Delaware State News

DOVER — With Delaware’s General Assembly practically looking between the couch cushions for loose change in a tight budget year, no funding can be considered entirely assured.

Lawmakers are facing a $217.3 million gap between revenue projections and the governor’s 2009 proposed $3.41 billion budget, and that divide must be bridged either through cuts or additional revenues by the end of the legislative session June 30.

Lawmakers are constitutionally required to pass a balanced budget.

After two weeks of hearings that concluded Thursday, the Joint Finance Committee has approved $40.4 million in cuts, with another $7 million in capital funds recommended for reduction. Those decisions must be approved by the full General Assembly.

The budget-writing committee will continue its examination of state finances this week, and one target that could find its way into the crosshairs is the grant-in-aid budget, a bill that allocates funds to organizations throughout the state such as fire companies, senior centers, community groups and nonprofit organizations.

"Grant-in-aid is one of the issues we will be discussing," said JFC co-chair Rep. William A. Oberle Jr., R-Newark. "It’s on the block. Given the situation we’re in, even with a 50-50 split (between cuts and revenues) it’s on our radar screen."

The 2008 grant-in-aid bill allocated $47.7 million to groups throughout the state, including several local organizations that rely on a level of state funding to balance their budgets.

"It would be devastating for us," said Carolyn Fredricks, executive director of the Modern Maturity Center in Dover. The senior center received more than $450,000 in the 2008 grant-in-aid bill.

"We’re dealing with the fastest-growing segment of our population, food costs have increased 20 percent and utility costs have increased.

"Even if our (grant-in-aid) budget is flatlined, that means we are going to have to serve less people. If the state cuts our budget, we are going to need a waiting list."

The Modern Maturity Center, Ms. Fredricks said, is growing by about 130 members each month, an influx that it cannot accommodate with stagnant or declining funds, and the state’s contribution hasn’t increased in several years.

"We have always tried to not have a waiting list," she said. "Who do you serve and who do you turn away? How do you make that decision?"

Ms. Fredricks said if funding is cut, some programs might have to be cut back, or the center might stop serving more-expensive food to save money.

The center also receives state money for its Meals on Wheels program for seniors, and with gas prices at record highs, any reduction in that funding would jeopardize the program.

Those prospects are troubling to Rep. Nancy H. Wagner, R-Dover, who serves on the center’s board of directors.

"For many seniors, the only hot meal they get is at the center or through Meals on Wheels," Rep. Wagner said. "It’s really difficult. How do you balance and say which program is more important?"

The Shepherd Place, a nonprofit homeless shelter in Dover, received $52,000 in the 2008 grant-in-aid bill, which director Lakena Hammond said pays the shelter’s utility bills throughout the year.

"If we don’t get that money … I’m scared," Ms. Hammond said. "Our major grants with Department of Health and Social Services didn’t get raised, either, and that takes care of our payroll.

"It’s not that we didn’t worry about money before, but we didn’t stress from month to month wondering if we’d be able to stay open."

If state funds start to dry up, Ms. Hammond said Shepherd Place might have to explore closing one of its two buildings — which would mean serving half of the 30 homeless it currently does — and possibly renting it out to raise revenue.

"We do have an option if push comes to shove," she said, "but I hope it never comes to that."

There are several other local groups that received funding in the 2008 grant-in-aid bill, including Frederica Senior Center ($180,455), Aid in Dover ($94,000), Delmarva Rural Ministries ($63,800), First Night Dover ($13,500), Smyrna-Clayton Heritage Association ($9,900) and Kent County SPCA ($5,000).

Losing a sizable chunk of the $100,000 Kent-Sussex Industries receives from the grant-in-aid bill would create a transportation nightmare for the Milford-based company, said CEO Craig Crouch.

Kent-Sussex Industries is a private, nonprofit vocational rehabilitation organization which serves the residents of Kent and Sussex counties. Since it serves people with disabilities, the company provides transportation for them.

"We do door-to-door transportation for 260 people every day," Mr. Crouch said. "In the current environment of gas going up 30 percent over the last year, you could see us cutting back on routes and making the ones we have longer, time-wise.

"We make 500 trips a day. We traveled 1 million miles in Kent and Sussex counties last year. DART can’t handle that flow if we had to cut routes. If KSI couldn’t provide transportation, only 20-30 percent of the people we serve could find a way here."

All three groups said they have been in contact with lawmakers about retaining their funds for the upcoming fiscal year.

During a break in JFC hearings Thursday, Rep. Oberle noted that he received three e-mails in a half-hour span from community groups asking about state funds they receive.

"Grant-in-aid will be one of those difficult decisions," Rep. Oberle said. "When you look at the economic climate locally and nationally, (nonprofit organizations) are relying on us more and more. It really tugs at your heartstrings."

Delaware State News

DOVER — Legislative budget writers slashed 138 positions out of the state budget Wednesday, but not a single state employee will receive a pink slip because all the jobs were vacant.

In fact, the positions had been vacant a minimum of two years.

"Back in February when we said we were looking for ways to make government smaller, we looked at every department’s vacant positions," said Office of Management and Budget director Jennifer W. Davis.

"We said to the agencies, justify why you need this position if it’s been vacant for two years or more."

Some of the positions that were on the books did not have funding tied to them. Most years, those posts would be carried over from year to year in the event that funding became available to fill them.

Cutting the positions will slice $2.94 million from the proposed $3.41 billion fiscal 2009 budget, but that is a drop in the bucket compared to the $217.3 million revenue shortfall that lawmakers faced entering hearings last week.

Last week, JFC sliced about $31.7 million from the proposed budget, including $28.94 million from public education and $2.7 million in debt reduction. Those decisions must be approved by the full General Assembly when voting on the entire budget.

Among the positions cut were 17 Department of Correction workers, although Mrs. Davis noted that none were the lower-ranking correctional-officer positions that are vacant, but mostly sergeant and corporal positions and a senior accountant.

"We have lots to go," Mrs. Davis said. "These are difficult times and difficult choices have to be made.

"This is better than layoffs, clearly, but will it have impact over the long run? Quite possibly."

JFC member Rep. Joseph W. Booth, R-Georgetown, described the process as "slow" to this point — less than 13 percent of the revenue gap has been closed — with six days of closed hearings and only three public votes.

Rep. Booth said that while eliminating even vacant positions is a difficult prospect for state agencies, he felt the panel could have gone further, possibly nixing posts that have been empty for one year.

"Three or four years ago, Gov. (Ruth Ann) Minner suggested we needed to re-engineer government, but when we went into the budget process, we didn’t see a lot of re-engineering and bought a couple golf courses," Rep. Booth said.

"Now we’re seeing that re-engineering, and it took a fiscal crisis to do it."

Other positions that were cut Wednesday include:

•a senior legislative fiscal analyst in the controller general’s office;

•a chief operating officer in the Delaware Economic Development office;

•12 positions in the state auditor’s office, with most of the work being done by outside firms;

•A paralegal in the insurance commissioner’s office;

•A public information officer and community relations officer in the Department of State;

•A training educator for the visually impaired office in the Department of Health and Social Services;

•Several administrative positions throughout several agencies.

Lawmakers have said they are frustrated by the budget hearings as they try to wade their way through the details of each agency and program under consideration.

The slow process means that the JFC will not complete its work before the legislature returns to session next week and the process will have to continue into the session’s final four weeks.

Rep. Joseph E. Miro, R-Pike Creek, said the committee is making progress, but proceeding very carefully to make sure they don’t impact programs or the workforce.

"If we cut programs on the front end, it’s going to come back on the other end," Rep. Miro said. "We have to look at what are the unintended consequences."

Rep. Miro and other legislators have said that solving the $217.3 million shortfall will require a mixture of budget cuts and revenue enhancers.

Although no formal proposals have surfaced, budget officials have briefed lawmakers on several tax and fee hikes to increase revenue.

Among the revenue options discussed are implementing sports betting, increasing the alcohol tax by 50 percent, increasing the state’s share of the realty transfer tax by 0.5 percent, increasing corporate fees and rolling back a gross receipts tax cut passed in 2006.

Del. auditor’s suggestions called late or flawed

Delaware State News

DOVER — A state auditor’s report that Delaware could save more than $21 million annually through a series of cost-saving measures was called into question by some of the targeted agencies Friday.

The seven-page report, sent to state officials last week and publicly released Thursday, details streamlining student testing, cutting back on prison food, filling vacant positions at the state psychiatric hospital, reviewing cell-phone usage and standardizing school blueprints.

But several of state Auditor R. Thomas Wagner Jr.’s proposals have been met with criticism, either because they already are being considered or allegedly do not take all details into consideration.

One proposal calls for consolidating the administrative offices for the state’s three countywide vocational-technical school districts into one office.

"You have three superintendents, three deputy superintendents, three building managers … with six buildings and a student population the size of a mid-sized school district," Mr. Wagner said.

Consolidating the offices would allow the reduction of duplicative administrative positions, at a saving of more than $860,000 annually.

But Polytech School District Superintendent Dr. Dianne G. Sole said there are several drawbacks to the auditor’s proposal.

"A central administrative office for the three technical districts will remove the day-to-day authority from the school community to a centralized location, which will diminish the returns to education," Dr. Sole said.

"There is a potential for student achievement and other student outcomes to be negatively impacted."

Dr. Sole said that if the offices were consolidated, the state would have to "level up" salaries because New Castle County Vo-Tech School District pays more than Polytech in Kent or the Sussex Technical School District.

"The leveling up of salaries of the three technical districts will negate the cost savings of a centralized administrative office for the technical districts," Dr. Sole said.

"The leveling-up of teachers’ salaries in Polytech School District and Sussex Technical School District to teachers’ salaries in New Castle County Vocational District total $1.92 million. All other salaries would have to be adjusted, as well."

The largest cost-savings venture for the state that Mr. Wagner proposed, standardizing school-construction blueprints, is something the Department of Education has considered, said agency secretary Valerie A. Woodruff.

The auditor’s report says if the school districts used standardized blueprints for schools based on the size of school needed, instead of contracting with architects to customize each new project, the state could save $10.9 million.

"We’ve promised reduced class sizes and full-day kindergarten, so we are going to be building a lot more classrooms," Mr. Wagner said. "We have to find ways to build classrooms cheaper."

Ms. Woodruff said a school construction committee found that using the same set of blueprints can work in certain situations, but there can’t be a one-size-fits-all approach to it.

"Every site (for a school) is very different and you have to adjust to that," Ms. Woodruff said. "But I believe there is some standardization that can be done. There are some commonalities that should be considered so you’re not rethinking and reinventing things every time."

Ms. Woodruff noted that Caesar Rodney School District already has taken advantage of using the same blueprints when it built Fred Fifer III Middle School and F. Niel Postlethwait Middle School.

"They are the same building; they just turned it on its side on the site so it looks different," she said.

Mr. Wagner also proposed cutting Delaware Student Testing Program exams to only the required grades — third, fifth, eighth and 10th for all tests.

Wednesday, the legislative Joint Finance Committee nixed DSTP writing tests for the nonrequired grades.

But Ms. Woodruff said the state would be violating federal law if it followed the auditor’s suggestion for the reading and mathematics portion of the DSTP.

"We have to test reading and math in grades three through eight and at least once in high school as part of No Child Left Behind," she said.

Prisons, Mr. Wagner said, could save more than $1.1 million a year by cutting back on how much food it prepares.

According to a 2004 economy and efficiency audit, prisons throw away about 20 percent of the food they prepare.

Commissioner of Corrections Carl C. Danberg said the prisons continue to look at that situation, but the number of inmates present on a daily basis is a constantly changing number.

"In the Delaware prison system, we have an incredible swing in population from day to day and morning to night," Mr. Danberg said. "It’s not the same as preparing food in a simple setting with a set number of people."

DOC spokesman John R. Painter said that since the 2004 audit, DOC has begun basing the number of meals it prepares on a three-month average of the number of inmates at each meal, which gives a more accurate number of how many meals to prepare.

Despite the criticisms, Mr. Wagner said his office was simply looking for ways to help the state out of its projected $217.3 million revenue shortfall for fiscal 2009.

"This is the time for everyone to work together and come up with ideas, and not worry about which political party you belong to or which branch of government you are," he said.

Delaware State News

DOVER — Delaware could save more than $21 million annually through a series of state office reorganizations, expenditure reviews and cost-saving measures, according to a report the state auditor’s office released Thursday.

The report details streamlining student testing, cutting back on prison food, filling vacant positions at the state psychiatric hospital, reviewing cell-phone usage and standardizing school blueprints.

State Auditor R. Thomas Wagner Jr. said the idea to assemble the proposal, which was distributed to legislators and the governor’s office last week, came in the wake of state-ordered budget cuts for government offices for fiscal 2009.

"We cut our budget by 19 percent, and I said, 'Let’s do some brainstorming and go over past audits and see where we could find some savings,'" Mr. Wagner said.

"This is the time for everyone to work together and come up with ideas, and not worry about which political party you belong to or which branch of government you are."

Mr. Wagner is a Republican. Democratic Gov. Ruth Ann Minner is facing a $217.3 million gap between revenue projections and her proposed $3.41 billion operating budget for fiscal 2009.

"I certainly don’t have all the solutions. These are just some of our options," Mr. Wagner said.

While all ideas are welcome, Office of Management and Budget director Jennifer W. Davis said that several of the auditor’s suggestions already are under consideration.

A proposal to administer the Delaware Student Testing Program to only the required grades, at a saving of $4.53 million, already was partly implemented, she noted.

The legislative Joint Finance Committee voted Wednesday to eliminate the writing portion of the DSTP for third-, fourth-, sixth-, seventh- and ninth-graders next year, tests that are not federally required by No Child Left Behind.

But, Mrs. Davis said, the state’s agreement with the federal government would become complicated, and funding could be lost, if the state started axing other portions of the test

Proposals to fill vacant positions — a Comprehensive Annual Financial Report (CAFR) management position in the auditor’s office and 99 Delaware Psychiatric Center positions — could save more than $1.2 million, according to Mr. Wagner’s report.

"We’ve twice posted for (the CAFR) position" without hiring anyone, Mrs. Davis said. "And do you know how hard it is to recruit for DPC with all the media coverage it has gotten?"

DPC has been under fire for several months amid accusations of physical, emotional and financial abuse of patients and worker intimidation. A House subcommittee and governor’s task force have examined the facility and recommended several changes to the hospital.

Another proposal in the auditor’s report, reviewing the state workforce and eliminating excessive or duplicative positions, is something Mrs. Davis said her office has been doing since February, when a hiring review was put in place. That has since been turned into a hiring freeze.

Mr. Wagner also proposed e-mailing pension statement to current state employees rather than mailing them, which would save the state $76,575 annually.

Mrs. Davis noted that not all state workers have computers, but Mr. Wagner countered that each state employee could have access to a computer while at work and enter their data and recover the information he or she needs.

"The state certainly has enough PCs (personal computers) around for people to check their pensions," he said.

JFC co-chair Rep. William A. Oberle Jr., R-Newark, said it’s common for "so-called experts" to come along during times excessive or tight finances and offer their thoughts on what should be done, but they are not involved in the intricacies of the situation.

"It’s nice to take a broad brush stroke from the outside in," Rep. Oberle said, calling it an "uninformed viewpoint."

Said Mr. Wagner: "I didn’t realize the state auditor wasn’t on the inside."

Delaware State News

DOVER — A legislative committee slashed nearly $30 million from public education Wednesday, the first public votes in what’s expected to be a long process to close a $217.3 million revenue shortfall for the fiscal 2009 budget.

Among the cuts the budget-writing Joint Finance Committee made Wednesday are the elimination of several "nice to have" programs for educators’ professional development, training, criminal-background checks and tuition reimbursement.

"We used to cover the cost of background checks for new hires, but we’re not picking up the cost anymore," said JFC co-chair Rep. William A. Oberle Jr., adding that the checks would still be required, but the new teachers would pay for them.

"In better financial times, we thought it was reasonable to cover those costs, but we’re not in reasonable financial times right now."

The $28.94 million in budget cuts passed the committee unanimously, but the final budget still requires the approval of the full General Assembly next month.

Wednesday’s votes were the first in the two-week session after three days of closed-door budget discussions.

The May meetings of JFC often are referred to as "markup" — because the committee adds programs to the governor’s proposed budget based on available revenues — but lawmakers have said that cuts are coming first.

The state is facing a $217.3 million gap between projected revenues and Gov. Ruth Ann Minner’s proposed $3.41 billion budget for fiscal 2009.

Absent any new revenue enhancers — tax or fee increases — JFC is forging ahead with cutting its way out of the shortfall.

Office of Management and Budget director Jennifer W. Davis noted that legislators, facing a possible massive layoff of 1,500 educators, capped public education’s share of the cuts at $30 million last month, down from the proposed $80 million.

The difficulty in Wednesday’s cuts despite that cap underscores how difficult future cuts will become, she said.

"This is just the start," Mrs. Davis said. "(Public education’s) cuts were restricted, so you can imagine how it will be for other agencies."

Among the cuts to public education JFC approved Wednesday are:

•$10.9 million by consolidating four block-grant programs — discipline, teaching cadre, extra time and reading — into one and giving school districts flexibility with how to spend the funds;

•$2.15 million by slowing school-bus replacement, a recommendation made by the Leadership for Education Achievement in Delaware Committee;

•$1.3 million cut from professional development, although teachers currently in the program will be able to continue;

•$1.22 million from educational programs and adult education workforce training grants;

•$1.1 million by eliminating tuition reimbursement;

•$500,000 from drivers’ education programs for nonpublic schools;

•$142,800 by eliminating Delaware Principal Academy;

•$136,600 by requiring teachers to pay for their own criminal-background checks;

•$84,500 by eliminating legislative essays contest.

"These were things added during good times, and certainly, we would like to keep them, but we’re in tight financial times," said Rep. Oberle, R-Newark.

Another sizable cut from public education would partially eliminate one of the "three R’s" — at least from the Delaware Student Testing Program.

JFC voted to nix the writing portion of the DSTP for third-, fourth-, sixth-, seventh- and ninth-graders next year, tests that are not federally required by No Child Left Behind.

The $2.7 million in recommended DSTP cuts also includes reusing an old test rather than composing a new series of questions.

Delaware State Education Association executive director Howard Weinberg said he was pleased that very little of the cuts centered on personnel, but the reductions would have a significant impact.

He specifically pointed at the recommended cuts to professional development, tuition reimbursement and skills and knowledge.

"It’s never a victory when $30 million is cut from programs that affect the people who work in schools; however, we knew these cuts were coming," Mr. Weinberg said.

"These are all areas that impact the employees and have an effect on the students in the long run. These are not areas or cuts that the (education) system can continue to sustain without a dramatic effect on students and education.

"Ultimately, we will have to find a revenue stream that helps the system."

Mr. Weinberg added that not restoring incentive programs such as tuition reimbursement and professional development could lead potential teachers to consider other states rather than working in Delaware.

"These are all difficult decisions, but when you look at the social programs we could be looking at cutting, it doesn’t get any better from this point on," Rep. Oberle said.

JFC will continue its budget discussions at 10 a.m. today.

Delaware State News

DOVER — After months of bad news on the financial front, state budget writers received a glimmer of hope Monday when state revenue estimates climbed by $39.2 million for fiscal 2008 and dipped by only $500,000 for fiscal 2009.

The leveling off of revenues as projected by the Delaware Economic and Financial Advisory Council was welcome news for Office of Management and Budget director Jennifer W. Davis.

"Obviously, DEFAC going up in ’08 is a good thing. Now it’s all hands on deck for ’09," said Mrs. Davis, noting that budget officials have spent the last four months focusing on 2008’s shortfall.

Legislators still find themselves in a $217.3 million hole for fiscal 2009 that needs to be closed in the next six weeks by budget cuts, tax and fee increases or a combination of reductions and revenues.

"I’m concerned that (the 2008 uptick) might be the last gasp we’ve seen from the economy for some time," said Joint Finance Committee co-chairman Rep. William A. Oberle Jr., R-Newark, who believes the state and country are in the midst of a recession.

"The greatest fear among us is that the slight bump in (personal income tax) is being seen as a light at the end of the tunnel. I don’t see it that way."

State revenue estimates plummeted by $373.7 million in the March and April DEFAC meetings, sending the 2008 budget into the red and forcing three rounds of budget cuts, transfers and reductions totaling $138.7 million to bring the current year back to a positive cash balance.

That $1.6 million positive balance was bolstered Monday by the additional $39.2 million in revenue, which largely comes from personal income tax ($19.5 million), abandoned property ($9 million) and corporation income tax ($8 million).

Despite the good news, budget officials are keeping their eyes on the June DEFAC meeting, which includes payments received for the bank franchise, corporate franchise, corporate income and insurance taxes.

"To the effect that (June DEFAC) stays flat, we can close ’08 and look toward ’09," Mrs. Davis said.

If revenue estimates for 2008 fall, Mrs. Davis said a fourth round of budget cuts would involve stopping existing projects or flipping payments into the next fiscal year.

Revenues for fiscal 2009 dropped by $500,000, but the financial picture was aided by the $40.8 million that would be carried forward from 2008.

That still leaves the legislative Joint Finance Committee, which began its budget-writing process Monday, with a $217.3 million gap to close between projected revenues and the governor’s proposed $3.41 billion 2009 budget.

JFC met behind closed doors for several hours Monday and did not emerge to take any public votes. In years past, the committee would vote on salary increases for state workers on the first day, but that did not happen.

"No recommendation today reflects where we are with the big picture," said JFC co-chair Sen. Nancy W. Cook, D-Kenton. "We still have major, major cuts to make. The thought of adding anything to the budget is not realistic.

"I’m not so sure we’ve seen the worst of the situation. It was a little encouraging to see (personal income tax) remaining stable."

Sen. Cook and Rep. Oberle cautioned against tapping into the state’s rainy day fund to bail the state out of its financial straits because of long-term effects it could have.

Sen. Cook said there is the possibility of going above the state’s self-mandated 98-percent spending limit, but that also has drawbacks. If the state spends above 98 percent one year, it has to make up the difference the following year.

Mrs. Davis, who described the closed-door hearings as "a long day," said officials have a long way to go to tackle the 2009 budget woes.

"I suspect a lot of late nights and weekends are ahead," she said.

Whether JFC cuts $200 million to $250 million from the proposed budget — state agencies have been instructed to cut 8 percent from their requests — depends on whether the legislature approves any revenue enhancers.

Budget officials briefed lawmakers in closed-door sessions last week about proposed fiscal 2009 budget cuts and possible tax and fee increases.

Among the revenue options discussed are implementing sports betting, increasing the alcohol tax by 50 percent, increasing the state’s share of the realty transfer tax by 0.5 percent, increase corporate fees and rolling back a gross receipts tax cut passed in 2006.

Legislative leaders constituting the unofficial Big Head Committee — which meets in closed session to hash out financial issues and agree on proposed revenue packages — have met several times but have not arrived at any agreement.

Rep. Oberle said that until JFC hears otherwise from legislative leaders, the committee will proceed with cutting its way out of the shortfall.

Nothing has been formally proposed, although the House of Representatives passed legislation Thursday authorizing sports betting, which would make Delaware the only state east of the Mississippi River to offer it.

Estimates vary, but sports betting and increased slots play could mean $22.5 million to $70 million in additional revenue for the state annually.

Delaware State News

DOVER — Legislative budget writers will gather this week to address the financial pitfall that has gripped Delaware this year, attempting to balance the current budget and even out fiscal 2009.

State revenue estimates have tumbled $373.7 million since December, prompting Gov. Ruth Ann Minner to order a hiring freeze and instruct state agencies to cut $100 million to $175 million from the current budget and slice 8 percent from 2009’s proposed budget.

"Some people in this building (Legislative Hall) don’t think that it’s that severe of a problem," said Rep. Peter C. Schwartzkopf, D-Rehoboth Beach, a member of the Joint Finance Committee.

"There are a lot of projects near and dear to legislators’ hearts that are going to get cut."

The sagging revenues and late hour have forced the Joint Bond Bill Committee to meet several times to consider capital budget cuts to close the revenue gap for fiscal 2008.

Last month, the committee approved $41.1 million in cuts, which was followed up last week with another $8.26 million in cuts and transfers.

However, revenue estimates have continued to fall, leaving legislators with a $54.1 million shortfall for this year.

Office of Management and Budget director Jennifer W. Davis said she expects to be able to slice another $25.46 million, which she would announce at the May 19 meeting of the Delaware Economic and Financial Advisory Council.

Those cuts, which would not require legislative action, would come largely from savings due to a statewide hiring freeze, budget cuts, legislative reversions and eliminating a reserve account no longer needed, Mrs. Davis said.

Even with those cuts, the state still would be $28.67 million short for fiscal 2008, which means more cuts are on the way.

"Tuesday, we will be meeting with the Bond Bill Committee for round three of budget cuts," Mrs. Davis said. "I don’t think budget cuts are ever easy, but there are less and less options out there, so it inherently becomes more difficult."

Because the state is 10 months into the fiscal year, cutting funds from the operating budget to balance the 2008 spending plan is difficult, forcing budget officials and lawmakers to look at the capital budget for unspent funds.

Last week, the General Assembly overwhelmingly passed legislation reallocating previously authorized funds for capital projects, reverting interest from several accounts and depositing special funds to the general fund.

Several projects lost funds, including the Delaware Civic Center ($700,000), Dover Public Library ($500,000), Harrington library ($413,500) and Chesapeake & Delaware Canal recreation area ($684,850).

The lone vote against the measure, Sen. Colin R.J. Bonini, R-Dover, said the state needs to do more than make marginal cuts, noting that the state’s budget has grown from $995 million in fiscal 1988 to $3.29 billion this year.

"That’s just nonsense," Sen. Bonini said. "At some point, we are going to be cutting services, but can we cut without greatly affecting people? The answer is absolutely yes."

But Joint Finance Committee co-chair Rep. William A. Oberle Jr., R-Newark, said cutting is going to be very painful and will have an impact on the average resident.

He pointed to Medicaid, which has grown dramatically in recent years. Knocking some of the 150,000 off the program could have "monumental" problems down the road.

The JFC will meet behind closed doors today to prepare for next week’s budget-writing session, a time traditionally referred to as "mark-up."

Given the state’s $250 million gap between the proposed $3.41 billion budget and available resources, the spending plan almost certainly will be marked down.

"It’s serious. It’s very serious," Mrs. Davis said.

The JFC’s two-week budget-writing session coincides with the May 19 DEFAC meeting, which will determine whether state revenues are leveling off or continuing to slide.

"I don’t think there are going to be any serious discussions (about cuts and possible tax or fee increases) until then," said House Majority Leader Richard C. Cathcart, R-Middletown.

"The 19th is going to tell us a lot."

But lawmakers say cuts come first for revenue shortfall

Delaware State News

DOVER — Heading into the home stretch of the budget-writing season with a $250 million hole, state lawmakers and officials are faced with the prospect of either drastically cutting programs or raising revenue.

And although many lawmakers say they are focusing on cuts to the proposed fiscal 2009 budget first, a document circulating throughout Legislative Hall could give credence to the notion that tax or fee increases could be on the way.

The three-page list details every tax decrease the General Assembly has passed since 1988, a series of reductions to personal income, gross receipts, corporate income and bank franchise taxes.

The 46 tax reductions combined have reduced state income by $426 million annually, according to the document.

Sen. Colin R.J. Bonini, R-Dover, has not seen the list, but has heard the figures and tax reductions mentioned as talking points when the budget crunch is discussed.

He believes it is a precursor to tax increases that could be proposed in the coming weeks.

"That’s certainly why it’s circulating," Sen. Bonini said. "There’s absolutely no question the administration wants to push tax increases.

"They’re unwilling to make the tough decisions. If they had been willing, we wouldn’t be in this situation … Don’t be surprised if you see across-the-board tax increases proposed."

State revenue estimates have plummeted $373.7 million since December, including $213.2 million for fiscal 2009.

But with the current fiscal year also in the red, there is no money to transfer to the next year — the governor’s recommended 2009 budget calls for $55.6 million to be transferred from fiscal ’08 — leaving budget writers in deeper peril.

State agencies have been instructed to cut their 2009 budget requests by 8 percent, which would slice about $250 million out of the $3.41 billion proposed spending plan.

"Government spending has been outpacing growth in the economy by two-and-a-half times over the last 16 years," said Senate Minority Leader Sen. Charles L. Copeland, R-Wilmington.

"Now we have two options: we can hit the taxpayers to pay for that mismanagement, or we can stop the mismanagement."

The "Big Head Committee," an unofficial group of lawmakers from both chambers that meets in secret to hash out financial issues, has held several preliminary meetings, but no specific revenue proposals have surfaced, said House Majority Leader Rep. Richard C. Cathcart, R-Middletown.

Rep. Cathcart said the panel is collecting information and is keeping all options open.

"It’s too early to speculate" on which tax increases could be proposed, Rep. Cathcart said. "I don’t think we’ve even established where the pain is if we try to cut our way out.

"I’m not prepared to give in to revenue enhancers until I know what $250 million of cuts means, until I see the impact."

And members of the legislative Joint Finance Committee, which crafts the budget, are preparing to move forward with cutting the budget.

"The course we’re on, given the lack of revenue, is to cut the budget to reach a balance," said JFC co-chairman Rep. William A. Oberle Jr., R-Newark. "Part of our mission is to identify the cuts first and take that back to our caucuses.

"That info has to be digested by the caucuses; then, we can take the incremental step of whether they would support revenue enhancers."

Rep. Oberle and JFC co-chaiwoman Sen. Nancy W. Cook, D-Kenton, both said they think tax or fee increases will be necessary to avoid cutting into core government services that would affect many residents.

"I don’t think it would be fair to the people of Delaware to totally cut our way out of this situation," Sen. Cook said.

Neither lawmaker would speculate on which revenue enhancers could be considered, but they agreed that one probably would not be touched — sales tax — so Delaware’s status as the "home of tax-free shopping" likely is safe.

But Sen. Bonini said he thinks that the cuts made would be the most "politically sensitive and politically effective" so residents get upset and are willing to accept tax and fee increases.

"Don’t be surprised if the elderly and children are what get cut," he said.

Although nothing has been publicly discussed, rumors of the General Assembly taking away local governments’ share of the realty transfer tax prompted members of the Delaware League of Local Governments and Sussex County Association of Towns to visit with Gov. Ruth Ann Minner and some lawmakers last week.

"Our position is that the state shouldn’t solve its budget problems by creating budget problems for us," said Bridgeville Town Commission President Joseph T. Conaway.

Bridgeville, Mr. Conaway said, has had to reduce its anticipated realty transfer tax share dramatically due to the homebuilding slowdown in recent years, but eliminating the local government share would be devastating.

"We would have to raise our property taxes by 62 cents to cover the transfer tax loss," Mr. Conaway said. Bridgeville’s current rate is $1.73 per $100 of assessed value.

The state and local governments split the 3 percent realty transfer tax in half, which was the result of 1999 legislation. Prior to that, the state’s share was 2 percent and local governments collected 1 percent.

One proposal that could raise revenue for the state without costing taxpayers is expected to hit the House floor Thursday.

Legislation authorizing sports betting in the First State is slated for a vote. Implementing sports betting could net the state anywhere from $22.5 million to $70 million annually, according to two studies.

Delaware is one of only four states — and the only one east of the Mississippi River — grandfathered into a 1992 federal law prohibiting sports betting because the state had a sports betting game in 1976 and the state constitution allows it.

The bill, which was introduced last year and has remained under wraps since, faces strong opposition from Gov. Ruth Ann Minner, who previously has threatened to veto any such legislation but recently has backed off that promise.

"We’re working sports betting Thursday," Rep. Cathcart said. "It has to be part of the negotiations."

Delaware State News

DOVER — Delaware’s cash-strapped coffers received an $8.26 million shot in the arm Thursday when the Senate passed a series of capital-budget cuts and transfers to offset a $62.4 million revenue shortfall for this fiscal year.

House Bill 412 cleared the Senate 19-1, a day after the House unanimously approved the legislation. Gov. Ruth Ann Minner signed the bill Thursday evening.

The measure reallocates previously authorized funds for capital projects, reverts interest from several accounts and deposits special funds to the general fund.

"I don’t think any individuals were really hurt by this," said Joint Bond Bill Committee co-chair Sen. Robert L. Venables Sr., D-Laurel. "This is mainly interest and money from projects that haven’t started yet."

State revenue estimates have plummeted by $373.7 million since December, prompting a hiring freeze and budget cuts both for this year and in the proposed 2009 spending plan.

Despite cutting nearly $75 million last month, the state is still $62.4 million short for this year. By law, the state cannot operate in a deficit and must close the gap before the end of the fiscal year on June 30.

The $8.26 million bill includes $4.35 million canceled from several capital construction projects throughout the state.

Several projects lost funds, including the Delaware Civic Center ($700,000), Dover Public Library ($500,000), Harrington library ($413,500) and Chesapeake & Delaware Canal recreation area ($684,850).

But Sen. Colin R.J. Bonini, R-Dover, who was the lone dissenter, considered the bill a superficial gesture that doesn’t get to the root of the problem.

"On the margin, small cuts simply condone the irresponsibility of our spending the last few years," Sen. Bonini said. "We need fundamental changes in how we spend money … This doesn’t get to the core problem, which is that Delaware has a spending problem."

HB 412 is part of a package of cuts and transfers that includes an additional $25.46 million that Office of Management and Budget director Jennifer W. Davis expects to announce at the May 19 meeting of Delaware Economic and Financial Advisory Council.

Those cuts, which would not require legislative action, would come largely from savings due to a statewide hiring freeze, budget cuts, legislative reversions and eliminating a reserve account no longer needed, Mrs. Davis said.

Even with the $33.73 million in expected cuts, the state still would be $28.67 million short for fiscal 2008, which means more cuts are on the way.

Members of the Bond Bill Committee will meet Tuesday to review another round of proposed capital budget cuts that budget officials said could be more painful and personal for lawmakers.