March 12, 2015
The State budget consists of two bills, traditionally numbered House Bill 1 (HB1) and House Bill 2 (HB2). HB1 is essentially a spreadsheet laying out spending levels, while HB2 contains all of the legal language to make it work on the spending side, as well as any changes needed to the tax code on the revenue side. Most of the 117 items contained in the Governor’s bill are technical details, but inevitably some new policy makes it in as well. Below are some of the major changes, and all of the tax and fee increases included.
Major Policy Changes:
Certificate of Need Repeal Delay:
The Certificate of Need (CON) is a state board which oversees healthcare providers’ major capital expenditures. Any major capital projects proposed by a healthcare provider, such as adding more beds, building new buildings, or offering a new service, must be approved by the CON Board. In theory, the CON was supposed to bring the cost of healthcare down, but has never been shown to do so. The repeal was first due to go into effect in 2014, but that was pushed off in the last budget to 2016. The Governor has proposed extending the repeal out again, this time to 2018.
Municipal Bridge Aid Calculation Change:
In order to assist municipalities with the very expensive task of replacing bridges, the Municipal Bridge Aid program, administered by the Department of Transportation, pays for a large portion of the costs. Currently 80% of bridge costs are borne by the state, with the balance (20%) paid for by the city or town. The change would increase the state’s share to 85%, and lower the municipal share to 15%. However, in her budget, Governor Hassan eliminated funding for the program.
Continues Medicaid Expansion:
The Governor has proposed repealing the automatic sunset of the Medicaid Expansion program. Repeal of the sunset clause would allow the program to continue on as it does today.
Changes in Medicaid Eligibility:
With the state’s Medicaid program creating budget problems, the Governor proposed moving pregnant women and children above 133% of Federal Poverty Level (FPL) off of Medicaid and on to the Exchange. From a state budget view point, this means going from paying half the cost of covering a person through traditional Medicaid, to paying nothing. By putting those above 133% of FPL on to the Federal Exchange, they qualify for subsidies to help underwrite the cost of purchasing private coverage. Those subsidies are paid for by the Federal government, not the state.
State Aid for Education:
The cap on Adequate Education Grants would be lifted from 108% of the prior year, to 115%.
Chief Operating Office:
The Governor has proposed the creation of a Chief Operating Officer for the state. Duties would include “coordinating and implementing statewide efforts to monitor, oversee, and improve the operating efficiency, customer service, and transparency of state government activities.”
Tax and Fee Increases:
Boat Access Fee: +$5. The increase is dedicated to the Fish and Game Fund.
Pesticide Product Registration Fee: +$40: Increases fees for pesticides and increases the percentage (from 10% to 15%) of the revenue that is dedicated to the Integrated Pest Management Fund.
Tobacco Tax: Increases tax by $0.21 per pack on cigarettes, and increases the tax rate for non-cigarette tobacco products by 9 percentage points (from 65.03% to 73.94% of wholesale) It also extends the tax to e-cigarettes and cigars for the first time.
Business Profits Tax: An increase the reasonable compensation safe harbor to $100,000, but puts the burden of proof onto the business owner making the deduction. Current law puts the burden of proof on the state to prove the deduction amount is unreasonable.
Business Profits Tax, Off Shore: Targets businesses based in countries or territories designated as ‘off-shore tax havens.’ Change would eliminate the deduction of distributed dividends against the business tax liability.
Motor Vehicle Registration Fee and Certificate of Title Increases: Across the board increases in the state portion of the MV Registration fees and Title fees. Taxed for the first time are Road Oilers and Ski Area vehicles. The fee for registering a mid-sized car would increase by $15.