Facing shortfall, Delaware legislators begin budget markup

DOVER — Budget-writing lawmakers received an overview of the budget for the fiscal year ending June 30 on Wednesday as they began to tackle the question of how to fill a $75 million gap.

Revenue projections took a sharp downturn Monday, placing the state in a hole for the upcoming 12-month period. Although Delaware has seen an increase in money from abandoned property and the gross receipts tax since Gov. Jack Markell unveiled his proposed $4.1 billion budget four months ago, drops in personal income tax and corporate income tax alone outweigh the gains.

Meanwhile, tens of millions of dollars’ worth of new projects, including Wilmington school redistricting, after-school program expansion and casino relief float around Legislative Hall.

The Joint Finance Committee will meet today and three days next week to balance the budget, confronting the $75.3 million shortfall as lawmakers try to minimize cuts and avoid raising taxes.

The largest chunk of that sum — $44.8 million — comes from revenue decreases since January. Another $28 million results from increased Medicaid outlays due to rising enrollment, higher costs and a negotiated risk agreement with a managed care organization owing from a larger population of children needing special care.

High-ranking legislators have said they intend to have the budget finished by the end of next week. Last year went down to the wire, as lawmakers haggled over Division of Motor Vehicles fee increases and prevailing wage rates.

“We’re looking at everything, and it’s all in flux right now. I don’t think we can give you any finals,” JFC co-chair Sen. Harris McDowell, D-Wilmington, said after the three-and-a-half-hour meeting.

Senator Harris McDowell by The News Journal/BOB HERBERT.

Harris McDowell III

Sen. McDowell said the $75.3 million is the largest deficit he can recall at this stage of the budget process, and his fellow co-chair, Rep. Melanie George Smith, D-Bear, called the process facing JFC “challenging.”

A few Republicans, who make up the minority in the General Assembly, provided some mild criticism during the hearing. Sen. David Lawson, of Marydel, questioned why lawmakers start with the governor’s recommended funding plan rather than using last year’s budget as the base they then adjust, and Rep. Joseph Miro, from Pike Creek Valley, expressed skepticism over recent positive job growth.

The state reported 4.2 percent unemployment in April, its best mark in eight years, but not everyone believes the picture as is rosy as it may seem.

“Yes, we have a larger workforce, but they’re earning a lot less than what they were earning before,” Rep. Miro said. “The big-paying jobs in Delaware is not what we are creating. We are expanding the workforce but with jobs that are a little bit above minimum wage and jobs that are not in-tune with what it was seven or eight years ago.”

Deputy Secretary of Finance David Gregor, providing an overview of the revenue picture, disagreed with his premise, noting personal income tax is increasing slower than previously expected but continues to grow.

“This is a revenue source where a relatively small handful of large payers pay a disproportionate amount of the tax. So the top 20 or 25 taxpayers may pay 70 percent of the tax, out of thousands and thousands,” Mr. Gregor said.

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