Delaware state budget (2008-2009)

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Delaware faced an $84 million budget gap for fiscal year 2009 as of February 2009^[1]. For fiscal year 2010 the budget gap was estimated to widen to $606 million^[1], however more recent reports place the FY 2010 gap closer to $750 million. ^[2]
In February, shortly after entering office, Gov. Jack Markell eliminated $28.7 million from the once $109 million shortfall for the current fiscal year. ^{[3] [4]} Markell instructed the Office of Management and Budget to cut non-essential state travel and cut the size of the state’s fleet of sedans and sport-utility vehicles by 20 percent.^[4] In an effort to eliminate the FY 2010 budget deficit the Governor has proposed a series of budget cuts, new revenue and tax increases including an 8 percent across the board cut in the salaries of all state employees and raising the cigarette tax by 45 cents per pack. ^[5] Despite federal stimulus funds the Governor warned, "These funds will not be here for us in the near future and cannot be counted on in any way as a long-term, sustainable solution to our problem." ^[6]

[edit] Impact of budget woes

See State budget issues, 2009-2010

• According to the Department of Labor, Delaware’s seasonally-adjusted unemployment rate in February 2009 was 7.4 percent as compared to 6.7 percent in January 2009. There were 32,600 people unemployed in February 2009 compared to 17,600 in February 2008. In the past year the largest job gains were in education and health, plus 1,500; and Government, plus 900. The largest over-the-year job losses were in professional and business services, minus 6,300; wholesale and retail trade, minus 4,800; and manufacturing, minus 4,800. ^[7]
• In light of the state's budget gap the Governor is calling for state employees to take an 8 percent pay cut and has proposed raising taxes for residents who make more than $60,000 a year. The pay cut, he said, would help prevent layoffs and save about $92 million. ^[8]
• Additionally the Governor is requiring state employees to switch out three holidays for three floating days off would cut back on overtime costs and save the state $1 million. ^[9]
• The fiscal 2010 budget proposed by former Gov. Ruth Ann Minner called for a 3 percent cut to higher education. Minner also recommended that incoming Gov. Markell's administration close the deficit by trimming another $36.4 million from higher education. For Delaware Tech, the cuts would mean a $10 million cut to its operating budget. ^[10]

[edit] Budget background

Delaware's fiscal year begins July 1 and ends June 30 of the following year. The state budget process begins in September when the budget office requests that each department in state government submit budget requests for the next year's budget. These requests are generally presented to the State Budget Office at public hearings held in October and November. Between November and January the Governor compiles a recommended budget which is then presented to both the House and the Senate in January. According to the State Constitution, the Governor must present a budget which is balanced at 98 percent of the state's projected revenues. The Delaware Financial and Economic Advisory Council is charged with making revenue projections, which are made in September, December, March, April, May and June. The Governor's budget is assigned to the Joint Finance Committee. The budget bill is typically introduced and voted on during the last week in June, just before the General Assembly adjourns. ^[11]

[edit] Budget figures

[edit] Ideas about why the crisis exists

• According to state data, in Delaware a little more than 10.1 percent of homeowners had a mortgage in foreclosure or are at least one payment behind. ^[18]
• The Delaware Economic and Financial Advisory Council lowered 2009's revenue estimate by $70 million compared to the panel's December 2008 prediction. The estimate for FY 2009 starting July 1 was downgraded by a total of $148 million. According to the council the decline was led by steep declines in estimated revenue from personal income and bank franchise taxes. ^[19]
• According to the state's estimates in March 2009 personal income in Delaware is expected to grow only 1.6 percent in fiscal 2010, which begins July 1, down from December 2008's estimate of 2.4 percent. ^[19]
• The stimulus package is expected to have a negative impact on personal income tax revenue of $11 million through 2011, and to negatively affect corporate income tax revenue by $20 million, said state officials. ^[19]
• A sharp increase in the federal excise tax on cigarettes is expected to mean $22 million less in state tax revenue as consumers buy fewer cigarettes. ^[19]
• According to state officials the collapse of the auto industry, downturns in manufacturing and the financial industry's upheaval negatively impacted Delaware's economy. ^[20]

[edit] Proposed actions

[edit] Governor Jack Markell

The Governor has proposed an expansion of gambling that would position the state as a "Vegas-style" destination. In the first year, the sports lottery is estimated generate $55 million in additional revenue. Additionally with corporate and income-tax increases, program and benefit cuts, and an across-the-board payroll reduction of 8 percent, Markell told lawmakers, his plan would balance next year's budget despite a $751 million revenue hole. Gov. Markell has also suggested raising the cigarette tax by 45 cents a pack and the alcohol tax by 50 percent. The plan also calls for raising income taxes for people who make more than $60,000 by one percentage point, but only on money earned over $60,000. The governor's office estimates that will bring in $30 million next year and $78 million in 2011. ^[20] In terms of budget cuts Gov. Markell has suggested $331 million in budget cuts and $40 million by moving funds from capital projects to the general fund. The state, he said, will gain $14 million by moving funds from the farmland preservation fund and the open space preservation fund into the General Fund, only leaving $3 million in each fund. Additional cuts include:reduce vacant positions and casual/seasonal funding to save $3.5 million; reduce contractor service, consultants and employment services by 10 percent to save $7.5 million; reduce cost share of energy costs in schools to save $2.1 million; eliminate Saturday and holiday hours for the state archives to save $198,400. ^[21]

[edit] Republicans

Some Republicans were taken aback by the Governor's gaming proposal and 8 percent salary cut for state employees. "Look, we realize we're facing some really tough challenges and a very deep hole. Having said that, some of these proposals worry me. For instance I think the salary cuts of state employees is too large," said the House minority leader Rep. Richard Cathcart. Rep. Daniel Short said that he is concerned that the proposal might open up too many conflicts, for example, with track owners, horsemen, people opposed to sports-betting, and people that'll be opposed to the overall expansion of legalized gaming. However, other Republicans like Rep. Deborah Hudson said that they aren't entirely opposed to the gaming proposal, noting that the Governor may have "struck the right note." ^[22]

[edit] Democrats

Although some Delaware lawmakers remain wary about the Governor's FY 2010 budget proposal, House Democrats said that they are supportive of two disputed items: 8 percent salary cuts for state employees and the introduction of sports betting in order to raise more revenue. House Majority Leader Rep. Peter Schwartzkopf said,"This is probably the worst time to cut employees’ salaries, but it’s something we have to consider at this stage." Schwartzkopf noted that although budget cuts may be drastic, careful consideration is placed on each cut. House Speaker Rep. Robert Gilligan said,"The severity of some of the proposals illustrates just how serious our budget shortfall really is. We will work closely with the administration to pass a responsible budget that minimizes the impact to residents." However, in regards to the introduction of sports betting Rep. John Viola said that that course of action may be just what Delaware needs to pull the state out of it's economic crisis. ^{[23] [24]}

[edit] Economic Stimulus Package

Delaware is expected to receive $802 million, not counting the tens of millions in tax cuts, increased unemployment benefits, student grants and other initiatives, of the $787 billion dollar economic stimulus package. ^[25] According to White House officials the package is expected to create approximately 59,000 jobs. ^[26]
For more information on how the federal stimulus funds are being used in the state of Delaware, visit the state recovery website.

According to preliminary reports Delaware is expected to receive:

• $3.6 million for mandatory transportation enhancements ^[27]
• $21.7 million for urban areas ^[27]
• $11.7 million for suburban areas ^[27]
• $3.2 million for rural areas ^[27]
• $81.6 million for transportation ^[27]
• $11 million for state and local law enforcement agencies ^[28]
• $38 million to make homes and businesses more energy efficient ^[29]

[edit] Budget transparency

Delaware currently has no statewide, official spending database online, despite multiple, recent attempts to pass legislation which would require such transparency. However, in May 2009, Governor Jack Markell announced that, by July 30, 2009, citizens will be able to see the state's expenditures online in a searchable database. Said Markell, "During these historically challenging financial times, it is critical Delawareans are confident their state tax dollars are being spent as effectively and efficiently as possible."^[30] Sign up here to learn more about Delaware's transparency.

The Caesar Rodney Institute recently launched an independent government spending transparency website, DelawareSpends.com, which allows users to search state employee payrolls and vendor payments. Visitors to the site can also post their own data, thoughts, questions, and concerns on the DelawareSpends Forum.

[edit] Economic Stimulus Transparency

• The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the U.S. Of that $787 billion stimulus package, it is estimated that 69%, or over $541 billion, will be administered by state governments.^[31]

• It is estimated that Delaware will receive at least $502 million in federal funding.^[32]

• The economic recovery website for Delaware is available here.

[edit] Legislation

None.

[edit] Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

[edit] Limitations and Suggestions

[edit] Support for creation of the database

The National Taxpayers Union urged legislators in Delaware to support SB 184, which would have created a state spending transparency website.^[33]

[edit] Independent transparency sites

None.

[edit] Public employee salary information

None.

[edit] See Also

Delaware taxpayer-funded lobbying

[edit] External links

• Model transparency legislation from the American Legislative Exchange Council is available at this link.
• Caesar Rodney Institute
• Delaware Office of Management and Budget
• Delaware General Assembly
• Delaware state site

[edit] Additional reading

• Information on Delaware's Budget Development
• FY 2009 Budget, as enacted by the legislature at the end of June 2008.

[edit] References

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