Delaware’s State Treasurer recently shared commentary regarding our state’s ability to handle the economic hardship resulting from the coronavirus (COVID-19) pandemic.
Treasurer Davis believes that “Delaware is well positioned to weather this storm for a number of reasons,” but most of the examples fall short of being able to help thousands of small businesses and tens of thousands of laid off or furloughed workers in the state.
The Treasurer boasted Delaware’s Rainy Day Fund, a reserve of 5% of state revenues, as one of our protections. However, according to a PEW Research Center analysis, Delaware could run only on Rainy Day Funds for 20 days if necessary, 7.9 days less than the national average.
Other “positives” listed for our economic recovery include “consistently funding our pension,” despite Delaware having total unfunded pension liabilities (guaranteed to be paid) that are 30% of the state’s personal income, or $13.75 billion.
To effectively assess the impact of this crisis and accurately model revenues, it is important to acknowledge Delaware’s true fiscal standing.
The First State ranks 44thin the nation for fiscal health, according to a Mercatus study. Our long-term liabilities are higher than the national average per capita, and is in the bottom in the nation for solvency (ability to pay debts and financial obligations).
However, if our Treasurer is correct and Delaware can help its small businesses in this time, why hasn’t it?
Alabama and seven other states have postponed various tax payments for small businesses. Iowa, Vermont, and Mississippi have suspended interest and penalties for late payments on various business taxes.
Delaware has not provided tax relief to affected businesses.
Maryland has released $50 million from its rainy day fund to help with the response, Washington $200 million, Wyoming up to $150 million, and Ohio has granted access to their fund when needed.
Delaware has not released rainy day funds for response.
Minnesota has already publicly projected that their budget surplus and rainy day fund will both disappear over the next two years while responding to and recovering from COVID-19. Idaho’s Governor has required one-percent budget cuts for all state agencies not directly involved in coronavirus response efforts, and Ohio has called for cuts up to 20%. California’s
Department of Finance has notified legislators that there should be no expectation of ability to fund new or existing policy proposals, and that revenue predictions must be revisited. New Jersey has frozen $900 million in spending in preparation for emergency financial strain, and New Mexico has denied millions for spending projects due to the outbreak.
Delaware has not addressed revenues or spending in the wake of coronavirus.
Montana took the initiative to prepare for disaster in good times, and now has $115 million in its Budget Stabilization Fund, a general fund surplus of $300 million, and $360 million in Unemployment Insurance Fund reserves.
Imagine the help Delaware could offer if our spending and saving habits had been more like Montana.
Delaware will have to play catch-up more than usual now that COVID-19 is closing businesses and crippling private and state revenues. Without growth, we cannot build new schools, provide clean water, or help our residents.
“In these deeply uncertain times, it is imperative that we lead effectively by managing the challenges of today, while preparing for the next issue over the horizon,” Delaware’s Treasurer said in her commentary. We couldn’t agree more.
Unfortunately, we may be too late. The time to prepare and exercise mindful spending is not in the midst of a pandemic, but as President John F. Kennedy said, “The time to repair the roof is when the sun is shining.”