(From the House Republican Caucus)
The governor’s proposed fiscal 2014 operating budget of $3.712 billion represents an increase of $126 million or 3.51 percent higher than the spending plan it seeks to replace.
The current budget, by comparison, grew at rate of 2.22 percent.
State House Minority Leader Dan Short, R-Seaford, said he would have liked to have seen a proposed budget with less growth. “The budget is increasing by three-and-a-half percent and we already know the revenue stream is going to be flat, if not even in the deficit position, because of some of the things we have hanging over our heads.”
One of those “things” involves the fate of a pending multi-million dollar tax appeal. According to the Department of Finance, an unidentified corporation has applied for a $63 million state tax refund. The ruling on that issue, expected in March, could create a sizable revenue gap for budget writers.
Delaware law requires the passage of a balanced budget which spends no more than 98 percent of projected revenues.
Governor Markell called for the implementation of several new proposals including expanding mental health services in public schools; establishing a competitive grant program to increase after-school and summer youth programs; and the hiring of six additional state police dedicated to fighting violent crime.
Collectively, the new proposals amount to less than $7 million in new spending, or less than 0.2 percent of the overall budget.
More controversial is a package tax increases enacted in 2009 to help bridge a budget gap that existed at the time. These higher taxes included hikes in the state personal income tax; gross receipts tax (a.k.a Delaware’s hidden sales tax); and the corporate franchise tax. The package also reinstated the defunct estate tax, which critics call “the Death Tax” because it is levied on a decedent’s assets.
Those tax increases were set to start expiring in the new fiscal year beginning July 1st. However, the governor is calling for the tax hikes to be extended.
Under the governor’s plan, the corporate franchise tax hike would be maintained and the estate tax would become permanent.
The personal income tax hike, impacting those making more than $60,000 annually, would be curtailed, trimming the top rate to 6.6 percent. However, it would still be significantly higher than the pre-2009 level of 5.95 percent.
The governor is also proposing a small cut in the gross receipts tax (GRT), but again the rates would be higher than if the 2009 tax hike was allowed to expire.
Rep. Short said he would like to see the tax hikes expire, as the governor and lawmakers promised four years ago. Rep. Short said while he understands the budget challenges facing the state, he said these are the same fiscal challenges facing working families and small businesses. He said small businesses are especially in need of some relief in the wake of higher Workers’ Compensation insurance premiums enacted earlier this month and uncertainty over the implementation of the federal healthcare reform law.
The 12 lawmakers comprising the budget-writing Joint Finance Committee (JFC) will take the governor’s recommended budget and use it to guide them as they craft a final spending plan that will need to be enacted by July 1. On Monday, the JFC begins six weeks of hearings examining the proposed budgets of every state agency.
One thing likely to generate discussion by the JFC is the governor’s proposed budget cuts for Open Space Preservation, Farmland Preservation and Municipal Street Aid. Rep. Short said he hopes legislative budget-writers will restore some of the funding for these programs, as well as the Community Transportation Fund (CTF), which the governor is also targeting for a reduction.
CTF money is used by lawmakers to address small transportation and drainage projects in their districts. “It allows us to do things very quickly for citizens that would otherwise take years to get done, so I’m hopeful they’ll see the light on this and make those tough decisions and help us out,” Rep. Short said.
