Back of Budget cuts at heart of current dispute

Senate increases Health and Human Services program spending

Grant Bosse

Governor Maggie Hassan had some harsh words for the Senate Finance Committee this week. But the “sweeping, across the board cuts” to Health and Human Services programs aren’t in the line by line budget headed to the Senate floor, which actually spends more than the Governor’s budget on HHS programs. The dispute is over a series of “back of the budget” reductions requiring state officials to find savings over the next two years. The New Hampshire House is seeking $13.5 million in HHS cuts, while Senate budget writers want HHS Commissioner Nick Toumpas to find $26 million in savings in his two-year $1.34 billion General Fund budget.

Hassan points to Toumpas’s claim that he would be forced to cut $40 million in critical programs such as Children in Need of Services, the developmental disabilities checklist, juvenile justice, and aid to counties. But that list of unpopular cuts goes far beyond any savings Toumpas would be forced to find within his department. Toumpas also thinks budget estimates for CHINS spending is $4 million too low, and that budget writers are counting on $10 million in savings from shifting Medicaid to Managed Care that won’t materialize in time.

House and Senate budget writers are quite close on the amount they would spend on most HHS programs, though the House increases uncompensated care payments to hospitals far more than the Senate. The starkest difference is in the amount of savings they expect Toumpas to generate within his agency. Hassan says that difference could lead to drastic cuts in crucial HHS programs.

These deep cuts to Health and Human Services and employees will cost hundreds of jobs and put at risk critical areas, including mental health care, funding the waitlist for people with developmental disabilities, the CHINS program, and the ability to deliver basic services.

But the Senate budget would actually spend more on HHS programs than the House plan, even after asking Toumpas to come up with more in savings. The Senate budget appropriates $35 million more from the General Fund than the House. It significantly reduces expected Medicaid Enhancement Tax revenues after State Medicaid Director Katie Dunn testified that the Governor’s original MET projections were far too optimistic. Overall, the Senate budget estimates $134 million less in total HHS revenues than the House, most of which would come out of state payments to hospitals rather than HHS programs.

Both Governor Hassan and the House direct HHS to return $2.25 million in savings in both Fiscal Year 2014 and FY15. The Senate seeks $3.5 million a year in “back of the budget” savings. The line by line appropriations for CHINS, developmental disabilities, and other key social services are nearly identical across all three documents. The Senate budget also directs the Governor to find $50 million in personnel savings, at least $20 million must come from state general fund spending. HHS employs just under half of the state workforce.

The Senate provision to find $50 million in personnel savings throughout state government is likely to be one of the most contentious issues in the $11 billion budget fight, as Hassan’s scathing statement foreshadows. It would direct savings to come not just from operations within agencies, but from salaries and benefits of state employees, prompting fierce opposition from the state’s public sector unions.

Budget writers use “back of the budget” cuts to give department heads flexibility while maintaining higher up-front appropriations. State officials can cut services, leave open vacant positions, or change their operations, as long as they keep the Joint Legislative Fiscal Committee updated on how they are reaching their budget goals.

Governor John Lynch often requested “back of the budget” personnel cuts in his budgets to give him leverage in labor negotiations, tying his hands before he ever sat down with union negotiators. In 2008, he sought $50 million in “back of the budget” cuts, and in 2010, directed state agencies to find $140 million in savings to make up for sagging state revenues.

Governor Hassan is also seeking $9 million in “back of the budget” cuts from the Judicial Branch, while the House asks for $9.5 million in savings, and the Senate is looking for $10 million. House and Senate budget writers agree in seeking $1 million back from the Legislative Branch, $750,000 from the NH Veterans Home, and $500,000 from the Sununu Youth Services Center in Manchester. The Senate budget also directs the Department of Revenue Administration to come up with $1 million in extra savings.

Hassan spokesman Marc Goldberg stresses that Toumpas already has to find $9 million in his budget to pay back the federal Centers for Medicare and Medicaid Services as part of a settlement over excess Medicaid disbursements in past years. Hassan included this provision in her budget, but the House moved that expense to the back of the budget in April, a move criticized by Hassan at the time.*

If HHS were to absorb half of personnel cuts included in the Senate budget, as well as the Sununu Center reductions and the federal Medicaid settlement, it would face $26 million in “back of the budget” cuts, far short of the $40 million hole Toumpas claims. The House budget would require $13.5 million in cuts from HHS, once the federal Medicaid settlement is included. Hassan’s budget called for just $4.5 million in HHS savings, accounting for the $9 million settlement in its baseline.*

Following next week’s Senate budget debate, differences between the House and Senate budgets will be hammered out in a Committee of Conference. Legislators face a June 30th deadline to approving the state’s two-year budget before the new Fiscal Year begins.

*Original article stated that Hassan had also included $9 million Medicaid settlement as a back of the budget cut. It was accounted for in her February budget submission, but not in either the House or Senate budgets. Hattip to Marc Goldberg for the correction.