Is A Little Bit More Enough?
From: Kathleen Rutherford, Executive Director, A Better Delaware
When John D. Rockefeller, once the richest man in the world, was asked by a reporter how much money is enough, he responded: “Just a little bit more.”
Rockefeller’s sentiment is one evidently shared by the Delaware state government under Gov. John Carney’s leadership, something he affirmed on Jan. 26 while presenting his record $5.48 billion proposed Fiscal Year 2024 budget. While there where some highlights to his presentation, Governor Carney’s budget proposal missed the mark on providing practical common-sense solutions to our states most concerning issues.
Gov. Carney Carney’s budget maintains the state’s untapped $316 million “rainy day fund,” and has directed nearly $19 million into a separate “budget stabilization” reserve fund. This leaves $421.5 million sitting in a bank account, essentially, available to use only if the state falls on hard times. The fiscal responsibility of building the state’s savings account is worthy of applause but ignores the elephant in the room: our states ballooning pension debt. This year a proposal to allocate $51M to pay down Delaware’s public pension debt, while the current debt is $8.9 Billion. Delaware’s financial problems stem mostly from unfunded retirement obligations, (it only had seven cents for every dollar of promised retiree health care benefits.) A Better Delaware recommends significantly paying down Delaware’s public pension debt and reducing new state worker retiree health and pension programs, so that future taxpayers will not be burdened with paying the under-funded retirement promises.
Taxes and Spending
To the governor’s credit, Carney’s budget reduces the effective tax burden on lower-income earners by increasing the state’s standard deduction from $3,250 to $5,700, a 75% jump. It also will increase the amount of refunded tax for those who meet federal Earned Income Tax Credit requirements to 7.5%. Those moves should provide some relief for struggling Delawareans, but the budget proposal fails to enact the type of long-term, meaningful tax cuts that would unleash the state’s economic potential.
According to The Tax Foundation’s State Business Tax Climate Index, Delaware ranks as having the 44th highest individual income tax burden in the nation. It leads the country with the highest corporate tax, and at 4%, Delaware’s realty transfer tax is the highest in the nation.
In a recent position piece, A Better Delaware outlined its legislative priorities, which include cutting the regressive gross receipts tax, reducing individual income taxes, slashing the realty transfer tax and lowering the corporate tax. Rather than celebrating the largest budget in state history, elected leaders should be asking why now isn’t as good a time as ever to make Delaware a more affordable place to live, work and do business.
Carney’s budget proposal doesn’t call for any of the things most likely to reduce health care costs for Delawareans: reforms to the state’s Health Commission and Health Resources Board, the repeal of cumbersome Certificate of Need (CON) laws, nor expanding options for out-of-state health insurance plans.
Delaware ranks fifth highest in the nation for health care costs per capita. In 2020, 10.1% of Delaware adults chose not to see a doctor because of costs. The state Health Commission’s Health Resources Board, as designed, prevents and discourages health care providers from entering or expanding in Delaware due to onerous CON laws. These laws stifle competition, reduce access to care and promote monopolies.
Carney’s budget proposal should come alongside demands to audit Delaware’s Medicaid system for fraud and abuse, phase out the Health Resources Board, eliminate CON laws, and increase access to care, competition and choice. In its current form, the budget won’t do anything to alleviate these issues. The General Assembly must consider alternatives before approving Carney’s proposal.
Carney’s budget offers 9% pay raises for teachers and 3% raises for other public-school employees, as well as $53 million in “Opportunity Funding” for students with disabilities, low-income students and those whose first language is not English. This proposal follows a disturbing trend: As Delaware’s education spending grows, students’ test scores fall. That’s because throwing money at a problem doesn’t make it go away.
In 2022, Delaware ranked 47th in educational performance out of 50 states when combining the rankings in both math and reading for fourth and eighth graders. That’s despite spending more per-pupil than the other 41 states.
In light of the state’s teacher shortage, Delaware should expand pathways to becoming a teacher, accept out-of-state certifications and ease restrictions on educator licensing. The governor’s budget doesn’t call for any of that.
Also absent in the Governor’s proposal was support for school choice expansion. Expansion in the form of education savings accounts (ESA’s) and tax credit scholarships would give parents the financial freedom to choose where their kids go to school and create healthy competition in the education marketplace.
Accountability and Transparency
This year the Bond and Capital Improvements Act totals $1.289 billion. That’s $1B in cash to the Bond Bill – up $150M from last year. It is the 5th “one-time” supplemental bill which is another 5.9% growth of overall spending. How much is sitting unspent? So why then, did Gov. Carney not include funding for oversight of the largest budget in our state’s history?
A Better Delaware recommends funding for the formation of a nonpartisan Office of Legislative Ethics and independent Inspector General’s office — ideas that nearly came to fruition in the last General Assembly. Neither does the budget include any funds to reform Delaware’s antiquated and toothless Freedom of Information Act, from which lawmakers have exempted their own communications. These offices would ensure accountability from our elected officials and state offices and give citizens recourse when they witness or fall victim to waste, fraud, abuse, or misconduct.
Gov. Carney signed into law a bill that will increase Delaware’s unemployment benefit one day after announcing a whopping $46.6M investment for workforce development. Carney stated in his budget address that in Delaware “thousands more job openings than we have people looking for work.” Why then, make it attractive to not apply for a job? A Better Delaware believes that by tightening unemployment benefit requirements to have applicants prove that they are seeking work and showing up for job interviews will help in decreasing our states workforce shortage.
The governor’s budget does nothing to reform burdensome business regulations, reduce occupational licensing fees, or increase apprenticeship ratios. Occupational licensing fees, which require trained professionals to pay for the privilege to work, particularly impact lower-income Delawareans. Those who can least afford it are shut out of job opportunities by costly regulations. Apprenticeship ratios, which often require three or even four journeypersons for each apprentice, restrict employers from creating opportunities for young tradespeople, crippling their ability to fill jobs that so many Delawareans need. If the governor was truly committed to workforce development, addressing these barriers to entry would have been highlighted as a priority in his budget proposal.
According to a study by Mercatus, Delaware is has the 2nd most regulations per capita in the region. Before passing the budget, the General Assembly should insist on a framework to reduce overburdensome, antiquated regulations. Reducing the number of regulations would refocus Delaware’s government on the issues that matter while also unleashing the job creating power of small businesses.
Energy and Climate
One and a half years after allocating some $80 million to a Clean Water Trust Fund which hasn’t since completed a single project (or started more than one, for that matter), Carney proposed an additional $26.2 million for the fund, to be administered in large part by the notoriously opaque Department of Natural Resources and Environmental Control. Before this money is allocated, there needs to be a serious inquiry into the efficiency and transparency of the Clean Water Trust.
The Trust was pitched to the General Assembly on the promise that it would not run out of funds or require new legislation to replenish its war chest because it would be replenished year after year by interest from project loans. With no projects to point to, the Trust is far from self-sustaining. The General Assembly must take a hard look at this before authorizing additional funds.
Additionally, as the state moves toward a near-total ban of new gas-powered vehicles by 2035 (and without approval by the legislature), the governor’s budget proposal includes $57 million for EV infrastructure and other associated projects. Rather than allowing the free market to drive this technological “advancement,” Carney has signaled his intention to spend an ever-ballooning amount of taxpayer dollars to subsidize an initiative with questionable environmental benefits.
The General Assembly should assert its right to weigh in on the gas-powered vehicle ban and offshore wind projects by rejecting any budget that authorizes the spending of state funds on these initiatives without legislative consent. In this budget, lawmakers can assert their power over runaway executive agencies. In addition, establishment of an independent Energy Advisory Council is needed to establish a realistic state energy plan to be approved by the Delaware legislature.
With unprecedented Federal and State funds flowing through Delaware, Dover has a unique and historic opportunity to lead in the moderation of the governments overall share and control of those citizen taxpayer dollars.
Now is the time to ensure more access and freedom of those dollars go to the individuals and businesses permitting them to choose where it is most productive with less mandates and restrictions. All the while ensuring all the branches of governments portions are openly, rigorously, and independently reviewed to eliminate waste, fraud, and abuse at each level.