Legislature compromises, passes budget


Reciting the Pledge of Allegiance from left, are Ruth Briggs King (R), Georgetown, Lyndon Yearick (R) Camden and Deborah Hudson (R) Hockessin during a Special Session of the General Assembly on Sunday. (Delaware State News/Marc Clery)

DOVER — Lawmakers reached a budget deal Sunday, the first day of an unprecedented “extraordinary” session that was called after a failure to find consensus.

After months of closed-door talks between Democrats and Republicans proved fruitless, the pieces fell into place Sunday. Lawmakers came to a consensus on tax increases for alcohol, tobacco and homes, allowing them to restore funding to nonprofits and reduce a variety of cuts, including ones to health-related programs and education funding.

The House passed the $4.1 billion budget around 11, while the Senate did the same just after midnight, sending it to Gov. John Carney. The bond bill was passed shortly after.

The two bills, along with grant-in-aid, were signed into law at about 1:15.

“We don’t want to take some of these votes, a lot of us don’t want to do it, but we have a job to do and we have to bring in some revenue to make ends meet,” House Speaker Pete Schwartzkopf, D-Rehoboth Beach, said.

Lawmakers met June 30, the last day of the fiscal year, and continued into July 1 in a special session but without a budget. It eventually became apparent no compromise would be reached that day.

The General Assembly passed a temporary funding bill and, after leaving around 5:30 a.m. Saturday, lawmakers returned at 1 p.m. the next day. They gaveled in only to quickly break, with the leaders of each caucus meeting together, along with members of Gov. Carney’s administration, for several hours and hammering out a deal.

The deal does not include personal income tax, which had been the focus of much of the discussion and was the centerpiece of Gov. Carney’s budget proposal.

Partly because of that, next year might be rough as well: Rep. Schwartzkopf predicted lawmakers will be in another budget “jam” in 2018, an election year, although he expressed optimism the General Assembly will avoid blowing past its deadline again.

Speaker of the House Peter C. Schwartzkopf (D) Rehoboth Beach during a Special Session of the General Assembly on Sunday. (Delaware State News/Marc Clery)

But legislators of the 149th General Assembly, who now bear the ignominious mark of failing to meet a deadline, will worry about that later. For now, they’re happy just to have a budget — and to not have to meet today.

Despite the agreement between the two parties, Sunday’s votes were not without drama. The alcohol and tobacco measures passed without a vote to spare, the former only after four Democrats switched their votes to “yes.”

Under the bills, Delawareans and visitors to the state will now pay more in “sin taxes” and when purchasing or selling a home.

The realty transfer tax, a 3 percent fee levied on home purchases, was raised to 4 percent. The increase will begin Aug. 1.

A six-pack of beer would cost an additional 6 cents more, while the tax on wine would increase by 13 cents for a 750 ml ounce bottle. Spirits with more than 25 percent ethyl alcohol would cost an additional 15 cents per 750 ml. The change would take effect Sept. 1.

Cigarettes would increase from $1.60 to $2.10, starting Sept. 1, and other tobacco products, such as moist snuff, would also see a hike in cost on that date.

Electronic cigarette products, which are currently not taxed, would be taxed at 5 cents per mL beginning Jan. 1.

Gov. Carney had proposed raising the cigarette tax by $1.

The increases to the alcohol and tobacco taxes would raise a projected $5.2 million and $11.6 million, respectively, this year, while the realty transfer tax would generate $45 million.

Because the changes are not in effect for the entirety of this fiscal year, they would bring in more money next year.

About 25 representatives of liquor stores, alcohol distributors and breweries testified against the alcohol bill when it was in committee two weeks ago, saying it would be bad for business, but their opposition was not enough to kill the measure.

There had been talk of taking a portion of the realty transfer tax, which is currently split evenly between the state and the county in which the house that is sold sits, away from the counties. Such a change would hinder the counties, which have already finished their budgets, and ultimately it was not adopted.

All three bills were based on Democratic backing but also saw some Republican support and opposition from a handful of members of the Democratic caucus.

Rep. Schwartzkopf said a “good lobbying effort” led to some Democrats voting against the alcohol and tobacco proposals, but he knew they would pass.

In the Senate, multiple Democrats decried what they said was a lack of support for middle- and lower-class Delawarean.

Senate Minority Leader Gary Simpson, R-Milford, said the Joint Finance Committee “did the best job that they could have under these circumstances.”

Budget talks were held up in large part due to prevailing wage — Republicans’ insistence to suspend or change it and Democrats’ refusal to consider alterations.

Members of the GOP believe the wage, which determines how much laborers on state-funded construction projects earn and is set based on rates currently paid by contractors, makes for a bad use of taxpayer money. They cite the fact wages are often several times higher than what workers would otherwise: An electrician on a construction job paid for with state funds earns $66.85 an hour, while average hourly wage for an electrician nationwide is $27.24, for instance.

Republicans refused to back tax hikes without changes to prevailing wage, and although the GOP did agree to compromise in the final days, Democrats were steadfast.

Because the Democratic Party lacked the three-fifths supermajority needed to raise taxes, the Republican minority had leverage.

Facing pressure and hoping to avoid meeting again, legislators reached an agreement Sunday. The discussion around prevailing wage and personal income tax “had deteriorated so badly,” Rep. Schwartzkopf said, and so lawmakers agreed to set those topics aside.

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