This summer, New Hampshire Governor Chris Sununu vetoed the budget that Democrats passed in the legislature. No one has come to an agreement yet, and it may be another month or so before they do. That’s because this continuing resolution goes until September 30th, and hopefully a decision will be finalized after the House and Senate meet in mid-September.
For now, a lot is up in the air depending on where the New Hampshire budget lands. New Hampshire Public Radio’s show, The Exchange, went more in-depth about what this budget stall could mean for the state. Below is my recap of some of the main points. Listen to the full version here.
New Hampshire Budget Stall – What happens now?
Jacqueline Benson, content editor for Citizens Count, said business will pretty much continue as usual despite the budget stall. That’s because the N.H. legislature passed a continuing resolution, which is like a three month extension of the current budget, she said. So the state will operate at those same levels of funding.
“That is going to be less money than they would have gotten had this 2020/2021 budget that the legislature passed had that gone through,” Benson said. “And so you will hear that there are certain agencies and certain places in New Hampshire that are feeling a pinch.”
Government financial advisor at the New Hampshire Municipal Association Barbara Reid said one problem for municipalities is that they have made plans based around money they assumed they’d have.
“There is $40 million 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,” she said. “That’s in limbo right now ”
Phil Sletten, policy analyst for the New Hampshire Fiscal Policy Institute, explained the importance of the business tax rate.
“Our business profits tax is our largest single tax revenue source,” he said. “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.”
David Juvet, Senior Vice President of Public Policy for the N.H. Business and Industry Association, said businesses will be hit differently.
“If you are a business like a hospital and you were anticipating an increase in Medicaid reimbursement, which was included in the budget, obviously that’s not happening,” he said. “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.”
Juvet said despite those losses, there were elements of the budget that would have impacted the economy indirectly. Those included creating a state-level housing appeals board, and another was increased funding to universities and community colleges to avoid tuition increases.
“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,” Juvet said. “So we supported those tax reductions. I think those are obviously going to be a negotiating point between the legislature and the governor as to what happens to them.”
Benson talked about how New Hampshire was ruled in court to not be meeting its education funding obligation.
“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,” she said. 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? …So the state has to figure that out.”
Benson said a lot of school districts have been cutting jobs, and they had been relying on that budget to put more money into education. Right now, that’s all on hold.
Barbara Reid, Government Finance Advisor for the N.H. Municipal Association, said one big problem with the state budget being held up is that municipalities are stuck in limbo waiting for a decision. Property tax rates are another concern.
“We’re concerned about what’s going to happen with the property tax rate-setting process, which normally begins at the end of September or October,” she said. “You know, we heard from many legislators this year that property tax relief was a huge issue for them. And there are 40 million dollars in the budget for municipal aid unrestricted to be used for any purpose municipalities, like property tax relief.”
The hope is that the House and Senate can come to an agreement in September, and pull the state budget out of this limbo.
Uncertainty can have a trickle-down effect. In this case, it means that projects around the state are stalled, causing a slowdown in the state’s economy. The less money that is paid out, the less there is in the economy.
We’re seeing this nationally too, as the economy is starting to slow down. The fed has decreased interest rates in anticipation of a potential recession. As I’ve mentioned before, there are multiple signs pointing to a recession on the horizon.
In New Hampshire, hopefully an agreement will happen next month – but only time will tell.