Delaware government ‘somewhat prepared’ in dealing with recession

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Elder-Rainy-Day-Map-1Delaware’s use of a “rainy day” fund gives the state a better shot at dealing with an upcoming recession.

That was the finding of a 50-state study from the Mercatus Institute at George Mason University in Virginia. The ranking indicated that Delaware and neighboring Maryland were somewhat prepared to deal with a downturn.

The state ranks 13th among the 50 states in the report that placed neighboring Pennsylvania and New Jersey as  states  tied for the bottom spot.

Alaska and West Virginia were among the best-prepared states. States in the best prepared. category tended to have revenues from oil and gas and mineral extraction.

Despite a boom in gas production in Pennsylvania, the state has not tapped revenue sources from that area and remains more vulnerable to a downturn.  Legislators and the governor have battled over recent budgets.

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Another factor facing both Pennsylvania and New Jersey are unfunded liabilities for pensions. Delaware passed legislation to address pension shortfalls.

The rainy day fund specifies that a small percentage of the total state budget should be left in reserve.

The rainy fund has the added benefit of allowing  the state to retain a Triple A bond rating that reduces borrowing costs.

The state, under Gov. Jack Markell and his predecessors, has worked to preserve the top-tier debt rating and maintain the rainy day fund.

This came despite pressure from public employees who wanted to tap the fund for salary increases during the recession of 2009.

The free market-oriented Mercatus Institute has not always been kind to Delaware.

A recent study from the think tank  on the state’s overall financial condition ranked it 38th, due to the debt burden and  other obligations.

Other reports and studies  have pointed to a structural budget deficit that will continue to burden the state and an economy that has not sprung back from the downturn with the same strength.

The state has a lost a large chunk of its manufacturing base with the closing of its two auto plants and downsizings at other employers.

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