It’s official: Carney signs $4.11 billion budget

DOVER — At 1:16 a.m. Monday, Gov. John Carney signed his first budget into law, thus ending one of the longest legislative sessions in state history.

Lawmakers came to a consensus on the budget Sunday, the first day of an “extraordinary” session called because the Democratic-controlled General Assembly had been unable to balance the budget.

After five months of negotiations, and a historic failure to pass a budget by July 1, the start of a new fiscal year, legislators found consensus Sunday.

“Sometimes a legislative body needs to be up against a wall in order to come together,” Senate President Pro Tempore David McBride, D-Wilmington Manor, said.

It was a long and rocky road.

In January, then Gov. Jack Markell proposed erasing what was at the time a $350 million gap between projected revenue and spending with several major steps, including tax hikes and changes to state employee health care.

Gov. John Carney presents a signed budget bill after 1 a.m. Monday as Speaker of the House Pete Schwartzkopf, center, celebrates with Rep. Steve Smyk. (Special to the Delaware State News/Patrick Jackson)

In March, Gov. Carney proposed his budget, which included more modest alterations to employee health care and tax hikes and eliminated a gap of close to $390 million with an even mix of taxes and cuts.

The final budget totals $4.11 billion, a slight increase from the previous fiscal year’s $4.08 billion total.

The bond bill is $590 million, with $318 million of that going to transportation projects. Counting $248 million in federal funds, the total dollars going to transportation is the most ever, according to Sen. Dave Sokola, D-Newark.

Grants-in-aid for nonprofits, which was zeroed out Wednesday, was funded at $37.2 million — 80 percent of the level in the fiscal year ended June 30,

Legislators agreed to raise taxes on alcohol, tobacco and home sales. Those hikes are projected to take $66 million more from taxpayers this year.

The legislators will use that money to fund grants-in-aid and reduce a host of cuts, including a school district reduction that would have allowed districts to raise property taxes without voter referendums.

“A couple things didn’t come off the table until today,” House Speaker Pete Schwartzkopf, D-Rehoboth Beach, said of negotiations between the two parties on around 10:30 Saturday night.

Democrats continued to push for income tax hikes, while Republicans sought to reform or suspend the prevailing wage law, until the last minute, he said.

In the end, both parties got something they wanted — nonprofit funding and some structural reform — while not achieving all their goals.

Partly because the income tax wasn’t increased, Gov. Carney predicted officials will face another budget hole next year.

The alcohol and tobacco measures passed without a vote to spare in both the House and the Senate, while the realty transfer tax received more support.

The realty transfer tax, a 3 percent fee levied on home purchases, was raised to 4 percent. The higher tax will go into effect on Aug. 1.

The Delaware Association of Realtors protested the change, saying it will discourage people from buying homes.

“We think that although they may be thinking they’re raising revenue, they’re hurting the economy,” saqid the association’s president Bruce Plummer.

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

The state tax on cigarettes will increase from $1.60 to $2.10 per pack on Sept. 1; other tobacco products, such as moist snuff, would also see a hike in cost on that date also. Electronic cigarette products, which are currently not taxed, will be taxed at 5 cents per mL beginning Jan. 1.

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

The increases to the alcohol and tobacco taxes are expected to take another $5.2 million and $11.6 million, respectively, from consumers this year, while the realty transfer tax will generate $45 million.

The budget passed 38-3 in the House and 16-4 (with Sen. Cathy Cloutier, R-Arden, absent because her mother was ill) in the Senate.

Rep. John Kowalko, D-Newark, criticized the budget as “austere” and Sen. Robert Marshall, D-Wilmington, voted against it for what he said was the first time in his 39 years in the Senate.

“This budget is in reality a house of cards,” Sen. Marshall said, criticizing what he said was an undue burden placed on middle- and lower-class Delawareans.

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

A few Democrats also spoke ill of the financial plan but cast votes supporting it.

The budget contains a pay raise for correctional officers and money to purchase cameras for the James T. Vaughn Correctional Center.

The grants-in-aid bill includes money for senior centers, veterans’ organizations and fire companies. It passed without any opposition.

Sen. Nicole Poore, D-Bear, president of Jobs for Delaware Graduates which receives money in grant-in-aid, voted for the proposal. Asked why she did not abstain, she said she has talked to “four different attorneys” and all said it was OK to vote for grants-in-aid since it concerns funding for organizations other than just Jobs for Delaware Graduates.

Nonprofit organization held multiple rallies at Legislative Hall over the past few days, calling for legislators to provide funding. House Democrats tried to apply pressure to Republicans Thursday by combining an income tax bill with grants-in-aid, hoping members of the GOP would vote to raise taxes out of a desire to fund nonprofits.

The vote fell short because of a three-fourths supermajority requirement for grants-in-aid, with no Republicans backing the measure.

Relations between the two parties were strained in the immediate aftermath, but things came together Sunday.

“Overall, I think this is a good plan for Delawareans,” House Minority Leader Danny Short, R-Seaford, said in a statement. “We killed the personal income tax hike proposals, restored funding for police protection, fire companies, schools, senior centers and community non-profit organizations. Just as importantly, we held the line on spending, holding budget growth to about one-half of 1 percent.”

It is certainly one of the most difficult-to-produce budgets ever.

While it comes with measures to study reducing health care costs, merging school districts and changing how Delaware budgets, Gov. Carney believes Delaware “missed an opportunity on the revenue side to have a more sustainable revenue stream.”

Despite the very public disagreements between Democrats and Republicans over the past months — and especially over the past two weeks — the governor said he is confident the General Assembly can continue working together.

“We are all in this together. That’s one of the things that I hope we all recognize. Look, I spent six years in Washington, D.C.,” the former congressman said. “I know what doesn’t work. I know what works, and the Delaware way works when we, Democrats and Republicans, are working together on the hardest, most difficult challenges that we face, and nothing is going to be more difficult than getting a sustainable revenue side and a sustainable spending side.”

Reach staff writer Matt Bittle at mbittle@newszap.com

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