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Wednesday, May 15, 2013

Next state budget faces shortfall

CONCORD – The next two-year state budget faces a $168.6 million revenue shortfall principally due to over-estimates of receipts from a hospital tax, the Senate Ways and Means Committee concluded Tuesday.

The finding sets up the real prospect of the Senate proposing deep cuts to its version of a two-year, $11 billion spending plan over the coming weeks. ...

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CONCORD – The next two-year state budget faces a $168.6 million revenue shortfall principally due to over-estimates of receipts from a hospital tax, the Senate Ways and Means Committee concluded Tuesday.

The finding sets up the real prospect of the Senate proposing deep cuts to its version of a two-year, $11 billion spending plan over the coming weeks.

The panel endorsed its report that found existing taxes and fees would come in $61.4 million below what the House of Representatives counted upon when it adopted a budget in March.

This $2.2 billion forecast is $150 million lower than what Gov. Maggie Hassan had figured upon in proposing her budget in February.

The overwhelming difference between the Senate finding and that of Hassan and the House concerns what the state should expect to receive from the 5.5 percent Medicaid Enhancement Tax that hospitals pay on net revenues.

The Senate tax experts are counting on $375.2 million from the MET – that’s $107 million less than what Hassan and the House believe the tax will generate.

Senate Finance Committee Chairman Chuck Morse pointed out that $107 million shortfall will require twice that in necessary budget cuts because Hassan and the House assumed that extra money from the tax would attract matching federal grants.

“When you say we are short $106 million that’s really a $212 million hole,” Morse said expressing doubt the MET will ever raise the kind of money the House and Hassan forecast. “I don’t see that this number is going to grow. If anything, I could see downward pressure on this number.”

A spokesman for the New Hampshire Democratic Party demanded Senate Republicans come clean on what could be close to $300 million in budget cuts to close this revenue hole.

“It is time for Senate Republicans to flat out name their cuts,” said Communications Director Harrell Kirstein. “If Republicans plan to devastate education, kill hundreds of New Hampshire jobs, put winter snowplowing at risk, downshift to local communities, and slash hospital funding – again – they should be honest with the people of New Hampshire about what exactly they plan to cut.”

The New Hampshire Legislature and then-Gov. Judd Gregg came up with the MET in 1992 as a legal way to leverage hundreds of millions of dollars in federal money.

Hospitals willingly cooperate with the scheme because after paying the tax, the state previously had reimbursed them what they paid to Concord and let the state budget keep the extra federal money.

But the Republican-led Legislature in 2011 wrote the current state budget that only gave back some MET cash, and to rural, “critical access” hospitals. The other hospitals had to pay the tax and get nothing in return.

This decline of more than $200 million in state support led hospitals to make huge layoffs and eliminate some services. It also prompted 10 hospitals to sue the state in federal court accusing it of Medicaid reimbursement rates that were illegally too low.

Senate Ways and Means Chairman Robert Odell, R-Lempster, noted the House and Hassan forecast record receipts from the MET he said weren’t plausible.

“We never had that money in the past, never had $250 million in net revenue before,” Odell said.

The head of a conservative think tank praised the Senate panel for its lower MET estimate.

“Realistic revenue estimates are the difference between a manageable budget and a looming crisis. The state’s recent history underscores the point,” said Josiah Bartlett Center President Charlie Arlinghaus. “ To understand the MET is to realize how much the estimate must be lowered as our report on the confusing tax shows.”

Senate budget writers still have decisions to make in the coming weeks that could improve this picture.

For example, the Senate’s revenue plan does not assume $80 million in a one-time license fee from a casino even though the Senate approved a casino bill in March.

A House super committee is expected to make its long awaited recommendation on the casino bill (SB 152) Wednesday.

The Senate plan also doesn’t go along in raising the state’s tobacco tax by 30 cents per pack of cigarettes that would raise $30 million a year.

Senate President Peter Bragdon, R-Milford, has said the 13 Senate Republicans who control the upper chamber will oppose increasing any taxes.

Under existing New Hampshire law, the tax will go up 10 cents a pack on July 1 because a first-ever tax cut in 2011 has failed to produce an expected revenue surplus over the past two years.

Senate budget writers also haven’t acted upon other revenue measures in the House and Hassan budget including adding more tax auditors, ($26 million) and postponing business tax credits ($13 million).

The Senate has to pass its state budget plan by June 6.

Kevin Landrigan can reached at 321-7040 or klandrigan@nashuatelegraph.com. Also, follow Landrigan on Twitter (@Klandrigan).