State again faces surplus challenge

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Good afternoon,

Delaware Gov. John Carney had encouraging words for the nearly 1,000 who attended the annual dinner of the Delaware State Chamber of Commerce on Monday night.

In what has become a tradition at the early January event, the governor makes a few remarks on the state of the economy and the upcoming legislative session.

Carney again had good news on the economy but noted the additional $200 million in additional revenue is a mixed blessing

The challengeinvolves what we witnessedlast year – a rush to claim the money.

Legislators were able to restore some cuts in grant in aid funding for nonprofits,hand out modest pay increases and provide modest relief to the state’s struggling casino industry.

The pent-updemand for assistance far exceeded available funds, given the state’s rising poverty rate and sluggish income growth.

The overall budget rose above the rate of inflation as employee health and benefit costs rose.

Carney remains well aware of a structural deficit that is destined to send the state into the red, even in a modest economic downturn.

A recession is not imminent, although a few red flags have appeared. After all, the economy has been growing for a decade.

Carney was part of a failedbipartisan effort to adopt a state constitutional amendment that would set aside a portion of the surplus in good times to balance out the budget when conditions go south.

Some legislators did not like the idea and instead have proposed higher income taxes for wealthier residents. Others made a power play to let the governor know who controls the purse strings.

Whatever the case, Carney issued an executive order ordering the budget process to go forward. He will have to deal with some bruised legislative egos amongDemocrats who strengthened their dominance over state government.

A few legislators appear to be poised to unleash another flurry of social justice legislation that will not be helpful to the business climate.

Carney understands the fiscal situation in the state. One will hope that legislators have the same grasp of the subject.

Agree or disagree? Let me know. Simply hit return and type away. – Doug Rainey, publisher.

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