Democrats cancel budget panel meeting


DOVER — With less than a month remaining in the fiscal year lawmakers have yet to reach an agreement on balancing the budget.

Failure to find consensus was magnified Wednesday when Democratic leaders canceled today’s Joint Finance Committee meeting.

The move, an atypical one, minimizes public backlash and concern in response to spending reductions and gives the caucuses more time to come to an agreement on tax increases.

The state government is facing a shortfall between projected revenue and spending of about $400 million. Gov. John Carney proposed eliminating the gap with what he called an “even mix” of tax increases and spending reductions.

JFC cut about $50 million last week and another $30 million Tuesday from spending projections, while the House last month passed a bill raising the franchise tax, which would take in around $116 million.

That places the General Assembly about halfway toward a balanced budget. But, while members of both parties deny negotiations are stalled, frustration is visible on both sides.

Democrats are generally less amenable to cuts, while Republicans are reluctant to go along with higher taxes without what Senate Minority Whip Greg Lavelle, R-Sharpley, calls “systemic change.”

JFC co-chair Rep. Melanie George Smith, D-Bear, suggested lawmakers have another $60 million in “soft cuts,” such as giving no funding to agricultural preservation and not shifting any of the operating budget to the bond bill. She also said legislators will save $35 million because of decreased growth for mandatory spending components, effectively leaving JFC with just $25 million left to cut.

However, Sen. Lavelle disputed that, saying he had never heard of soft cuts and wanted to see JFC finish cutting spending. Gov. Carney’s plan, he opined, does not provide long-term reform but is designed to get the state through the 2018 election.

Leaders of each of the four caucuses have been meeting regularly for months to discuss a solution to the budget woes, but they have yet to agree on how the $400 million gap will be eliminated.

Gov. Carney, a Democrat, recommended raising the income tax and cigarette tax, and House Speaker Pete Schwartzkopf, D-Rehoboth Beach, said Wednesday the alcohol tax is also being considered.

A statewide property tax has also been floated but received a cold reception from legislative leadership, the House speaker said.

Lawmakers said they have already begun receiving phone calls from angry and distressed constituents protesting cuts made by JFC. Committee members called many of Tuesday’s decisions, including reductions to health-related programs, cuts to education initiatives and elimination of a handful of positions with the Child Placement Review Board, painful. Rep. Schwartzkopf said further cuts will be “drastic.”

Democrats said Wednesday they do not want to eliminate or reduce some programs and services when that funding could later be restored if the two sides make a deal for tax hikes.

“I don’t see the need to go down there and cut to the point peoples’ lives change yet,” Rep. Schwartzkopf said.

Those reductions may become a necessity, however, if no agreement on revenue is reached.

Senate Minority Leader Gary Simpson, R-Milford, said he expects there will be “pain” as lawmakers try to balance the budget, though Rep. Schwartzkopf said the caucuses are communicating well despite the ideological differences.

The situation is reminiscent of 2015, when lawmakers spent months negotiating for ways to raise money for infrastructure and did not finalize the budget until the final hours of that legislative session.

Like in 2015, neither side appears ready to give in.

“I guess they’re waiting for us to make some sort of a move,” Sen. Simpson said.

Among the things Republicans would like to see is a change in prevailing wage, which governs how much laborers on state-funded construction projects are paid. The limit was increased two years ago, allowing the state to get more bang for its buck, and Republicans are adamant another alteration would benefit Delaware.

Rep. Schwartzkopf, however, said he is reluctant to change the prevailing wage threshold, which has little direct impact on the operating budget.

Raising prevailing wage could also lead Democrats to vote against the budget, which needs 21 backers to pass the House (and 11 to pass the Senate).

“It’s all a juggling match to try to keep 21 in mind,” Rep. Schwartzkopf said.

For now, there are two key dates: June 19, when an updated revenue forecast is issued, and June 30, the last day of the fiscal year.

JFC co-chair Sen. Harris McDowell, D-Wilmington, said “there’s a general tendency to wait” and see the new revenue forecast each month, but with the pages of the calendar turned to June, he believes lawmakers are now more focused on the budget.

According to Rep. George Smith, JFC will meet again before June 19, and if no revenue agreement is reached by then, lawmakers will craft a budget with the remaining shortfall eliminated entirely though cuts.

While lawmakers have different ideas for a long-term fix in mind, both sides want budget reform. For Democrats, that change is predicated more on revenue, while Republicans envision a solution based on less spending.

“Part of the (reason) we want structural change is so we’re not sitting here 365 days from now doing the same damned thing we’ve been doing since 2009,” Rep. Schwartzkopf said.

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