Public employees are concerned about preserving their health care and pension benefits.
State payments are frozen to a number of contractors that serve disabled Delawareans.
Medicaid patients may have to make do with fewer medical appointments.
Popular state programs that preserve farmland and open space also face cuts.
Delaware organizations and lawmakers may have big plans for $155.7-million in additional revenues that are being projected in the state budget.
However, the guidance from analysts and budget writers: “proceed with caution.”
The Delaware Economic and Financial Advisory Council (DEFAC) officially approved revenue projections at its March meeting showing an additional $78.6-million for the current fiscal year since December, and $77.1-million for fiscal year 2012 which begins July 1.
These figures are the first to come from DEFAC since Governor Markell proposed his $3.4-billion budget in late January, which was the subject of six weeks of hearings held by the General Assembly’s Joint Finance Committee.
Leading the way in these encouraging numbers were higher-than-expected collections in corporate income taxes and bank franchise taxes. Bank franchise taxes were up 113% from the December projections. State Bank Commissioner Robert Glen said a relatively small group of “taxpayers” are the source of that revenue, due to “tremendous consolidation of banking over the past 15 years.”
However, according to Secretary of Finance Tom Cook, “the areas that are the real economic indicators for the state – personal income tax and the gross receipts tax paid by businesses – were relatively flat.”
“P-I-T [personal income tax] is typically a lagging revenue source. Jobs are usually the last to come around,” says Director of Office of Management and Budget Ann Visalli. “We’re going to keep watching that and be optimistic. But, we’re just not there yet.”
Delaware Director of the Office of Management and Budget Ann Visalli
Visalli cautions against adding encouraging revenue projections
directly into the budget now.
Visalli says the administration continues to work with legislators and a coalition of public employee union leaders about ways to reduce the demands on the budget incurred by pension- and health care payments. Governor Markell said in January those expenditures account for a projected $452-million in fiscal year ‘12.
State gambling figures fall in the category of lottery revenues, which were not as negatively impacted as projected by out-of-state competition, according to Cook. He says the state’s racinos at Dover Downs, Delaware Park and Harrington attracted visitors by offering new forms of wagering – table games and sports betting on NFL games. New facilities opened during the past year in Ocean City Maryland, Perryville Maryland and Philadelphia. As surrounding states continue to offer more gaming halls, the General Assembly is considering whether to legalize one new gaming facility in New Castle County and one in Sussex County.
Delaware Secretary of Finance Tom Cook
Cook explains the increased estimate in state gambling revenue.
Cook explains what shapes DEFAC estimates at this time of year.
DEFAC revenue subcommittee chairman Ken Lewis said coming out of the recession, the economy still seems to be under a “significant hangover.” He added that Delaware needs to move forward as it “evolves in the knowledge-based economy.”
Panel members acknowledge that Delaware’s economy could be affected by a number of unfolding developments:
- uncertainty in the Middle East affecting the price of oil and the cost of gasoline and energy in Delaware
- whether the devastation caused by the Japanese earthquake, tsunami and nuclear crisis will have a ripple effect
- the overall direction of the nation’s economy and job-creation efforts
Visalli, meanwhile, believes the state is in no position to immediately add $155.7-million back into the general operating budget. “I would suggest we do similarly to last spring – take those monies, invest in one-time economic development initiatives, infrastructure throughout the state, job-creation and retention,” Visalli says.
DEFAC will hold its next meeting April 18th, as well as update revenue figures in May and June during the budget-writing process. Delaware is constitutionally required to have a balanced budget at the start of the new fiscal year.
