(Click here for a link to the Roundtable report and click here for an earlier story in Delaware Business Daily.com).
By Doug Rainey
A recently released study from the Delaware Business Roundtable stated the obvious. Delaware has a revenue system that is no longer able to snap back when the economy recovers.
Spending, meanwhile, remains above levels that can be supported by revenue growth.
Project the current trends into the next decade and the state would face a deficit of $600 million. That’s big money in any state. For Delaware, it’s a budget cliff.
The problems have worsened over the years, papered over by the use of financial settlements and a brief regional monopoly that led to a windfall from casino revenues.
Meanwhile, the legislative and executive branches have struggled to deal with rising costs for Medicaid, public schools and the criminal justice system. Of late, the state has been checking under the couch cushions for proceeds from one-time legal settlements and even a beleaguered Transportation Trust Fund to keep the budget in balance.
Few are happy with the current state of affairs
State employees – while winning a victory over efforts to require payment of a larger share of insurance costs – have seen their paychecks remain stagnant.
The health insurance fix contributed to the budget gap in the past session and was plugged in a controversial move that tapped money from a settlement over mortgage lending practices. That alone did not stop budget cuts in areas such as general assistance, a program for those in desperate straits.
Education performance, while improving modestly as standards get tougher, is often ranked in the lower half among the 50 states, despite funding that remains well above the national average. Teacher salaries, however, remain the lowest in the immediate region, making recruiting of top talent more difficult.
The report may mark a turning point for Delaware’s corporate leaders, who have often stayed out of partisan battles over taxes and spending, but now see the state at a crossroads.
In the early going, solutions often seem to fall along party lines.
“While we look forward to reading the entire report in detail, this independent study reaffirms what Delaware Republican lawmakers have been saying for years; that our state’s economy continues to underperform and that we need to start work immediately creating a framework to reduce government spending,” state Senate Republican Leader Gary Simpson, R-Milford, wrote in a weekly newsletter. Some Democrats are urging tax increases on the wealthy, with Rep. Paul Baumbach, wondering if the General Assembly is up to the task of dealing with a looming crisis.
The Delaware State Chamber of Commerce, perhaps sensing the need for middle ground weighed in on the report late last week.
“As the State Chamber has repeated, we are not interested in planting stakes in the ground or pointing fingers. We are only interested in solving problems. Any comprehensive solution must be bipartisan in nature. We look forward to participating in any solution to find sustainable revenue sources and position the Delaware economy to move forward,” stated Chamber President Rich Heffron.
Taking a somewhat different stance is Republican State Treasurer Ken Simpler, who sees the issue being “ bang for the buck,” rather than spending increases or cuts. He offered his thoughts in a recent newsletter.
“In my view, both our revenue system and our spending constraints are flawed in design, and that leads to poor decisions and outcomes from a budgeting perspective. More importantly, the focus on too much or too little expenditure or income tends to overlook the obvious nexus of the two: value. What are we getting for our money? Finally, the obsession with micro-managing the annual budget leaves little oxygen in the room to deal with the long-term aspects of our fiscal picture. This is where the real trouble lies,” Simpler wrote.
