- Associated Press - Saturday, December 20, 2014

CONCORD, N.H. (AP) - The state budget will serve as the political battleground between Democratic Gov. Maggie Hassan and Republican lawmakers in the upcoming session, with state spending on universities, prisons and services for vulnerable populations at the center.

Between a landmark mental health settlement and a loss in state revenue from a controversial hospital tax, the state is already looking at more than $100 million in new costs in the general fund, excluding a possible deficit leftover from the current budget. State agencies are asking for $12.5 billion in spending, a 17 percent increase over the current $10.7 billion budget and a number Hassan says is too high.

Partisan arguments will drive some of the conversation: Hassan says recent reductions in business taxes are to blame for potential problems, while Republican Senate President Chuck Morse says the state spends too much.

“I’m not going to support increases in taxes or fees,” Morse said.

The session begins Jan. 7 and a budget must be approved by June 30.

Republicans, who now control both houses of the Legislature, also will push legislation aimed at improving the business climate and reducing government regulations. But Republicans lack the supermajority necessary to override vetoes, strengthening Hassan’s veto power and likely stopping efforts to approve right-to-work legislation or prematurely end the state’s Medicaid expansion program. Social issues are unlikely to be a priority, House Majority Leader Jack Flanagan said.

Looking ahead to the next budget, the university system wants $52 million to invest in engineering and math scholarships and keep tuition flat while the corrections department says it is desperately in need of money to hire new employees. The issues will compete as lawmakers deal with an already tight budget: a deal with hospitals last year over a longstanding tax will cost the state $80 million more and the state has committed to spend $24 million on community mental health services. The Department of Health and Human Services is already running $48 million over budget.

State revenues are overall ahead of target, but revenue from key business taxes is down. If the downward trend continues, the state’s final revenues might come in below target. If the next budget cycle starts with a deficit, items such as restoring school building aid fall farther down the priorities list. Hassan recently directed state agencies to cut this year’s budgets by a collective $18 million in response to the potential revenue shortfall.

Hassan hasn’t said whether she plans to request new revenue in her budget. In 2013, she failed to push through her proposals to legalize a casino and increase the cigarette tax as revenue boosters.

Lowering business taxes, reducing the cost of energy and promoting local control of education are all stated priorities among Republicans in the House and Senate. House Republicans are also likely to try to modify the state’s Medicaid expansion plan, through legislation or the budget process. The plan ends in 2016 if lawmakers don’t reauthorize it. Hassan has said she’ll veto any proposal to end the law, and Democratic House Minority Leader Steve Shurtleff said making the expansion permanent will be his caucus’s top priority.

“I can’t see someone taking away health care from people who really need it,” he said.

Flanagan said after a Wednesday Republican caucus that his House colleagues have to be realistic when dealing with Medicaid expansion, partly because senators from the GOP helped write the bill.

“I tried to temper their enthusiasm because we’ve got to get it across the wall,” Flanagan said, referring to the upper chamber.

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