Lawmakers still facing obstacles to balance budget

DOVER — After three days of deliberations, the General Assembly’s budget-writing committee still faces obstacles on the road to a balanced budget.

The Joint Finance Committee is set to meet three days this week, and co-chair Rep. Melanie George Smith, D-Bear, hopes to have the budget complete by the end of the week.

But first, the committee’s 12 members must agree on programs for every state agency, potential changes to the state’s health care offerings and reductions to education funding.

Legislators agreed last week to reduce a property tax subsidy given to senior citizens and lowered a gap between projected revenue and expenditures by $51 million.

Coupled with a bill to increase the franchise tax, which passed the House overwhelmingly, about a $230 million gap remains.

How exactly that shortfall will be erased remains to be seen. Democrats are hoping it involves a mix of cuts and revenue, but Republicans are less keen on tax increases.

“The hope would be that Joint Finance Committee is given an indication from legislative leadership as to how much revenue we can expect. We will work within whatever we are given and we will have a balanced budget by the end of (this) week,” Rep. George Smith said.

Gov. John Carney’s budget proposal includes hikes to the income tax and cigarette tax, raising more than $80 million combined. Because passing those hikes would require support from Democrats and Republicans, leaders of each caucus in the General Assembly have been meeting regularly to discuss the proposal. Lawmakers at this point are publicly unsure as to the likelihood of tax hikes.

The legislature is required to balance the budget, so a spending plan will be produced by July 1. The exact shape of it just may vary greatly.

If leadership cannot agree on a compromise within a few days, JFC would have to erase the $230 million shortfall entirely with cuts to projected spending.

“We’ve had to try to stuff a $5 billion budget into a $4 billion pail,” JFC co-chair Sen. Harris McDowell, D-Wilmington, said. “We’ve been doing this for years. We have cut just about everything that can be reasonably cut.”

He doubts an agreement will be reached this week, leaving it to the committee to reduce funding to some areas, shift costs and slash certain programs entirely.

If there is a compromise later, JFC could come back in and re-insert select cut programs into the budget.

Gov. Carney’s recommended budget included what amounts to a cut of $6.5 million for health care subsidies by shifting, on average, 3 percent of the costs to state government employees. Delaware currently covers 90 percent of the costs for state employees’ health care.

Under the proposal, monthly costs would rise by about $20 for a family in the First State Basic plan, $27 for a family in the CDH Gold plan, $35 for a family in the HMO plan and $77 for a family in the PPO plan.

Meanwhile, eliminating an arrangement that allows spouses who both work for the state to obtain health care insurance for $25 a month would save state government $3.5 million.

The proposal will be especially challenging for lawmakers who position themselves as champions of state government employees, although the JFC co-chairs don’t want to rule out the increases.

“Clearly, if you were to ask us if we would rather not do it, sure, we would rather not do it,” Rep. George Smith said. “I think we can’t look at anything in isolation at this point. We have to look at the entirety of what’s left in the base budget and what do we have to work with.”

Gov. Carney also called for slashing $37 million in projected education spending and allowing school districts to raise taxes without public referendums to make up part of the difference.

Discussion on that, along with health care changes and $4.5 million in new funding to increase hazardous duty pay for prison correctional officers JFC has pushed to this week.

Grant-in-aid funding, money given to nonprofits throughout the state, would see an across-the-board reduction in spending of about 11.3 percent under the governor’s recommendations. That could seriously impact nonprofits and it’s for that reason JFC might opt to make a smaller cut.

Grant-in-aid will not be finalized until after the June revenue forecast, set to be issued June 19. A last-minute influx of revenue, however small, would almost certainly be used to undo some cuts.

While JFC normally takes the spending plan for the current year and then adds or subtracts based on each agency’s needs, JFC initially planned to “start at zero and add in,” Rep. George Smith said.

However, members found that to be too challenging for observers to keep track of and so chose to continue basing agency spending off this year’s budget.

Reach staff writer Matt Bittle at mbittle@newszap.com

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