On June 25th the Governor vetoed the budget, one day after it passed both chambers of the Legislature. The path forward is unclear but we know two things - the Governor and Legislature must agree on a budget that is balanced, and all parties have promised to return to the negotiating table. Disagreements on business tax cuts, cigarette tax increases, aid to cities and towns, funding for local schools and higher education, state funding of the safety net for low income individuals and raises for state workers will all be part of the agreement to come.
The Governor's veto of the budget passed by the NH House and Senate, provides a clear signal that she disagrees with the direction and policy priorities established by the Legislature. This is the first in a series of posts that will explore the differences that exist between the Governor's budget vision and that of the legislature. First up is a look at the magnitude of differences in spending priorities. Next up? An effort to understand and quantify the impact of those spending differences. And finally, a discussion of what the economics literature suggests about corporate taxation and job creation and new business development.
How did the Legislature prioritize their spending?
The 2016-17 budget approved by the Committee of Conference represented a 10% increase in general fund spending (which we focus on in the remainder of this post) over 2014-2015. Some of this change represents a change in the way in which the state is budgeting funds (for example, the Department of Safety has been reliant on highway funds for their funding in the past). Others represent material increases in program funding including Health and Human Services (at $157 million additional), the Department of Corrections ($14 million), and our major educational systems (including UNH and the Community College System). Only four areas saw reductions in spending relative to 2014-15, one of which was the Department of Education.
Is there a big difference between the Governor’s budget and the Legislature's budget?
Both the Committee of Conference passed budget and the Governor’s budget represent significant increases in spending beyond the 2014-2015 budget. The Governor’s proposed budget was 12% higher than the amount spent in the current biennium (2014 actual and the amount authorized to be spent in 2015). The Committee of Conference proposed budget represented a 10% increase. The difference between the two, in dollar terms, was $54 million dollars.
If the budgets are so similar – varying by less than 2% - where are the differences? In the table below, we show how general fund spending varies between the Governor’s proposed budget and the Legislature's budget. The primary areas of difference are Health and Human Services, the University of New Hampshire, and the Department of Corrections. Put another way, relative to the Governor’s budget the Committee of Conference decision’s regarding revenue (the reduction in business taxes, increasing the amount of resources in the state’s rainy day fund, and the exclusion of Keno) meant they had less revenue to work with.
What do these differences mean to the people of New Hampshire?
Unfortunately, the budget process hasn’t yet answered these questions. At this point, beyond statements made by the Governor and spokesman for the House and the Senate, we don’t really know what the impact of the different decisions are. While some of the differences are clear (the Governor would reauthorize and fund the state’s Medicaid expansion), others (the Senate’s decision to fund corrections at a lower level than the Governor) are not. In our next post, we will try and put these differences in context by providing a quantitative assessment of these differences.