to spend money on K through 12 and higher ed, including a type of public school aid known as stabilization grants.

Laura Knoy:
And here he is telling school district leaders to pass along a message to their representatives in Concord.

News Clip:
Let them know that the governor found a way to provide stabilization funding with some additional education funding, maybe even the student debt program and the money we want to put at the university that can all come into play without taxes and without a deficit.

Laura Knoy:
So, again, that's Governor Sununu making the case that he does want to fund education. Go ahead, Phil, jump in.

Phil Sletten:
Yeah. So the governor had proposed in a similar vein here, this one time school of infrastructure funding. And this is you know, all of this is part of a larger issue around how much money does the state collect and then send to local governments. So sometimes that's municipalities. Sometimes that school districts, the school funding side is as. Jackie correctly mentioned the really big potential change in terms of how these how this budget might shift over the course and over the course of the budget process, that has been where it's shifted the most. The governor had a one time appropriations as well as some additional ongoing appropriation for special education needs. The House contributed quite a bit more and set up, you know, sort a new tiers of the education funding formula infrastructure. The Senate pulled that back a little bit. The committee of conference reached a compromise situation, but that is expected to be an ongoing contribution. Now, there are a whole slew of issues on the municipal side separate from that. But education is the education component in terms of sending money to local governments is going to be a big part of the debate. The municipal side is as well and has been at various points in this budget process.

Laura Knoy:
Well, speaking of municipal issues, perfect timing to bring in Barbara Reid, government finance adviser at the New Hampshire Municipal Association. And Barbara, thank you for taking time out. We really appreciate it. Well, thank you for having us. So we're just about three weeks out from no budget, not a real long time. Have you felt an impact at the municipal level so far?

Barbara Reid:
Well, not not necessarily at this point. But I think there there are a couple of concerns with the state being in this situation and not having passed a budget. And as you've been discussing already, this there is some there is a lot of money in the budget that would be very helpful for municipalities. And also, we're concerned about what's going to happen with the property tax rate setting process, which normally begins in the end of September or October. You know, we heard from many legislators this year that property tax relief was a huge issue for them. And there is 40 million dollars in the budget for municipal aid unrestricted to be used for any purpose. Municipalities want they can use it for property tax relief. They can use it for roads, bridges, whatever. But again, without having the budget pass that, that's in limbo right now, as well as other money for a highway block grants and, you know, general funding from the meals and rooms, tax revenue. So so this is all still up in the air. And as I mentioned in the fall, the Department of Revenue will start setting tax rates and without knowing what is the municipal aid that can be built into those tax rates. It's going to be a problem in establishing what those property tax rates should be.

Barbara Reid:
I say tax bills that go out in December.

Laura Knoy:
So just for people who aren't as involved as as you are.

Laura Knoy:
So how it works, Barbara, and correct me if I'm wrong, is you at the municipal level really need to wait for the state to figure out how much money it's going to send you and for what? Before you can even start your own planning, including that all important property tax rate. That's the problem for you.

Barbara Reid:
Yeah. And most municipalities, all the municipalities and all the school districts have already adopted their budgets for this year and within an assumption that there is going to be some state aid coming back to them. So the question is, how much will that be? And if there isn't a state budget, then that money can't be included in the property tax rate.

Barbara Reid:
So to kind of lower the property tax rates.

Laura Knoy:
How much has the governor reached out to you, Barbara, and other city and town leaders? There was some news late last week about a gathering of municipal officials with the governor.

Barbara Reid:
Yes. But the governor did meet with them a number of quite a number of municipal officials. And as we understand, I think there were about 60 municipal officials there. And, you know, obviously, you know, talked to them about his concerns with being in this situation with the continuing resolution, but also took questions from them and heard their concerns, too.

Laura Knoy:
Well, it's here a little bit from the governor following last Friday's meeting with city and town officials. Here's Governor Sununu saying just what you said, Barbara. It was a chance for local leaders to express their concerns.

News Clip:
There was a lot of discussion about the opportunity for the state pulling back on the downshifting of costs that happened years ago, being able to pull some of that back. I think there's opportunity, therefore, that they talked a little bit about education funding and we re-emphasize our support for stabilization grants, our ability to possibly do something in education for funding and provide a rates and all of these things.

Laura Knoy:
Again, that's Governor Sununu after meeting with city and town leaders. That clip from in-depth New Hampshire's Paula Tracy. What about the House and Senate leadership, Barbara? Had they reached out to you as well?

Barbara Reid:
Well, worth more so when the legislature was still in session and certainly during that committee of conference, as they mentioned, there were there were some significant chunks of money in the budget and House bill, one in House bill two that we were tracking very closely. And as I said, there was a desire on the part of legislators to provide property tax relief. But without without the budget having passed that, we're not going to see that happen until we know there is is really that money is available to do that.

Laura Knoy:
How are you? Feeling about the prospects of compromise and compromise coming soon so that you guys can start making your plans.

Barbara Reid:
Well, the continuing resolution goes through September 30th. You understand that the House and Senate will be coming back in mid-September. They're going to have to do something either or come to some compromise or have another continuing resolution. And I think that is that is what we are fearing. They can put whatever they want into another continuing resolution. But, you know, obviously, they'd rather have a budget adopted. And that's obviously what we all want to see. So, you know, we think we're we've got a deadline of September 30th and we've got at least the House and Senate coming back, as we understand it, in mid-September. So we're we're being optimistic.

Laura Knoy:
Ok. Well, I appreciate that. Thank you very much for being with us, Barbara.

Barbara Reid:
OK. Thanks.

Laura Knoy:
That's Barbara Reid. She's government finance adviser at the New Hampshire Municipal Association, talking about how cities and towns view this lack of a state budget and feel slighted. What do you think?

Phil Sletten:
Well, she mentioned Barbara mentioned property tax relief. Jackie mentioned the property tax caps and municipalities, you know, creating challenges for them. It's important. Remember how much of this is about how we collect and dispense revenue as a state as a whole. And really, if the property taxes, two out of three state and local tax dollars collected in New Hampshire are property tax dollars, the vast. It's a lot of dollars. Right. So setting aside the federal government, that's two out of three dollars that all of us in aggregate pay in taxes in New Hampshire. Most of that goes to local governments and local governments. Remember, whether it's a school district or a municipality, they have a certain property tax base. And that property tax base varies considerably depending on what part of the state you're in, what community you're in.

Phil Sletten:
So a lot of this conversation around, you know, what happens to taxes at the state level, if the effect of that is how much money do we spend to local governments, then for a lot of people, it's a question around where are where the attack, where's the tax revenue collected, is collected the state level and then sent to local governments or is more of it still collected at the local level? And that's you know, that's an ongoing question. That's not a question about, you know, the surplus that we have in particular now. That's the sort of onetime relief argument. It's a question around what do we do as a state in terms of targeting aid to local governments that don't have the same amount of property tax base as you know, as they may want to fund their level of public services? The education funding provisions in in the budget, as proposed by the legislature, would target some of that aid towards those property, poor communities or those communities with smaller property values per student. So that's an important component. To remember in all these budget discussions, is that we're not just talking about funding the state, but we're talking about the interaction between the state and local government.

Laura Knoy:
Right. As you describe and as Barbara so clearly described to including just planning, trying to get things organized and figure out how much money you'll have for this, this or this. And in that meeting with municipal officials, the mayor of Berlin.

Laura Knoy:
This relates to the property poor districts, Phil, that you mentioned. He was pretty upset because he was looking forward to getting some of these moneys from the state.

Phil Sletten:
And in particular, Berlin is a combined school district and municipal government. So it's compounded there depending on how much aid comes from the state.

Laura Knoy:
Ok. And Jackie, let you jump in after a short break as well. And coming up, we will hear about community mental health and substance abuse providers, how they see this lack of a state budget. And we'll keep taking your questions and comments at 1 800 8 9 2 6 4 7 7. You can e-mail, exchange it and HP York.

Laura Knoy:
This is The Exchange I'm Laura Knoy, exchange listeners were hoping to meet you this summer at one of our coffee and community events. We want to hear what's happening in your part of the state and what you'd like us to cover. We'll be in Littleton next Wednesday, July 30, first at noon at the Inkwell Coffee and Tea House. So go to our Web site and JPMorgan or to our Facebook page for more details and hope to see you in Littleton. Back to our conversation now about why New Hampshire doesn't have a state budget. Several weeks past the end of June deadline and what the impact is. Let's hear from you, our e-mail exchange at an HP morgue. Our phone number, 800 889 2 6 4 7 7. And before we go back to our listeners, Jackie Benson and Phil Sletten. Jack, I'd love for you to jump in on what we heard from the municipal association, the difficulty of planning for city and town spending, for setting tax rates.

Laura Knoy:
And then Phil also mentioned, you know, following up on that same point, that it is a very complicated pie, so to speak, state money, municipal money, school district money and so forth.

Jacqueline Benson:
Well, this is the thing is we were talking earlier about how how big a deal. The question of education funding is around how this recent ruling that we had in the Carnival case was really clearly saying that New Hampshire at the state level needs to be paying more for education. And that's because we have to remember the way education is paid for New Hampshire is it's it's it's property taxes, both local property taxes and state property taxes. And most of that money is coming from local property taxes. And as as Phil pointed out, the ability of particular towns to raise that money varies greatly based on how much the property in that town is worth.

Jacqueline Benson:
And in in the ruling for the ConVal case, which, you know, I'm a nerd, so I read the whole thing. You know, he the judge made it really, really clear that a funding system for education that relies on property taxes, that that doesn't redistribute, that relies on each individual town, you leveraging it's property values, it's property base. To pay for schools means that you don't have an equal burden. It's some towns are gonna have a much harder time doing that than others. You know, and the ruling basically said this this a system like this is not going to work in the long term. Now, what the state will do with that? How else do we pay for it? You know, but this is this question of how how much should towns individually in New Hampshire be responsible for raising the money and for paying for you know, we could have had this conversation 20 years ago.

Laura Knoy:
Looking at you, Jackie, I'm thinking, gee, people were here 20 years ago saying the same thing, because it's a hard it's hard.

Jacqueline Benson:
It's hard, you know. I mean, New Hampshire's gone four years without a broad based tax. We don't want to add one, but there are things we need to pay for as a whole, as a state that we need to find the money for. And the question of how we do that in a way that's fair and equitable is is hard.

Laura Knoy:
Let's go back to our listeners. And Steve is calling from Newmarket. Hi, Steve. You're on the air. Welcome.

Caller:
Hi Laura, this is Steve Fournier, I'm town administrator in Newmarket.

Laura Knoy:
Oh, great. Good to hear from you.

Caller:
Yeah. And I was actually in the room with the governor on Friday discussing the budget. And, you know, our opinion as a mass party is they just need to come to a compromise. You know, we're gonna be you know, Barbara mentioned they're tied up with saying our tax rate in October, but we're also having a plan for our next year's budget. And if we don't know what kind of funds that we may or may not be getting from the state, we're not only impacting this current year, but next year as well. So it's about time that the legislature gets back to the table with the governor and start negotiating a deal.

Laura Knoy:
So what would you like to see them do in obviously start negotiating a deal if you had your druthers, what would be included in that deal, Steve?

Laura Knoy:
Speaking is that I mean, a town official.

Caller:
Definitely, you know, we've been so used to having costs down shifted to municipalities. You know, the state still doesn't live up to their commitment for shared revenues. They still don't live up to their commitment for the public sector retirement costs. I would just like some of that back to help offset the property taxes that we're continuing to see go up because of the downshifting. But if they don't even discuss the issues, we're not going to have anything and we're still gonna have to impact tax rates come October.

Laura Knoy:
What do you think, Steve? And sorry to put you on the spot, but you are certainly right in this. And so I'm really glad that you called. What do you think about the governor's argument that, you know, setting up the way the Democrats have said the budget is not sustainable in a long term way, that using onetime moneys to fix bridges and, you know, schools is fine, but don't set up any new large long term spending programs?

Caller:
Well, that's that's where we do the municipal budget as well. If we have a surplus in any given year, we're not going to start new programs with a surplus. We're gonna do one time capital projects. You don't want a budget on the back of one time money because it would just not be there in the future if the economy tanks.

Laura Knoy:
All right. Last thing for you, Steve, since you called. What's your message for lawmakers and the governor?

Caller:
Just get to the table, come and hammer out a deal, you know, and try to find some common ground.

Laura Knoy:
Okay. Good to hear from you. Thanks for calling in today.

Laura Knoy:
Again, that's Steve in Newmarket who called in here. You can hear the frustration, Phil, in his voice. You know, as a town official.

Laura Knoy:
So it's really interesting to hear from him.

Phil Sletten:
And especially considering how much in this budget has been debated around how much to send back to local governments. You know, Jackie pointed out earlier that there's some pretty broad agreement across a lot of these different iterations of the state budget. A lot of a lot of the disagreement has been around. What do we spend the additional money on that we have and how do we spend it? And then how much do we raise over the course of the biennium? So seeing not only what's happening in terms of municipal dollars being sent back to town officials, a lot of these programs were suspended around the time of the recession when there was a very different economy and the state was trying to balance its budget and saying we're only getting so much revenue coming in, we're going to have to cut cut away somewhere. Now, we're in a very different economy and people are seeing that. And so seeing the debates going on in the legislature and seeing when is this money coming back to local governments, if it is coming back in in what form that. That's something I imagine that local governments are watching with keen interest.

Laura Knoy:
Well, let's bring one more voice into our conversation. Joining us now on the line is Peter Evers, CEO of Riverbend Community Mental Health and president of the New Hampshire Community Behavioral Health Association, and Peter Evers. Welcome back. Thank you for making time out for us today.

Peter Evers:
Sure. Absolute pleasure.

Laura Knoy:
Well, what is the impact so far and against just a couple weeks of New Hampshire not having a budget?

Peter Evers:
Well, there's there's a great deal of disappointment, I think, in and in from where we're coming from, because that disappointing really is based based on the optimism that we had before the veto. And what I mean by that is I think for the first time four years, legislators, policymakers and providers have come together and worked on a 10 year mental health plan, which really takes into account all of those issues and comes up with a great plan for the next 10 years.

Peter Evers:
It's got off to a bumpy start, really, because, you know, that needs to be funded. All of those issues around creating more space at the state hospital and looking at the forensic unit, all of those things are in there.

Peter Evers:
But unfortunately, if if if the budget is going to be vetoed, then we can't get on with our Medicaid increases. And really at the community mental health level, increases in Medicaid rates are really important. They're important for workforce. It's very difficult for us to hire people when we haven't had a medical Medicaid increase for 13 years. And this new budget proposed three point one percent this year and three point one percent next year. It's not going to get us to near where we where we really need to be. But it's progress in terms of keeping some of the folks that we have employed and actually enticing them to come into community behavioral health.

Peter Evers:
You know, there's a student loan repayment piece in there as well, which really helps us retain those folks. And I think, though, that the big point I want to make is that, you know, we're leaving federal money on the table by not getting these Medicaid increases because, you know, obviously the feds are matching whatever we're paying in that race. So that's another reason we should really get this resolved so that we can match that money federally and put that to use in terms of providing great services for people.

Laura Knoy:
And just to unravel a little bit for folks, Peter, who might not understand how the system works. So the Medicaid rates are basically what providers and behavioral health organizations receive to take care of low income folks. The state and federal governments say, hey, thank you for doing this. And here's what we're going to reimburse you for taking care of that. That population and the rates have been very low here in New Hampshire. So you've been having a hard time getting people to join this profession. Is that the correct summary?

Peter Evers:
That's absolutely right. Really, those Medicaid rates are the safety net, if you like, for services like developmental disabilities, obviously behavioral health choices for independents, those services that keep people in their homes. This is an ever burgeoning population in New Hampshire. We know that the highest growing population in New Hampshire is 85 and over. We really need to preserve that safety net for people because we know that those folks become more vulnerable as they age.

Laura Knoy:
When New Hampshire has very low Medicaid rates, what does it mean for the workforce then? Do people just say, you know, I think I'll just work in Vermont or Massachusetts?

Peter Evers:
Yeah, we do get a lot of spill over to to other states. You know, we also we're not just competing with ourselves as as providers of Medicaid rates as well. We're competing with school systems, hospitals, insurance companies. As insurance companies come into the into this space, they tend to hire people away. And we just we we need to be able to fight with both hands in front of us. And having those low rates means. That actually, if you think about it, 13 years worth of no rates is the equivalent of a 25 to 28 percent reduction in fees because of the consumer price index for four months for medicine. So we you know, we're falling behind and it means that people they really want to stay. They want to stay in mission, but it gets more and more difficult as the property has its prices go up. The cost of living goes up. And they have to make some very difficult choices, especially when they've got massive student loans.

Laura Knoy:
One last question for you, Peter. What about the idea that the governor put forward that some type of Medicaid providers would get increases, but it should be targeted to those areas where there seems to be the most need? How do you feel about that?

Peter Evers:
Yeah, I mean, I I think I think if you neglect the system for 13 years and that's many go governors issue, it's not just this one, but if you if you neglect this system overall for many years, you have to have all boats rise. And I think an across the board is a good place to start because every one of those services is really important for people.

Laura Knoy:
All right, Peter, thank you very much for being with us. We appreciate it. Thanks a lot.

Laura Knoy:
That's Peter Evers, CEO of Riverbend Community Mental Health and president of the New Hampshire Community Behavioral Health Association. Jackie? Medicaid keeps coming up. Peter did a good job untangling how it's so important. Just remind us how Medicaid reimbursement rates are just felt across the state where they're talking about substance abuse or people with developmental disabilities. I mean, it's it is felt in many, many corners.

Jacqueline Benson:
It's everywhere. And this is the thing that we need to remember is that it doesn't just impact people that are Medicaid enrollees. Right. This impacts anyone who's seeking health care in New Hampshire. Anyone. And all of us. Private insurance. Yeah. I'm married to a teacher. I have great insurance. But part of the reason that we have trouble getting, you know, teacher contracts approved is the cost of these benefits. The benefits are expensive because what ends up happening when Medicaid rates are so low is that providers are kind of forced to charge higher rates to private insurance. Right. To make up the difference. So this drives up insurance premiums for everybody else. This is this is why it impacts everything and it's why it's it's one of the things that, you know, Sununu as mentioned it. David, you've mentioned I believe mentioned it as well, because it has a big impact on business. You know, health insurance costs are a big deal for business, you know, and if if they're being forced to kind of make up the difference because the state's not putting enough money on the table to cover the real costs of these services, you know, that's that's that's a challenge for everybody.

Laura Knoy:
So I have a really sort of one on one basic question for you, Phil. The concern keeps coming up. And the governor certainly raised it that while he wants take care of onetime needs, you know, fixing that bridge or that school, he doesn't want a budget that commits the state to long term problems because, you know, he feels that's not sustainable. How do you raise Medicaid rates in a sustainable way? Because it didn't seem like you can raise them one year. And then if the money starts to, you know, starts not to flow, you say, oh, sorry, never mind about that increase. How do you raise Medicaid rates in a sustainable way? The governor did put forward the idea of targeting some increases for some sectors.

Phil Sletten:
Yeah. So raising them in a sustainable way and not folding them back later, is it? Yeah, we'd certainly be a challenge.

Laura Knoy:
It's easy to see onetime funding. You know, again, fix that road.

Phil Sletten:
But yes. So that that's where you have to decide what are we going to fund with onetime funding or what are we going to fund with ongoing funding? Medicaid reimbursement rates might be something you would want to fund in the ongoing funding category because some of this funding is ongoing. But there is a there's a chunk that's likely to be one time. That being said, you know, if legislators find room in the budget for this to be funded with ongoing funding, that would bring in that extra money from the federal government, that additional 60 plus million dollars that would come in in federal dollars that comes into the economy. Jackie mentioned the low unemployment rate. Peter mentioned how it's maybe difficult to hire and retain workers. The Medicaid reimbursement rates certainly help on that front end. You know, when providers aren't able to fund the services for the hundred seventy five thousand people in the state who are generally people with pretty limited means because they're they're enrolled in Medicaid and Medicaid eligible those hundred seventy five thousand people, you know, not all of them are in the same categories of service needs, but if they don't receive their services, there are other costs, the economy and other costs to the state government itself that the state might see that they would that the state wouldn't see if those services were funded in a more robust manner upfront.

Laura Knoy:
Now, we should do a whole program on this.

Jacqueline Benson:
Oh god.

Laura Knoy:
Yes, you guys can come in.

Laura Knoy:
It really is just it's just got its its imprint on everything. Oh, my God. Even even people who have, again, like Jackie said, excellent health care.

Phil Sletten:
So we've talked about education funding being a really big deal. That's about a billion dollars that the state sends to local governments to fund. Haitian, of course, that has systemic effects. Medicaid is a is a roughly 2 billion dollar program in the state if you include the federal funds as well. So both of these programs obviously have big systemic impacts on how our state functions, how the state economy functions and the well-being of the state long term.

Laura Knoy:
Did you jump in, Jackie, on that?

Jacqueline Benson:
No nodding in agreement, with everything he's saying.

Laura Knoy:
Ok.

Laura Knoy:
We got an e-mail from Fred who says he's an at large city councilor for the city of Concord. And Fred says, I attended the meeting with the governor this past week. Again, that's the meeting he held with city and town officials. And Fred says, I can share with you that there was an overwhelming consensus of participants that downshifting costs to municipalities is not a sustainable model. Fred says depending on local valuations, there's a wide variation in the delivery of services, depending on the city or town you reside in. Fred says in Concord, over 30 percent of property is tax exempt, state, federal or nonprofit. So we come to the plate with a challenge. Fred says there needs to be a more equitable taxation structure in place. While I believe the dollars collected locally are generally spent more efficiently. It is a tough structure for people, property, poor communities. This is the point that some people don't realize that cities like Concord or towns like Hanover, where there's a lot of non-profit or government property, you can't tax that property. So you do kind of miss out. I guess I could say there is also a benefit to being the state capital. A lot of people come in. They eat at your restaurants and so forth.

Peter Evers:
I'll add to that list as well. Some of the laws that the state has around, for example, current use and the state's required exemptions for certain types of property that also affects the property tax base. And in places that you might not necessarily think of in current yourselves, the impacts a lot of rural areas.

Laura Knoy:
Ok. All subjects that we have done shows on and will again. Last question for you, Jackie. What do you think the chances are that this will be resolved soon, maybe by the end of the month or.

Jacqueline Benson:
Well, we're hearing optimistic statements from both sununu and the legislature on that

Laura Knoy:
Yeah that's the sense I got.

Jacqueline Benson:
If you if you ignore kind of the 2020, you know, campaigning that's going on over here on the side, I think that they both sound optimistic that they're going to come up with a solution. You know, in in in a timely fashion.

Laura Knoy:
Well, and that will be welcome news to the people that we talked to today. Dave Juvet with the Business Association and Barbara Reid with the Municipal Association and Peter Evers with that Community Behavior Health Association. All those people saying, please get this done so that we can move forward with our planning. Thank you very much, both of you, for being here. I really appreciate. It's good to talk to you. Phillip, thank you so much. Thank you for having you. That's Phil Sletten, policy analyst with the New Hampshire Fiscal Policy Institute, and Jackie Benson, content editor for Citizens Count. We'll talk again. Thanks for being here. This is The Exchange on an HP.

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