Delaware governor proposes $5 billion operating budget

January 27, 2022 GMT

DOVER, Del. (AP) — Delaware Gov. John Carney is proposing a $5 billion operating budget for the fiscal year starting July 1, an increase of roughly 4.6% over this year’s $4.77 billion budget.

The $4.99 billion operating budget Carney unveiled Thursday does not include $216 million in a “supplemental” budget bill of one-time expenditures that would bring spending to more than $5.2 billion.

The Democratic governor also is proposing a capital budget for construction, transportation and economic development of $1.18 billion, including $315.7 million for transportation and $305 million for school construction and renovation. That’s down slightly from the whopping $1.3 billion that lawmakers approved last year, when skyrocketing revenue estimates following 2020′s overly pessimistic forecasts prompted them to tack on $460 million to the record $894.4 million capital budget Carney had proposed last January.

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Carney also is proposing $56.9 million for an annual grants package for community groups and nonprofit organizations, down from this year’s $63.2 million.

The proposed state appropriations for fiscal 2023 do not include hundreds of millions of dollars in federal COVID-19 relief and infrastructure funds that Delaware has received and will continue to receive over the next few years. Federal infrastructure funding, for example, includes $1.2 billion in highway funds for Delaware, $355 million for clean water initiatives, $255 million for bridges, $220 million for public transit and $100 million for broadband infrastructure.

“All those federal funds will enable us to really accelerate our economic growth, job creation, as we move out of the pandemic situation,” Carney said.

Meanwhile, revenue projections for the current and upcoming fiscal years have grown by more than $800 million since June, which could lead members of the legislature’s budget-writing committee, which begins meeting next week, to add even more dollars to Carney’s proposals.

The administration, however, continues to take a relatively cautious approach.

Despite the spending increases, Carney’s proposal keeps expenditures to no more than 98% of estimated available revenue, as required by the state constitution. It also maintains Delaware’s never-tapped “rainy day” fund of $280 million and sets aside $15 million in a separate “budget stabilization” reserve fund that Carney created for budget planning purposes in 2018, bringing the total in that fund to $302 million.

“We’re really positioned well now with strong reserves,” said Carney, who is proposing pay raises for state employees ranging from 2% to 9%, with the larger increases aimed at workers on the lower end of the scale. The $89 million recommended for additional compensation includes $17 million for a $500 one-time bonus for state retirees.

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The recommended budget also includes $60 million for economic development, $30 million for farmland and open space preservation, $20.6 million for mental health services in elementary schools, $11.5 million in increased support for child care providers, and $7.6 million for police body-worn cameras.

Carney was noncommittal when asked whether Delawareans deserve to see tax cuts given the current surplus revenues, as other states have done.

“There’s a lot of uncertainty in the economy right now,” he said, citing the pandemic. ”... We would think about it when the conditions are right.”

State Finance Secretary Rick Geisenberger expressed concern about inflation and warned that explosive growth in the state’s three most volatile revenue sources is likely not sustainable in the long run. He noted that increases in the corporate income tax, real estate transfer tax, and estimated personal income tax payments, which are largely driven by capital gains, have grown over the past two years at four times the rate of the preceding 10 years.

“When that happens, we tend to see a drop-off,” Geisenberger said, adding that a decline of 30% to 45% poses a downside risk of $500 million or more.

Republican lawmakers have proposed a variety of tax cuts, but Democrats who control both chambers of the General Assembly are not likely to go along.

“We hope the governor and the majority gives serious consideration to that, especially considering the windfall we have now,” Senate Minority Whip Brian Pettyjohn of Georgetown said Thursday.

The GOP proposals include cutting personal income tax rates by 10%, reducing the corporate income tax by almost 30%, and cutting the gross receipts tax on businesses, sometimes referred to as Delaware’s “hidden sales tax,” by 50%.

Republicans also have introduced bills to restore a real estate tax credit for senior citizens to its previous maximum of $500, decrease real estate transfer taxes and provide a $500 tax credit for low-income residents.