Budget veto likely to lead to extended impasse

June 26--HUDSON -- Lawmakers anticipate an extensive impasse following Democratic Gov. Maggie Hassan's veto of the Republican-crafted budget on Thursday, with both sides deadlocked over proposed business tax cuts and the future of Medicaid.

Hassan made good on her threat and vetoed the proposed two-year budget, saying the tax cuts would blow a $90 million hole in future years in exchange for giveaways to big corporations.

"When I made this decision, which I didn't do lightly, what I really stepped back to think about was the progress we've made over the last two years and the progress we need to continue to make so that we are a competitive 21st century economy -- not just in this two-year cycle, but in all the cycles to come," she said Thursday during an interview with The Telegraph editorial board.

The Legislature, both chambers controlled by Republicans, passed the $11.3 billion budget on Wednesday and a continuing resolution anticipating a veto. Hassan signed the resolution.

Nevertheless, lawmakers expect a standstill for months.

"I really don't know where we go given the lines that have been drawn," said House Speaker Shawn Jasper, R-Hudson. "I really just think this is going to be a matter of moving forward and seeing where revenues go, so I don't see a lot of movement in the next couple of months."

Jasper said the governor's claims that the budget is unbalanced is more of a red herring than reality. He said they could find common ground over the negotiated contract with the State Employees' Association of New Hampshire once revenues come in over the next month.

The union -- SEA/SEIU Local 1984 -- bargaining team and Hassan reached a contract agreement months ago that included a 2 percent wage increase per fiscal year for the next two years and included concessions to save funds.

"(Hassan) also made it clear that she wants the employee pay raise as part of the budget. We certainly think that's an issue that needs to be discussed," Jasper said. "I have still never seen the employees' contract. I think it was unrealistic to think that the House was going to endorse something that we haven't even had the opportunity to review."

Hassan criticized the Republican budget for unpaid-for tax giveaways to mostly out-of-state corporations at the expense of other economic priorities such as higher education and public safety.

Her administration said the budget would not provide year-to-year increase to the university system and leaves New Hampshire vulnerable to losing young people looking at high price tags at in-state colleges. She also blasted the budget for failing to adequately fund substance abuse prevention and diverting infrastructure funds intended for road and bridge repairs.

Hassan said she is not against corporate tax reductions when done properly, but said Republican budget writers raided all the wrong funding sources to make them a reality.

"Philosophically I'm not opposed to doing it, but we do have to be able to pay for the very things that businesses all around the state tell me are their priorities," she said.

Rep. Cindy Rosenwald, a Nashua Democrat and party leader in the House, said there is general agreement on spending priorities and she shares the governor's concern about the unpaid-for business tax cuts.

"They would cost $23 million in this budget and $90 million in future budgets. The evidence that such tax cuts would drive higher economic growth just isn't there," Rosenwald said. "States like Kansas and Ohio have tried without success, and our own experience several years ago with a reduction in the tobacco tax rate also failed."

Across the aisle, Republicans said reducing business taxes gradually over the next five years would affect mostly small companies providing a majority of private sector employment in the state.

"That's an issue that I don't see us moving on," Jasper said. "The Senate had clearly wanted that tax cut to start earlier and be larger, and they have already compromised down to the point where its $21 million ... and there's no room to compromise with that unless it comes out of the budget."

Commerce groups in the state called the tax reduction modestly phased over a three-year period to spark economic growth and reduce the burden for small business owners.

GOP lawmakers shot down any recommended tax or fee increase from Hassan's budget address, including a 21-cent jump in the cigarette tax, suggesting there is no desire or need to take money out of the economy.

Additionally, Jasper said he does not see any room for compromise over the New Hampshire Health Protection Program, part of a previously agreed upon Medicaid expansion. Advocates tout the roughly 41,000 Granite Staters who have signed up for health insurance coverage under the expansion, including the enrollment of more than 3,000 Nashua residents.

The speaker said there is no willingness to discuss having expansion in the budget and reiterated his inclination to have it appear in a separate bill. Health care, he said, requires a more thoughtful and complete discussion of consequences.

"The governor keeps talking about not paying for tax cuts moving forward, clearly we haven't even begun to look at the costs of Medicaid expansion is moving forward. It's a little bit of a contradiction in her position by wanting it one way in one area and wanting something else in another," he said.

Hassan told The Telegraph she remains willing to sit down with Republican leaders to reach an agreement.

"I have indicated to them that I will be available as soon as they want to sit down to begin to forge a true and meaningful compromise that will protect the economic future of our state," she said. "And I have indicated on numerous items that a compromise is possible."

Senate President Chuck Morse, R-Salem, said he was extremely disappointed following the veto. He said Hassan's decision blocks funding increases critical to state agencies and puts on hold the Senate-sponsored business tax reductions.

"The governor's budget veto shows that her priorities continue to be centered on narrow-minded special interests and not the good of New Hampshire citizens," Morse said. "Although I still believe that a veto is unnecessary, the continuing resolution will keep state government operating while we resume our work in order to produce a budget we can all agree on."

The continuing resolution ensures the state government will remain operational at the fiscal 2015 level. It will go into law July 1 and allow the Hassan administration and legislators to continue negotiations.

Chris Garofolo can be reached at 594-6465, cgarofolo@nashuatelegraph.com or @Telegraph_Chris.

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