Too soon? It’s never too soon to start thinking about Delaware’s Fiscal Year 2019!
Lots of interesting tax bills on the agenda for the Delaware House Revenue & Finance Committee! Will it be enough to shrink the budget deficit? As well, the Delaware Economic Forecast Advisory Committee is meeting on Monday. Will the budget deficit go up or down? What will the Joint Finance Committee do with their plethora of cuts? This is where it all starts going down. And where is the budget bill anyway? With all the suggested cuts and epilogue language? I’m hearing it is out there but they won’t let anyone in the media have it.
Fiscal Year 2018 will involve a lot of pain if the Joint Finance Committee’s marked-up state budget continues down the same dark path it is on now. While some cuts seem like a good idea, others will make children go without desperately needed services. The State Board of Education is kaput if everything stays the same. But could new tax bills, which would bring in more revenue to the state, cause some of those cuts to disappear?
In Delaware, the General Assembly needs a 3/5 vote to pass any revenue bills. In the House, that requires 25 yes votes and in the Senate, 13. This is where it gets very tricky. The House has 25 Democrats and 16 Republicans. The Senate has 11 Democrats and 10 Republicans. The House could conceivably pass the budget just on their Democrat base, but complications could easily arise. Some Dems in the House will not favor certain perks in the epilogue language, such as the Charter School Transportation Slush Fund. There is at least one Democrat, State Rep. John Kowalko, who will not say yes to the budget if that is in there. The Republicans in both houses want something: prevailing wage. They have wanted this for years, but this could be the year where they get what they want, or at least make some inroads towards it.
The Joint Finance Committee has to make the cuts until they see more revenue. Are they going after some of the programs that help people the most? Not yet. But today is another day and is expected to be uglier than yesterday. The JFC does not meet again until Tuesday, June 6th. I expect a whirlwind of activity at Legislative Hall every single day someone is there between now and July 1st.
In Governor Carney’s proposed budget, the local share of student transportation costs went from 10% to 15%. Yesterday, the Joint Finance Committee raised that to 20% with the expectation the school districts can recoup those costs from this mythological one-time Match Tax. Carney proposed the district school boards utilize this option without a referendum. Let’s be very clear on this: if this happens, do not expect taxpayers to pass referenda any time soon.
No matter how this plays out, John Carney’s vision of shared sacrifice will have winners and losers. If the uber-wealthy get more perks like the estate tax repeal, it will become very obvious who is pulling the strings behind the curtain at Legislative Hall in Dover.
Yesterday, the Delaware Economic Forecast Advisory Committee (DEFAC) projected Delaware’s budget deficit for Fiscal Year 2018 to be $395 million dollars. This is up ten million from the last time the committee met. Tonight, the Christina Board of Education will discuss the impact on taxpayers. Governor Carney is suggesting school boards raise what is known as the match tax (the portion the state matches certain funding) by having the district school boards levy the tax without a referendum.
Christina’s Chief Financial Officer, Bob Silber, created an impact budget for how this increase would hit taxpayers. In the below example, a home that just sold for $224,000 would see their property taxes raised $46.50 with the match tax scenario. Keep in mind, this is based on the property assessment value of $63,700, which is almost a quarter of the home’s actual value based on the sale price.
This is not the only sting homeowners, as well as all Delaware citizens, will feel starting July 1st. State taxes, collected from paychecks, will go up for most. State employees will see higher insurance rates. Salary raises for state employees will most likely disappear. Services will be cut. It is all rather bleak. Our General Assembly has utilized every single benefit to state funding, such as the proceeds from the tobacco lawsuit, without realizing those perks were eventually going to disappear. State revenue does not match state expenses. Companies, such as DuPont and soon Barclays, left Delaware for the most part, causing a severe lack of revenue and jobs. Delaware has, and will continue to, spend more than it makes.
With the Wilmington Education Improvement Commission, there was a request to raise property assessment values. While Delaware’s assessment values are still far lower than most states, it also created an influx of senior citizens moving to The First State because of that. But the ability of school boards to raise property taxes, already through the special education tuition tax and soon the match tax, could have a negative impact on the desire of the elderly to move to Delaware or even stay here.
Meanwhile, there has been no action on the Governor’s part to institute the basic special education funding for students in Kindergarten to 3rd Grade. State Rep. Kim Williams introduced two bills in the last two General Assemblies to take care of this but neither bill has moved forward due to the state funding issues. Oblivious to all the future costs by not having this essential funding in place, our state continues to bumble through special education with this very real omission to the foundation of special education students who are just beginning to manifest their disabilities. The projected amount to fund what should have always been there is a little bit less than $13 million a year. By not providing that funding, the state relies on the school districts or charter schools to pay for these services. Either way, it has a negative effect. If the school does provide those services, it results in more of a drain on local funding. If the school doesn’t, they are not only breaking special education law if the child qualifies for an Individualized Education Program, but they are also looking at higher costs for that student in the future by not providing that foundation. So that $13 million a year mushrooms to much higher costs for these students down the road.
Just this morning, State Rep. Earl Jaques announced a new bill on Facebook creating a fund in the Delaware Dept. of Education budget for an Educational Support Professional of the Year award. Delaware has 16 school districts, 3 vocational districts, and over 20 charter schools. This bill would allow each district (20, which includes one award for all the charters) to give their winner an extra $1000.00. The overall winner would get $1,500.00. While $21,500 in the DOE budget doesn’t amount to much, it is symptomatic of the mindset of far too many of our legislators. Instead of finding solutions, too many of them find ways to spend even more money. If our state was swimming in money, I would be okay with this bill. But not now.
Delaware’s legislature is going to have their hands full when they return from Spring Break next Tuesday. This budget deficit is not the result of a national recession like what we faced in 2009. This is Delaware created. We spent our way out of the recession and now we are paying the piper. Governor Carney looks like a deer running towards headlights with his reactions to this ever-increasing budget deficit. I predict he will have a very tough time getting re-elected in 2020 if this trend continues.
Delaware Secretary of Finance Thomas Cook issued the Fiscal Year 2016 Month-End Financial Statement for September 30th a couple weeks ago. Make no mistake, the First State is spending a lot of money, but our revenues are much less. And which state agency is spending the most money? One would think it is the Department of Health and Social Services. Nope. The Department of Education. For the month of September, we went from a beginning cash balance of $536,915,269 and we are down to $241,244,740 as of 9/30/15.
This is the elephant in the room that no one can quite tackle. But everything in this state WILL hinge on this financial monster coming our way. And it will play a huge part in every single Delaware election next year. Governor Markell has already checked out and he will keep bantering about how great education in our state is but how far we still need to go. Ignore him.
You can see the whole thing here: