Closely divided House, economic questions to mark 2023 legislative sesson

The state budget is just one bill, and it hasn’t even been proposed yet, but already 824 would-be bills (known as legislative services requests) have been filed, and at least 313 of them could have some impact on New Hampshire businesses if they pass.

Of course, that’s not to say that the next biennial state budget isn’t important.

“Clearly, the big issue is the budget, even more so this time around. Uncertain revenue streams, uncertain economic times, some of loss of federal support, and then you have a different political situation,” said Bruce Berke, state director of the National Federation of Independent Business.

That different situation — the previous Republicandominated House is now nearly evenly divided, and the more moderate Senate is firmly in Republican hands — could result in chaos, as we have already seen in Washington, or compromise in Concord, as Gov. Chris Sununu asked for in his inaugural address.

The state budget determines how much government spends on such things as infrastructure, workforce development and tourism, and how (and how much) to raise in taxes and fees to spend it.

For the Business & Industry Association of New Hampshire, the big issue this go-round isn’t taxes, as long as they don’t go up, but the issue that affects just about every business in New Hampshire: the need for more workers.

The BIA and its supporters want more money spent on higher education, both for university and community colleges, making sure Medicaid expansion becomes permanent, and workforce housing — all seen as key to keeping and attracting workers in New Hampshire.

The language of most proposed bills was not released by deadline, but by speaking with lawmakers and lobbyists, we have enough information to give you a sneak preview of what to look forward to in the coming year in some key areas: taxes, energy, labor and housing.

Taxes

Last session, lawmakers cut taxes. This session, there is talk of continuing that trend, but it will be much harder to translate into legislation that will pass.

“We are going into a recession here,” said Rep. Laurie Sanborn, R-Bedford, the new chair of the House Ways and Means Committee. Sanborn, who also is the speaker pro tempore — making her the third-highest ranking member — was first elected as a firebrand conservative, determined to cut taxes and shake things up. Now she sounds like a cautious conservative, even though she signed on to House Bill 100, which would eliminate the interest and dividends tax next year — three years earlier than the target date of 2027, a move that could result in a revenue loss of $106 million in the next two fiscal years, enough to give any budget writer pause. “We’ll listen to the testimony,” she said.

Even the bill’s sponsor, Rep John Janigan, R-Salem, seems hesitant. He would still like to get rid of the tax, worried that it could drive wealthy individuals out of the state.

“The initial thought was the state could handle it. We are still strong on receipts so it looks good, but we still have to verify it. We have to be responsible,” he said.

Less-than-wealthy individuals are already shielded from the tax. They don’t have to pay on the first $2,400 of interest and dividends, and Rep. Susan Almy, D-Lebanon, has proposed a bill that would roll back the tax cut but increase the threshold to $7,500, gaining $51 million for the budget, even though fewer people would pay the tax.

The interest and dividends tax is not a top priority for businesses, said David Juvet, BIA’s executive vice president of policy, since it “affects investors, not business directly.”

More direct are the business profits tax, paid mostly by larger, out-of-state businesses, and the business enterprise tax, paid by smaller firms. Both have been going down gradually, with the goal of lowering the BPT rate to 7.5 percent and the BET to 0.5 percent. The BPT hit that goal last session, but the BET rate remains at 0.55 percent. House Bill 15 is being proposed to finish the job, but Sanborn wasn’t exactly enthusiastic about that one either.

“That is a tough one. It is a tax on payroll, and we want to encourage businesses to hire, but we have to see where that one goes,” she said.

“I support getting it down to 5,” echoed Senate President Jeb Bradley, R-Wolfeboro, “but I suspect it’s going to be a heavy lift.”

“I think that’s a very fair statement,” said Berke, who has been a strong advocate of cutting the BET. “There was a really good faith effort to cut both the BPT and BET, and with all the uncertainty, maybe it is smart to go slow on the tax front. We are not banging the drum to see this final step.”

“We certainly favor lower taxes,” said Juvet. “We are all about small business, but we need to have sufficient revenue to meet the state’s obligation.”

Other tax measures include repealing the 7 percent communications services tax, proposed by House Majority Leader Jason Osborne, R-Auburn, which would cost the state about $31 million a year, and another that would let businesses ignore other states’ attempts to collect a sales tax, defying a recent decision by the U.S. Supreme Court.

“The guy pushing it on the court is no longer there, and it was a 5-4 decision. If it goes back to the court, the court would side with us,” predicted Rep. Michael Harrington, R-Stratford, the bill’s sponsor.

And there are a couple of new ideas proposed by Rep. Thomas Schamberg, D-Wilmot. One would remove the limit on the net operating loss deduction under the BPT. Being able to count on losses on future profits is really important for “startups that don’t make anything in the first five or 10 years,” Schamberg said. The other would change the accounting method to figure out how to tax out-of-state companies, basically denying them the right to deduct intangibles — something small businesses are not able to do as easily.

And on the Senate side, Sen. Tim Lang, R-Sanbornton, would like partners in limited liability companies to be able to count disbursements (the owners’ draw) as reasonable compensation as opposed to profits, so they would be taxed under the BET, not the BPT.

Employment

The perennial minimum wage bill is back. HB 57 would increase the hourly rate to $15 an hour by 2025, and also increase the tipped wages from 45 to 50 percent of the minimum. New Hampshire’s minimum wage remains tied to the federal minimum of $7.25 an hour. Neighboring Massachusetts just increased its to $15 an hour, Vermont is at $13.18 and Maine is at $13.80.

According to the bill’s sponsor, Rep. Kristina Schultz, D-Concord, 144,000 Granite Staters earn less than $15 an hour, “and that’s significant.” While the bill might pass the closely divided House, it will have a tough go in the Senate, which has killed such proposals in the past, though she dismisses the attitude “that we don’t need to talk about minimum wage, because we know it is going to die.”

Her companion bill would eliminate the tipped wage, currently locked in at $3.20 an hour, forcing hospitality businesses to pay their staff at least the full minimum wage. That probably has even less of a chance, but Schultz wants to move forward to raise the issue.

“We are the only country on earth that does it that way.

It is a vestige of slavery. Tips are for positions held by former slaves to keep them completely beholden.”

Two bills sponsored by Rep. Michael Cahill, D-Newmarket, might seem familiar.

HB 74 would require employers to pay employees the earned time they were promised, if they are laid off or because of a change in business ownership. HB 125 brings back restrictions on child labor that were eliminated last year — 16- and 17-year-olds would no longer be able to work over 35 hours a week during the school year or 48 hours during vacation, nor could they work after 9 p.m. on a school night or past midnight on weekends.

Senate President Jeb Bradley, R-Wolfeboro, however, is doubtful that child labor laws will return in any form.

“That bill had a huge amount of support from the hospitality industry. I don’t see any reason to roll it back. It’s up to the students to figure out how they are going to balance work, school and growing up as a kid,” Bradley said.

Energy

If it appears that there are a lot of bills about energy this session, it’s for a good reason.

“Energy rates have gone through the roof, so energy is such a hot topic,” said Sam Evans-Brown, executive director of Clean Energy NH. “You would hope that crisis would start some new good ideas.”

Well, one new idea has been proposed: rate stabilization. Rep. Rebecca McWilliams, D-Concord, would base the rates on a five-year average of utility costs, making the ups and downs more gradual. “It would create more market stability,” she said.

Other than that, most of the bills are copies or variations of old ideas, though some might bear fruit this time, especially those previously supported in the Senate that fell through in the House.

Four bills support expanding net metering for larger users. Currently, those with midsize projects — 1 to 5 megawatts — can sell any excess electricity back to the grid at a rate that’s not as high as the one that goes to a typical homeowner, but higher than the default rate that utilities pay to buy electricity.

Critics have called this rate — a compromise blessed by the NH Public Utilities Commission — a subsidy, while advocates say that net metering saves utilities money. A study completed just a few months ago showed that any subsidy would be very small.

One bill would expand net metering to entities like New Hampshire Housing, while others would let larger businesses take part in it as long as they aren’t in the business of power production.

“There is a possibility to expand net metering,” said Bradley, “but you have to approach it in steps and not have cost shifting.”

Rep. Michael Vose, R-Epping, chair of the House Science, Technology and Energy Committee, is seeking to expand net metering, though only to allow one company to bundle several dams together. Vose opposes a broadbased expansion but says he is looking to work with the other side of the aisle.

His committee has “10 Republicans and 10 Democrats, and that means there could be bills out of the committee without any recommendation. I want to avoid that as much as possible.”

Vose also thinks he’ll get bipartisan support on his bill to get rid of the Site Evaluation Commitee, giving its power to the PUC. “We want to streamline the process.”

There is consensus that there is a problem. “Millions spent and nothing is done,” said Harrington. “Windmills take years and years. The message is being sent: Don’t come to New Hampshire; we won’t let you build anything.” Bradley over in the Senate seemed to like Vose’s proposal.

Evans-Brown, however, said advocates aren’t on board with the idea. The SEC process has slowed down a lot of projects, he said. “You have to have some sort of change. But when you ask what we should do, it’s a mess.”

The other major energy issue this year will be whether New Hampshire will procure renewable energy by putting out a request for proposals and signing long-term contracts for it. Massachusetts has a similar process.

Sen. Kevin Avard, R-Nashua, plans to propose the idea, but the bill is not out yet. According to Evans-Brown, the procurement would be local and would have to be cost effective. Bradley says it should include traditional procurement as well. “It can’t just be renewable,” he said.

There will again be attempts for the House to change the Renewable Energy Fund, which gets its money from utilities that don’t meet various renewable energy goals. Harrington would phase it out over five years.

“With the federal government giving so much money, they don’t need subsidies,” he said.

Rep. Mark McLean, R-Manchester, would merge together all the renewable classes into one.

“I don’t think renewables are ready to compete with fossil fuels, but they can start competing with each other. That way, if something is a right fit for New Hampshire, it would have a larger bandwidth to expand rather than kept to swim in its own narrow lane.”

He would also count “fourth generation” nuclear as renewable. The latest technology, he says, can use the radioactive material in mine tailings for fuel or even nuclear waste from first-generation plants like Seabrook. It uses a salt slush rather than water as a coolant, so if it leaks it will solidify and self-sea, he said. “It’s very clean and will give you baseline power.”

On the other hand, McWilliams wants to fix “sweeping” — a long-standing problem with renewable energy certificates, or RECs. The certificates, earned for producing renewable power, are what utilities need to buy if they don’t meet their renewable energy goal. The problem is that they lapse to the utility if the producer doesn’t do anything with them, so they have enough to meet the requirements without having to buy any.

“We don’t want people, through inaction, to just give these RECs to the utilities,” she said.

She has one bill that would end the practice. The RECs would stay with the producer. The other would require better notification.

Expect several battles over energy efficiency, especially the systems benefits charge — the line item on your electric bill that funds most of the conservation program NHSaves. Those programs nearly suffered a big setback last year when a PUC order cut back the SBC. The Legislature came together to save it, and now Vose wants lawmakers to have the power to set it.

Harrington doesn’t think the SBC should go to weatherization programs, which save primarily gas and oil usage. But it is those programs that save the most energy costs, said Evans-Brown, who points to two bills — one in the House and one in the Senate — that would end the practice of requiring that 65 percent of savings be on electricity. The result would be a “dramatic cut” in the most popular energy conservation program because “it’s too cost-effective,” he said. “That is just absurd.”

The Regional Greenhouse Gas Initiative also contributes to NHSaves, but not as much. That’s because only the first dollar goes to the energy-efficiency program, with the rest going to ratepayers. Rep. Kat McGhee, D-Hollis, would make that the first three dollars.

“The ratepayer is not counting on the penny they are getting, yet New Hampshire is not getting the benefit,” said McGhee.

McWilliams would do away with the ratepayer rebate altogether, but whatever happens on the House side, Bradley says not to expect any changes on that score in the Senate.

Finally, there are numerous bills involving electric vehicles and charging stations. The debate still rages on how they will contribute to the Highway Fund, which gets most of its money from the gas tax. Vose would tax separately metered electric vehicles for every 34 kilowatt-hours — the equivalent in energy to a gallon of gasoline.

McWilliams would increase their availability by adopting California Low Emission/Zero Emission vehicle standards and double the inspection fee.

“We are the doughnut hole,” said McWilliams, since all the other New England states have such standards, resulting in their automobile dealers getting first dibs on the vehicles, which are in short supply.

On the Senate side, Lang plans to introduce a bill that would force the PUC to allow utilities to recover expenses spent on electric charging station infrastructure, though now he has doubts about his own bill, since he doesn’t want it to result in increased electric rates. On the other hand, he said, “if we don’t have the infrastructure ready, and tourists don’t come here because they can’t find a place to charge their vehicle, then we could lose some rooms and meals revenue.”

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One energy issue will be whether NH will procure renewable energy by putting out a request for proposals and signing long-term contracts for it.