As Delaware faces a $450 million dollar budget deficit, lawmakers on the Joint Finance Committee were presented with a new budget proposal that severely slashes spending due to uncertainties and revenue loss tied to the coronavirus pandemic.
Office of Management and Budget director Mike Jackson noted revenue collections of personal and corporate income taxes as well as the gross receipts tax and lottery revenue were all under expectations.
He recommended that 2 percent raises for state employees be axed along with step increases for teachers along with raises in union-negotiated contracts to save $55.1 million, a proposal sure to be the subject of deliberation among JFC, which met in the House Chamber Tuesday, June 2, 2020.
"The governor did propose a third year of a pay raise for employees. Given the significant changes in the revenue forecast and the amount of resources that will have to come out of the proposed plan in order to have a balanced budget, obviously, that would have to be paused for Fiscal Year 2021," he said. "In addition to that, we do have certain collective bargaining contracts as well as required salary step increases--to pause those increases and put a trigger in the budget that if we do start to collect revenue that exceeds the final budget that you hopefully adopt by the end of June, that it would trigger actually putting those increases in place, not including the general pay increase of state employees."
At his biweekly coronavirus news conference, Governor Carney has said he'd strive to avoid layoffs of state employees.
The state is also seeking to eliminate all discretionary funding requests that were included in the January budget proposal to save $35 million and maintain a hiring freeze into the next fiscal year to save $5 million.
"Only being able to direct any additional resources in the budget towards areas such as school enrollment growth and transportation growth for our schools," he said.
He believes reducing debt service by taking advantage of favorable interest rates and refinancing bonds can save the state $13.5 million.
"It's the prudent thing to do in the current climate, where our interest rates are at basically the point, almost zero percent, so it's a smart move."
Jackson recommended the state redirect $25 million in realty transfer and public utility taxes that's dedicated to open space, farmland preservation, and energy efficiency programs to the operating budget for Fiscal Year 2021.
"It doesn't mean that those programs won't be funded, what it means is that those programs will have to compete for funding just like all other capital projects in our bond bill; we've done that in the past during periods of economic downturn--most recently in Fiscal Year 2018."
Jackson also recommended the JFC transfer $76.3 million from the relatively new Budget Stabilization Fund, which contains $126.3 million to help plug gaps. That would leave $50 million in reserves.
"...In anticipation of potential future downturns in revenue, and I think that's an important point to keep in mind. We may need resources as the impact on our economy becomes clearer, month by month, and what this does is provides a hedge--and a little bit of a safety net-- to be able to draw on potential resources should we need them, should...the revenue forecast that's used to build that budget doesn't come to fruition."
Non-profits could also suffer from the state's budgetary woes. The state is proposing a slight adjustment to the Grants-in-Aid bill.
"The Grants-in-Aid bill in Fiscal Year 2020 included $1.8 million in one-time funding investments, and this plan simply takes those out of the Grants-in-Aid bill," he said. "You could look at it from this perspective that agencies that receive grant-in-aid funding fire companies, senior centers, a variety of non-profit organizations would be in a position--as you deliberate--to continue the same level of funding as Fiscal Year 2020 into Fiscal Year 2021."
The JFC returns to work Wednesday, June 3, 2020.
Here's a look at what JFC was presented Tuesday: