We learned last week that Rashmi Rangan – head of the Delaware Community Reinvestment Action Council is asking US Attorney General Loretta Lynch to take a look at the legality of a decision by the Delaware General Assembly to balance the budget with proceeds from a foreclosure practices settlement
The action in the waning hours of the General Assembly came as we got a rare view of the ugly “sausage making” side of the legislative process and the less than business-like “all nighters” we see at the end of June.
After cobbling together a last-minute budget deal that gave Republicans a few million dollars in transportation funding concessions and a couple of other pledges on the spending front, legislators were still left with a big budget hole that was plugged with a portion of proceeds from the settlement. It was part of a pattern that has emerged in recent years of tapping into one-time revenues when push comes to shove.
This decision in Dover was a little different than past raids as it came after a California judge ruled that a similar budget balancing move in that state was illegal.
Meanwhile, we had the moral issue of diverting money from those in dire need of assistance after losing their homes to allegedly shady loan practices during the mortgage bubble. The legal and moral worries were aired in social media by at least one legislator who did not vote for the budget.
In taking note of decision and the California ruling in the Bulletin and website, we felt the loneliness of the Maytag repairman when we pointed out the moral and possible legal consequences of the decision. Legislative leaders did not return our email messages, perhaps hoping the issue would go away. Even those worried about the decision were slow to respond.
We learned that Attorney General Matt Denn was not happy because he thought a better use for the money would have been crime-fighting efforts in Wilmington.
Denn went on to indicate that Delaware may be on less shaky ground, due to the possibility of fewer restrictions on the use of the money. We also learned that the Markell administration did not seem to be overly worried.
After the brief stupor we generally see after the all-night session and the mandatory summary, the News Journal ran a story on the issue and followed up last week with news of Rangan’s letter.
The issue may go away in a legal sense – California, with a large budget surplus – would have little trouble coming up with a financial settlement. Still, the moral and fiscal issues remain.
One shaky argument that could be made is that the increase in state spending covers the cost of a larger percentage of the population sliding into poverty after losing income and in some cases their homes.
Rangan pointed out a couple of examples of those counseled by DCRAC in need of assistance.
It also appears that Delaware may be forced to tap the remainder of the settlement next year. The state faces a much larger revenue gap brought on in part by a structural problem that uses one-time windfalls to balance the budget and often avoids the thankless of finding revenue and cutting spending. When cuts are made, they can center on things like general assistance, a program for the most desperate among us.
Meanwhile, trial balloons are floated on lazy summer weekends about reducing tax breaks for seniors, or perhaps tapping property taxes for state use. We then see predictable sense of outage that leads legislators to run for cover.
All of this is of little comfort to those who lost their homes, thanks, in large part, to the Wild West lending environment of a decade ago that led us to the brink of financial catastrophe in 2009.
