Delaware’s treasurer: Do we have a spending problem or a revenue problem?

This past quarter for me was dominated by the conclusion of two processes: a macro-level examination of our state’s revenue system and a micro-level review of my office’s workflow and resource utilization.

If that is not a topic sentence that grabs you, I suspect the rest of this read might require a little exertion on your part.

So, let’s jump right in using two related questions that I get asked all the time:

How bad are our budget issues?
Do we have a spending problem or a revenue problem?
In the latter case, I always give the same answer: “Yes.” In the former instance, I usually remind people that you can drown in 6 inches of water; it’s not the depth but the duration that matters. I am not trying to be cute with these responses, although they do seem to get people’s attention. I simply believe that they are the truest answers that I can give.

In my view, both our revenue system and our spending constraints are flawed in design, and that leads to poor decisions and outcomes from a budgeting perspective. More importantly, the focus on too much or too little expenditure or income tends to overlook the obvious nexus of the two: value. What are we getting for our money? Finally, the obsession with micro-managing the annual budget leaves little oxygen in the room to deal with the long-term aspects of our fiscal picture. This is where the real trouble lies.

If you watched our latest budget debate, the concept of return on investment did not make it to center stage. Rather, the political sides seemed to have arrived at the statehouse seeing our fiscal quandary as either too much spending or too little revenue. Democratic legislators generally argued for more money, whether a greater share of the realty transfer tax, more fees at the DMV or a new income tax bracket. Republicans countered with a unanimous call for a 5 percent across the board cut in expenditures.

Ultimately, to avoid stalemate, they had to do a little of both. Emphasis on “little.”

I say this not to undercut the efforts of our General Assembly. I respect and honor our legislators for their significant and sincere annual exertions. I believe, however, that the system in which they operate is defective and that the flaws of that system cost them great time and effort accomplishing what amounts to trivial adjustments in our budget from year to year.