Study: Delaware below average in fiscal health

DOVER — A new study ranks Delaware 38th in fiscal health among the 50 states, a finding that has been seized on by Republicans who cite it as evidence policy changes are needed.

Completed by the Mercatus Center at George Mason University, a think tank that focuses on the economic market, the study judges Delaware as below average primarily based on three categories for the fiscal year that ended June 30, 2014: assets versus liabilities, spending versus available funds and taxes versus average personal income.

Delaware compares better in the categories of debt and available cash for the short term.

The state, which ranked 30th overall for the previous fiscal year, suffered the largest fall among the 50 states.

The study’s findings come despite consistent, if sometimes muted, improvement in unemployment rate and contradict claims of a growing economy trumpeted by the administration of Gov. Jack Markell.

A spokeswoman for the governor, a Democrat, said he has yet to read the entire report but “tends to place more emphasis on the fact that year after year the state continues to maintain the highest possible credit rating with all of the major rating agencies. That, combined with job growth rates that are fastest in the region and a 4.2 percent unemployment rate, shows that Delaware remains firmly on a path of good fiscal health and positive economic growth.”

According to the U.S. Bureau of Economic Analysis, Delaware was seventh among states in gross domestic product per capita, which measures the strength of a local economy weighted for population, in 2014. Its per capita income of $47,662 was 21st in the nation and right in line with the national average.

Republicans saw the report both as evidence and as ammunition.

Lawson, David G. by .

David G. Lawson

“Delaware’s long-term fiscal health should concern every taxpaying citizen of this state,” said Sen. David Lawson, who represents the Marydel area, in a statement. “As the report stated, we have long-term liabilities that are more than twice the national average, including over $3,000 in debt for every person in the state.

“We simply can’t keep kicking the can down the road to please the special interest groups. Hard decisions have to be made, and they should be made starting right now, not next year or 10 years from now.”

The report makes note of what has been the defining feature of Gov. Markell’s seven-and-a-half years in office: an economy battling back from the so-called Great Recession.

“The finances of state governments continue to be shaped by a sluggish economy and steady but modest revenue growth since the recovery from the Great Recession of 2008 began in 2011,” it says. “According to the Government Accountability Office, if current tax rates remain in place, total tax revenues for state and local governments as a percentage of GDP will not return to 2007 levels until 2047.”

Delaware struggled with budget shortfalls both last fiscal year and this year, and the lawmakers on the Joint Finance Committee have emphasized they believe more tough times lie ahead.

Budget-writing legislators grappled with the budget over the past two weeks, crafting a spending plan for the fiscal year beginning July 1. Primarily by making cuts to the governor’s January recommended budget, they were able balance the budget, even as lawmakers of differing views bemoaned that too much had been slashed or that not enough had been done to curb spending.

In the study, Delaware’s lowest rank comes in service-level solvency, which measures “how much ‘fiscal slack’ states have to raise taxes or increase spending by calculating the size of taxes, expenses and revenues relative to state personal income,” according to the publication. “States with high levels of taxes, revenues or expenditures relative to state personal income may have difficulty obtaining increased revenues in a sudden downturn.”

The First State is 46th in the category.

The study does note the results “do not indicate whether a state’s tax system is efficient, equitable, volatile, progressive or regressive.”

The findings also place Delaware 41st in budget solvency and 40th in long-run solvency. The former measures revenues versus expenses and the latter focuses on value of assets and liabilities.

Eight of the nine highest-ranking states all have Republican governors, and several of them are among the country’s largest producers of crude oil. Alaska, Nebraska and Wyoming top the list, with Connecticut, Massachusetts and New Jersey bringing up the rear.

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