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Sunday, December 30, 2012

One word for Hassan’s top challenges: Budget

CONCORD – Gov.-elect Maggie Hassan has three major challenges facing her as she becomes 81st governor of New Hampshire this week.

Budget. ...

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CONCORD – Gov.-elect Maggie Hassan has three major challenges facing her as she becomes 81st governor of New Hampshire this week.




Every single priority item Hassan’s 2012 campaign hoped to make progress on during her first term relies upon a state budget for 2014-15 that is balanced but has enough room for at least some of her wish list.

Outgoing Gov. John Lynch said Hassan, 55, starts out on more-firm footing than he found himself over the last two years, given that the voters have delivered to her a closely-divided Legislature. A Hopkinton Democrat, Lynch spent his last two years paralyzed by a super-majority Republican caucus that had at least a 3-1 edge in both legislative bodies.

“I truly believe we are going to see a return to civility that New Hampshire government has always been known for,” Lynch said.

New Hampshire has one of the weakest governor’s offices in the nation. The chief executive here must consider legislation from the largest and lowest paid legislature in the U.S. Each one has commissioners reporting to them who have a longer contract than the governor, and every two weeks, each state contract of any size has to pass muster through a quasi-board of directors known as the Executive Council.

Unlike more than 30 state chief executives nationwide, New Hampshire’s governor cannot carve out or line-item veto any bill but has to decide if all or none of it should stand. New Hampshire governors also only serve two-year terms. Vermont is the only other state where voters can decide to throw you out every other year.

Many argue, however, the New Hampshire governor’s power is at its zenith by Feb. 15 every two years when he or she has to present a proposed, two-year budget to the Legislature.

“I don’t think most people fully realize how much of a governor’s budget ends up becoming the law of the land,” said Charlie Arlinghaus, director of the Josiah Bartlett Center for Public Policy, who is considered an objective expert on state budget and taxing trends. “Sure, there are different notes played by this legislative branch or that, but it’s the governor’s sheet of music that everyone is working off of.”

This raises the political stakes for Hassan who has six years experience as a state senator including a stint as Senate majority leader.

“The plain reality is that Governor-elect Hassan can do everything else right, but if she messes up the budget, it could turn into an unmitigated disaster that frankly leaves her very vulnerable,” said Kevin Smith, R-Litchfield, who lost the 2012 GOP gubernatorial nomination to Ovide Lamontagne.

Smith worked for Republican Gov. Craig Benson, the only governor in 80 years who wanted a second two-year term and didn’t get it when he lost to Lynch in 2004.

Hassan can’t presume the voters, regardless of performance, will punch her elective ticket in 2014, Smith maintained.

“I think the paradigm has changed. In my view, that first re-election campaign not just for this office but for any major office has become the most dangerous one,” Smith said.

Along with Benson, those who tried and were denied second straight terms in recent years include ex-U.S. Sen. John E. Sununu, R-NH (2008), Congresswoman Carol Shea Porter, D-New Hampshire (2010), and Congressman Frank Guinta (2012).

Shea-Porter just won the 1st District seat back from Guinta on Nov. 6.

House Speaker Terie Norelli, D-Portsmouth, said she’s optimistic the new Democratically led House, with a small partisan margin of 221-179, will work with Hassan to make the budget work, but admitted it won’t be an easy task.

“The revenues are pretty flat, so unless the picture changes, we don’t have a lot of money to play with,” she said.

Norelli made a surprising shift last month in tapping former Majority Leader Mary Jane Wallner, D-Concord, to lead the House budget effort as finance chairwoman. The odds-on favorite had been for Norelli to reinstall ex-Chairwoman Marjorie Smith, D-Durham.

Some observers believe Norelli may have seen Wallner, a longtime, daycare provider for state services, as someone who would be more amenable to deliver Hassan’s desires than Smith.

In four years, Smith was not a demanding house finance boss but she made a series of sweeping changes to make the process more transparent and to force state agency heads to itemize up front all the potential dollars they would be spending over the next two years.

Hassan admitted to the uncertain fiscal reality when she lectured state agency heads last month to toss into the trash their spending requests that totaled a 19 percent increase.

Instead, Hassan has asked to receive, by Friday , the plans of agency directors to spend 3 percent less in 2014 than they have this year and the same amount they are spending currently for 2015.

Senate Finance Committee Chairman Chuck Morse, R-Salem, is the fiscal conservative who will have to lead the effort to trim requested spending if a House budget comes over next spring that the state cannot afford.

Morse gave Hassan high marks for her performance, though it’s early in the marking season.

Hassan also has wisely kept Morse in the loop, telephoning him on many occasions before she’s gone public with statements or key appointments.

“I think she’s done all the right things,” Morse said.

Here’s how all of Hassan’s top priorities and the state spending blueprint are inextricably tied together.

Innovation Plan: The signature theme of Hassan’s run, she wants to boost enrollment at in-state colleges and graduation degrees in the so-called STEM (science, technology, engineering and mathematics) disciplines.

If the University System of Trustees makes this commitment, Hassan would support freezing in-state tuition for the next two years.

The trustees have embraced the theme but note it would rely on Hassan finding $100 million to undo the 50 percent cut in state aid to higher education that’s in the existing budget.

Health Care Providers: At nearly every campaign stop, candidate Hassan decried the Legislature’s decision to cut state aid to hospitals by nearly $300 million over the next two years.

Hassan tried to lower the expectations bar last month when she said would be unable to undo all of the spending decisions the GOP-led Legislature made in 2011.

Lynch said recently that he’s optimistic that Hassan and the Legislature will be able to work with hospital CEOs and come up with a plan to restore some of the aid.

This could have the added benefit, if it’s enough, of prompting the 10 hospitals now suing the state over Medicaid reimbursements to drop their litigation, Lynch said.

Health Care Reform/Expanding Medicaid: Hassan has endorsed the concept of making as many as 50,000 low and lower middle income families eligible for this government-provided health care.

The Affordable Care Act would cover 100 percent of costs for this new population for three years and at least 90 percent through 2020.

But a health care consultant told Health and Human Services Commissioner Nick Toumpas last month the Medicaid change will still cost the state up to $85 million in higher administration and copayments over the first seven years.

The GOP-led Legislature blocked the state from entering into a health care exchange that would manage coverage for citizens who couldn’t get it through their employer or private insurers.

As 30 states have not moved forward at all with exchanges, the Obama administration is trying to make it easier for them to find an alternative and proposed a hybrid or state-federal partnership to act as this government health care administrator.

Ailing Infrastructure: Hassan got into trouble during the campaign when she said she was open to either raising the gasoline tax or increasing turnpike tolls to try and finance more bridge and highway construction.

After GOP opponent Lamontagne called her out on it, Hassan walked it back, particularly the idea of increasing costs as the pump as consumers face already high prices in a slowly growing economy.

Hassan’s top goal, along with other leaders like new House Public Works and Highways Committee Chairman David Campbell, D-Nashua, is to find the $250 million needed to complete the widening of Interstate 93 from Salem through Manchester.

An alternative source could be to try and reinstate an annual, $30 surcharge on car and truck registrations that would pay for $45 million worth of projects.

Former House Speaker William O’Brien, R-Mont Vernon, had led the successful campaign to repeal the surcharge, calling it a “car tax,” which made similar proposals in other states politically unpopular.

Expanded Gambling: Hassan has supported the concept of awarding one, competitively bid casino where it would raise the most money for the state, presumably near the Massachusetts border.

The New Hampshire House has not approved of a casino bill over the past 20 years it’s dealt with the issue.

Would Hassan improve its chances and attract wavering legislators by tying casino profits for the state to popular spending items in the budget?

Ex-GOP candidate Smith said that would be a risky strategy.

“She may be forced by the numbers in her budget to try and do that but then her budget becomes a house of cards if gambling goes down,” Smith said. “I can’t see the House changing its mind about gambling if it’s a monopoly and if all the money is linked to higher spending.”

Senate budget boss Morse is one of the state’s most vocal casino supporters for his hometown and the struggling Rockingham Park racetrack. But Morse opposes using gambling as a license to spend more money on new state initiatives and instead would want New Hampshire profits earmarked for such uses as I-93.

If all this weren’t enough on her fiscal plate, Hassan inherits a series of bad budget news hits.

They include a $16 million savings from managed care for Medicaid clients that has proven illusory, a $36 million owed penalty to the federal government stemming from a 2004 Medicaid audit and public assistance rolls that stubbornly remain high with spending over budgeted amounts even as the state’s enviable jobless rate slowly improves.

Arlinghaus, from the right, and Jeff McLynch, with the left-leaning New Hampshire Fiscal Policy Institute, agree Hassan will have no more than $100 million in revenue to play with even if lawmakers answer her demand to cancel the 2011 cut in the state cigarette tax of 10 cents per pack.

“One of the key challenges we will see in 2014 and 2015 is revenue growth will really constrain the budget choices available to budget writers over the next seven to eight months,” McLynch said during a recent budget summit the Business & Industry Association sponsored.

This likely explains why one of the last appointments Hassan has announced to her personal staff is her budget director.

“It’s challenging job but a fun one,” said John Beardmorive, Lynch’s budget director who left a few months ago to become administration director in the Department of Safety.

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