Good morning everyone,

It is good to report that Gov. John Carney came out strongly in favor of what is being dubbed budget smoothing.

Simply stated, the approach calls for a formula that shifts revenue projects to a multi-year formula that takes into account income growth and other factors.

Acting on the legislation this year is essential since it involves a constitutional amendment that would have to pass two separate legislative sessions.

Currently, the spending estimates issued by Delaware Financial Advisory Council use formulas that date back to the days of mainframe computers.

Over the years, the state has been content in being one of thebest of a bad lot in its forecasting practices. Neighboring New Jersey is a good example of what not to do, based on a study from Stockton University.

As it now stands, legislators and special interests are all too willing to spend money from windfalls, only to later struggle with shortfalls when the economy lags.

The amendment would replace the tiny and essentially meaningless rainy day fund with a budget stabilization fund that could be used to sock away money in good times and balance budgets when things get tough.

Carney joins a number of legislators and Republican State Treasurer Ken Simpler in backing the plan, which would require approval from two sessions of the General Assembly.

Earlier, I praised Simpler’s push for the measure amid muted enthusiasm from his own party as well as some Democrats.

Budget smoothing does address only one aspect of a structural budget deficit facing the state.

Still unresolved is the burden of lavish (by private sector standards) employeehealth care benefits. Pension funding also lurks in the background, with the state in need of rolling out 401 (k) style plans for new employees.

Sadly legislators face conflicts of interest on the benefits side since many are current or former government employees who may be receiving the equivalent of two pensions.

Still, the stabilization fund is a good start and deserves support from the business community.

Stay cool folks. Days like these can be dangerous. The newsletter returns tomorrow. – Doug Rainey, publisher.

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