On May 5, 2015, New Hampshire Fiscal Policy Institute Executive Director Jeff McLynch provided the following testimony regarding the FY 2016-2017 state budget at a public hearing held before the Senate Finance Committee.
Testimony of Jeff McLynch,
Executive Director, New Hampshire Fiscal Policy Institute,
Before the Senate Finance Committee
Regarding the FY 2016-2017 Budget
May 5, 2015
Chairwoman Forrester, Members of the Committee, thank you for the opportunity to appear before you today.
For the record, my name is Jeff McLynch and I am the Executive Director of the New Hampshire Fiscal Policy Institute. NHFPI is an independent, nonpartisan, nonprofit organization dedicated to exploring, developing, and promoting public policies that foster economic opportunity and prosperity for all New Hampshire residents, with an emphasis on low- and moderate-income families and individuals.
I want to thank you as well for your willingness to listen the views of your fellow citizens and your constituents as you go about the difficult task of crafting the state’s budget for the next two years. In that vein, I would like to express two concerns about the version of the budget that the Senate may produce, one pertaining to a set of provisions currently lacking from the document that you received from the other body and another regarding changes that could be added to that document.
First, as you know, the New Hampshire Health Protection Program, which you and your Senate colleagues were instrumental in creating last year, currently allows New Hampshire to leverage federal funds to provide affordable health insurance coverage to low-income Granite Staters. More than 35,000 people have already enrolled in the program, which, in turn, will bring more than $200 million in federal funds into the state’s economy this fiscal year alone. Information presented by the Department of Health and Human Services in March indicates that the flow of federal funds could swell to more than $400 million annually or in excess of $800 million in the FY 2016-17 biennium.
Moreover, data compiled by the New Hampshire Hospital Association suggest that the Health Protection Program may already be yielding the kinds of benefits expected of it at the time it was established. More specifically, a survey of the Association’s membership reveals that, while overall inpatient admissions, emergency room visits, and outpatient services have been roughly stable between 2013 and 2014, there have been substantial declines in these areas among the uninsured, thus reducing the amount of uncompensated care local hospitals have had to provide.
Nevertheless, as the Committee is also no doubt aware, the Health Protection Program is presently scheduled to expire at the end of 2016. The budget proposal put forward by Governor Hassan in February would have removed that expiration date and made the program permanent, while also preserving important safeguards that would terminate the program in the event that federal matching percentages (which will range between 95 and 90 percent over the next several years) should fall below the levels now stipulated in law. The House of Representatives, in passing its version of the budget on April 1, rejected the Governor’s recommendations and would allow the program to end in 19 months’ time.
I urge you to reverse the House’s decision, to reauthorize the New Hampshire Health Protection Program, and to make it permanent. Doing so would provide greater certainty, not just for those Granite Staters who now have access to affordable health care, but also for the health care providers, insurers, and other private entities that help to ensure they receive it. Needless to say, integration with private markets is a central element of the Health Protection Program. As a result, the need to act now is great, since delays in reauthorizing the program could create significant difficulties for those insurance carriers that wish to offer private market plans to Health Protection Program enrollees beyond 2016. Making the program permanent would assure them that investments of time, energy, and capital will result in real dividends over the long run.
Second, many here today know that the Senate has already this session approved multiple pieces of legislation to cut taxes for businesses operating in New Hampshire. Chief among those bills are SB 1, which would reduce the rate of the business profits tax from 8.5 to 7.9 percent by 2020, and SB 2, which would lower the rate of the business enterprise tax from 0.75 to 0.675 percent over the same span. Fewer are aware of the significant impact that business tax cuts would have on New Hampshire’s finances. Based on the fiscal notes accompanying SB 1 and SB 2, when taken together, the two bills would reduce business tax revenue by roughly $28 million over the course of FY 2016 and FY 2017 and, once they are fully implemented during the FY 2020-2021 budget cycle, by approximately $83 million on a biennial basis.
A variety of recent press accounts suggest that the Senate may seek to incorporate the substance of those two bills into its version of the budget for the coming biennium. However, the version of the budget passed by the House of Representatives, the spending reductions it contains, and the one-time fixes it employs, demonstrate quite clearly that New Hampshire simply cannot afford costly and ineffective business tax cuts.
To be sure, the revenue estimates on which the Senate ultimately bases its version of the budget may prove to be more robust than those projected by the House. However, even if that does prove to be the case, it simply would not be possible to preserve dedicated funds, to restore funding for municipalities, for public colleges and universities, and for services for the elderly and other vulnerable Granite Staters, and to cut taxes for large and profitable corporations as part of the FY 2016-2017 budget.
Furthermore, phasing business tax reductions in over time, as SB 1 and SB 2 would do, or delaying their initial implementation until several years from now, simply puts off – for another day and onto future legislatures — the difficult choices and tough tradeoffs that would have to be made to accommodate the revenue losses certain to result from business tax cuts.
Consequently, I urge the Committee to reject any attempt to use the FY 2016-2017 budget to lower business taxes, either now or in the future.
Again, I thank you for the opportunity to testify today and would be happy to try to answer any questions you may have.