Under financial pressure, budget committee kills employee pay raises, with caveat

DOVER — Delaware’s budget-writing committee voted Thursday not to fund contractually mandated pay raises for certain employees, at least for now. The Joint Finance Committee unanimously opted to waive collectively bargained “step” increases, which are given annually to educators, state troopers and deputy attorneys general, among others.

At the same time, they put in place a provision restoring the step payments if the state’s financial situation takes a positive turn over the next year.

Legislators did completely remove a 2 percent pay raise for all state employees proposed by the governor in the winter.

In January, Gov. John Carney unveiled a spending plan that would have been the largest in state history on both the operating and capital sides. Since then, of course, the world has changed drastically.

Among the casualties of the COVID crisis are the governor’s proposed operating and capital budgets for the fiscal year starting July 1. Totaling $4.64 billion and $893 million, respectively, they would have represented increases on the $4.45 billion operating and $863 million capital spending schemes approved by legislators last summer.

Now, they are officially things of the past.

Coronavirus and the resulting lockdown caused a revenue dip of $619 million over two years, according to the council that provides the state’s official revenue forecasts. To balance the budget, JFC members have cut not just the pay bumps but areas like farmland preservation, cash to the bond bill and hiring for new positions. They also pulled $76 million out of an unofficial reserve account, a move that on its own reduced about 16 percent of the gap for the upcoming fiscal year.

Members of the Joint Finance Committee meet Tuesday in a socially distanced meeting that was open to the public via YouTube. (Submitted photo/House Democratic caucus)

This shortfall came on even quicker than the Great Recession, although the impact on the budget has not been as big. However, unlike 2009, legislators have been unable to meet to work on the problem for several months, with the virus canceling most of the legislative session.

Because lawmakers are constitutionally required to approve a budget by July 1, the General Assembly last week approved virtual meetings, and JFC gathered this week to begin the markup process. With Legislative Hall still closed, most of the 12 members have convened in the House chamber, which is much more spacious than the normal basement meeting room and thus allows for social distancing.

Along with legislators, only a few staffers, budget officials and reporters have been allowed in the building for the meetings. Audio has been broadcast online on YouTube (https://bit.ly/2UcG93x), though with occasional technical difficulties like JFC members forgetting (or not knowing how) to unmute themselves.

With a tight timetable, the Office of Management and Budget developed a plan to act as a “bridge” between the current fiscal year and the one that starts July 1 of 2021. Now, after approving the changes with relatively little public fuss, JFC appears to be set with the spending plan.

Of particular interest to more than 10,000 state employees, a plurality if not majority of them teachers, are the step bumps.

Although the increases won’t be handed out in July as normal, language in the budget would restore those pay raises should revenues reach a certain level.

If the forecast for December 2020 or March, April, May or June 2021 is at least $50 million more than this June’s prediction, it would trigger a provision calling for the General Assembly to meet for a vote on reinstating the steps. Should that occur, the step increases would be paid in full — in other words, retroactive to July 1, 2020.

State employees who retire during the fiscal year would also receive the full benefit from the increase.

In the event revenues do not hit the $50 million threshold, JFC would presumably have the same discussion again next spring, according to Controller General Mike Morton.

American Federation of State, County & Municipal Employees Council 81 Executive Director Mike Begatto described the action by JFC as temporarily halting rather than eliminating steps.

Mike Begatto

Weeks of discussions between legislators, the executive branch and major unions preceded the vote, he said, expressing confidence the state will reach that $50 million trigger at some point over the next calendar year.

“We understand what’s going on. We’re all in this together,” Mr. Begatto said. “We could have played hardball.”

Shelley Meadowcroft, a spokeswoman for the Delaware State Education Association, said the union is disappointed but not surprised by JFC’s decision,

“Having had a representative at most of the meetings we knew that this was a possibility,” she wrote in an email. “We understand what is happening in the world around us, especially over the last few months with revenues falling drastically. Since this pandemic has happened our priority has been to make sure that students can keep learning and educators keep their jobs.”

It’s not clear when, if ever, legislators last withheld step increases. Even during the nadir of the Great Recession, when legislators had to close a gap of around $850 million, steps were still funded, and OMB spokesman Bert Scoglietti could not recall such a move occurring during his 33 years with the agency.

One more revenue forecast will be released June 17, just ahead of the end of the fiscal year. A negative picture there could force lawmakers to make further cuts, although there’s also room for good news in the form of an uptick in the revenue projection.

Other JFC discussions

Lawmakers on Thursday also approved funding for contact tracing, a key part of the state’s plan to combat COVID-19. Sens. Dave Lawson, R-Marydel, and Bryant Richardson, R-Seaford, voted against it, with Sen. Lawson characterizing the widespread testing and tracking as oppressive.

“There’s been fatalities to the flu and every other disease that’s come along. I think this is overreaction,” he said, expressing concerns every Delawarean will soon be required to isolate due to potential exposure to the virus.

In the latest step in an ongoing saga, JFC batted around the question of whether the University of Delaware is subject to inspection by the state auditor and the larger issue of whether the institution is public or private.

The university’s website calls it a “state-assisted yet privately governed” school, which has its roots in the institution’s charter. Delaware State, in contrast, has a slightly different status, according to officials.

UD has butted heads with state auditor Kathy McGuiness recently about whether she has the ability to audit its finances, an issue that came up again Thursday. Delaware law says the university’s expenditures of state funds shall be reviewed annually but does not reserve the ability for the auditor, instead noting only the officeholder “may” examine the records.

The auditor’s office has been working with UD officials to hire a contracted firm to go over a section of the university’s books, although Ms. McGuiness characterized the UD representatives as very reluctant to participate.

Trey Paradee

Sen. Trey Paradee, D-Dover, took some shots at the institution, blasting it for what he described as lack of diversity, overemphasis on out-of-state students and aversion to transparency. Should UD not be willing to commit to changes, the state should consider sending more money to DSU and Delaware Technical Community College, he said.

About 10 percent of the University of Delaware’s funding comes from the annual state budget, including $125.5 million for the upcoming fiscal year.

“I would just like to see the University of Delaware start acting like the University of Delaware,” Sen. Paradee, himself an alumnus of the school, said.

After almost 45 minutes of discussion, the committee moved on to different subjects. The dialogue on UD concluded with Rep. Quinn Johnson, D-Middletown, noting the General Assembly could require the university to fall under the same restrictions as DSU and DelTech. That, he pointed out, perhaps slightly ominously, could prompt the institution not to take state dollars and focus less on in-state students.

The Joint Committee on Capital Improvement is set to meet to work on the bond bill next week.

The full legislature still must vote on the budget bills, although that won’t happen until June 18 at the absolute earliest.