CONCORD, NH — Citing the familiar red flags of tax increases and a structural deficit, Gov. Chris Sununu as expected vetoed the two-year operating budget Friday the House and Senate passed the day before.
“The legislature’s proposed budget for fiscal years 2020 and 2021 …both threatens the state’s economic growth and leaves the next legislature with a massive fiscal deficit,” Sununu wrote in his veto message. “This budget takes us down the wrong path, and the people of New Hampshire will never support it.”
But Democratic legislative leaders said the governor chose big business over the people of New Hampshire who would have benefited from property tax relief, expanded child protection and mental health services, and business tax reforms businesses want more than a small tax reduction.
“It’s deeply discouraging that the governor chose today to put big businesses before the people of New Hampshire when he vetoed the state budget,” stated Senate President Donna Soucy, D-Manchester. “While the Senate remains committed to ongoing budget negotiations, the governor’s veto today delays implementation of statewide children’s mobile crisis services, jeopardizes critical funding to address the mental health and substance use disorder crises, and kicks the can down the road on education funding and property tax relief.”
The House and Senate passed the $13.3 billion, two-year budget package without one Republican vote in either body and with a partisan, contentious debate in the Senate.
While Democrats claim the budget meets the needs of New Hampshire residents more than any budget in a long time, providing critical services such as substance abuse treatment and recovery, mental health emergency care, child protection and crisis help, along with a first step in addressing the state education funding system that has some communities in crisis, and revenue sharing with cities and towns for the first time in a decade.
But Republicans said the budget would hurt the businesses that creates the jobs for the state’s robust economy, and will spend the state into an income tax.
The key disagreement between the Governor and the Democratically controlled House and Senate is business tax rates.
Democrats say the rates are “stabilized” at 2018 levels, while Sununu says that is a tax increase because the rates went down in January under the last budget plan.
Maintaining the rates produces $90 million in revenue the Democratically controlled House and Senate need to balance the budget and say business taxes have been reduced over the last few years and are now the lowest in New England.
Democratic leaders say the budget includes business tax reforms bringing New Hampshire in line with surrounding states that are more important to businesses than the small rate cuts Republicans demand.
Sununu said in his budget message the ongoing rate reductions are responsible for the state’s growing economy, noting four years ago, New Hampshire had the highest business tax rates in New England.
“The Legislature began the process of providing tax relief by lowering the burden on our employers in a measured process,” Sununu writes. “This had an immediate impact on our economy. Employers thrived and created jobs.”
He said the legislature’s budget would reverse that success.
Democrats said they tried to work with Sununu and met him more than half way giving up a capital gains tax the House used to increase education funding and a paid family and medical leave program both houses passed, while the governor refused to budge on any significant issue.
“The House and Senate listened to the governor and the people of New Hampshire and built a budget that helps everyone. The budget vetoed by Governor Sununu today did more for cities and towns than any budget in the last ten years while enacting meaningful business tax reform,” said Senate Finance Committee chair Sen. Lou D’Allesandro, D-Manchester. “The governor let this opportunity go by with the stroke of one red pen today simply because he wanted his way. That’s not what cooperative government is all about.”
Both House and Senate Republicans urged the governor to veto the budget Thursday saying they would support him, which would sustain his veto because Democrats do not have a two-thirds majority needed to override the veto.
“Republicans in the House stood united against the Democrats’ fiscally irresponsible deficit-ridden spend-a-thon budget, and we fully support the Governor’s decision to veto HB1 and HB2,” said House Minority Leader Dick Hinch, R-Merrimack. “This budget raises taxes on our citizens, jeopardizes our economic success, and puts us at a real risk for an income tax or capital gains tax in order to dig ourselves out of an impending structural deficit.”
Despite the veto, the governor and Democrats agreed on many issues in the budget including Medicaid provider rate increases, a new Secure Psychiatric Unit, upgrading Department of Transportation vehicles, $40 million in revenue sharing with municipalities, funding for child protective and mental health services, reducing the number of mentally ill patients in hospital emergency rooms, ending the wait list for developmentally disabled services, lead paint remediation and fixing state owned dams.
But the two sides could not agree on business tax rates.
Democrats say the veto leaves the state’s children, families and property taxpayers in the lurch as they try to negotiate a new budget package
“With so many crises facing our children, our families, and our state, Governor Sununu’s veto of an entire state budget over one issue he didn’t win on is just not the New Hampshire way. It is reckless, tone-deaf, and Trumpian,” said Senate Majority Leader Dan Feltes, D-Concord. “Our families, our economy, and our property tax payers all deserve better. They deserve a budget.”
But Sununu contends the budget creates false hopes and likens it to the one passed in 2009 that resulted in a significant deficit, causing lawmakers in the next legislature to cut critical programs and layoff state employees.
“I will not put our state in that position again,” Sununu writes. “By putting our booming economy at risk and by building spending expectations that are unsustainable, this budget relies on bad financial management practices and therefore, I cannot support it.”
The House and Senate unanimously approved and Sununu signed a three-month continuing resolution to allow state government to continue operating at approved fiscal year 2019 spending levels. The resolution remains in effect until Oct. 1 or until a new two-year budget is approved.
Legislative leaders and the governor say they intend to continue the ongoing negotiations that continued until Thursday when the legislature voted for the budget package down party lines.
While lawmakers’ budget spends $13.3 billion in total funds, Sununu’s proposed budget would spend $13.1 billion.
The Legislature’s budget spends $5.5 billion in state general funds, which is approximately $500 million more than the budget proposed by Sununu.
Garry Rayno may be reached at firstname.lastname@example.org