Delaware General Assembly

Governor Markell Submits His Last Budget

You can see the complete Press Release here.  There is also a Powerpoint deck summarizing the budget approach here.

It will take some time to absorb this and think through the implications, but in the main this is a mixture of tax increases and budget cuts and the strategy is still to make sure that everyone pays except the wealthiest Delawareans.  (Caveat that I haven’t closely read all of this, so perhaps I am wrong here.)

Tax increases:

  • Itemized deductions on personal income tax would be completely eliminated, but the standard deduction would be increased 50 percent. Raises $18.1 million.
  • Top personal income tax rate increases from 6.6 percent to 6.8 percent, at $60,000. Raises $9.9 million.
  • Raise eligibility to age 65 for pension deduction and extra tax credits.  Eligible age is 60 right now.  No new revenues are anticipated for next year, but would save the State $18M in out years.
  • Corporate Franchise Tax: raised to match inflation, with a new new top rate —  $250,000 for companies with $750 million or more in revenues or assets. Raises $115 million.
  • Cigarette tax increases from $1.60 a pack to $2.60 a pack. Raises $18.6 million.
  • Realty transfer tax would increase from 1.5 percent to 2.5 percent. Raises $44 million.
  • State cuts the share of the realty transfer tax that goes to counties by 50% to 0.25 percent.  Raises $11M (and puts an $11M hole in county budgets).

Some Spending Cuts:

  • State employees pay more for health care. Now all State Plans would have a deductible, and existing deductibles would increase. Saves $24 million.
  • The subsidy that pays up to $500 of senior citizens’ property tax bills would be eliminated.  Saves $25 million.
  • All State department budgets would be cut.  Saves $56 million all in.
  • A senior citizen prescription drug program is eliminated.  Saves $9.4 million.
  • The state reduces its share of  the cost of transporting students from 90 percent to 70 percent. Saves $14 million.
  • The state reduces its share of school construction from (60 – 90%) to 50%. The state would only pay for 50 percent of new school construction; currently, it pays 60 to 80 percent. This applies to new construction projects only.
  • Grant-In-Aid would be reduced, eliminating the partnership with the Paramedic Programs (saves $10+M) and reducing funding to Community Agencies by $1.6M.

So the wealthiest of Delawareans contribute only $9.9M, while we stop the grant program for Paramedics.  Interesting.

John Carney sent out a press release shortly after the Governor’s:

“Governor Markell and his team deserve our thanks for putting forward another balanced budget, and we will review the specifics of his plan. It’s no surprise that Delaware faces a challenging financial situation, and we need a budget reset that looks at state spending and our revenue system. We are very focused on this problem. Over the coming weeks and months, we will work with lawmakers of both parties on a sustainable, long-term solution to our budget challenges.”

Budget Reset, Sustainable, Long-Term — these are key words to guide the new Administration and legislators over the next several months.  There is no doubt that there is a structural problem here, a problem that most of the Doverites have been utterly complicit in creating.  Nipping round the edges, robbing Peter to pay Paul and pretending that the only people who should bear the financial burdens are middle class, working class and poor people of the State have to come to an end.  Transferring the payment for these structural issues to those who can least afford it isn’t about doing the right thing or about doing what Democrats should be doing.

9 comments on “Governor Markell Submits His Last Budget

  1. Steven Newton

    This budget is the final implementation of the Tim Cook financial report–remember that one? It was to restore “predictability” to our finances. So first, last year, we cut the corporate tax rate, and predictably revenues declined. Now, with equal predictability, we are restoring some of those revenues by (1) eliminating itemization for middle-class families; (2) removing tax breaks for senior citizens; (3) stiffing State employees with health care premiums that (for married couples both in State jobs) will amount to as much as $9,000/year increase.

    Much of the rest is smoke and mirrors. Cutting bus transportation from 90% to 70% doesn’t actually save anybody anything–it just means I end up paying more to the school district while the State marches on. What it doesn’t tell you is that Governor Markell chose to cut the transportation reimbursement for public schools instead of addressing the issue that the State is still subsidizing a percentage of transportation costs for private (not charter, private) schools. But, hey, he kept the private school subsidy intact four years ago while slashing the State program meant to fund transporting homeless kids to school, so who is surprised?

    • Why do private schools get bus transportation subsidies? Why is this even a thing? If you opt out of the public system, you opt out of everything.

      I had my kids in private school for a few years when they were young and I remember receiving a check in the mail for this and wondering why I was receiving it. I can’t remember the exact amount, but I remember it being significant – enough that I was really, really happy.

    • cassandram

      I don’t think that the Counties are going to see the reduction in the Transfer Tax as smoke and mirrors — especially NCCo. Shifting the payments may take care of the State’s budget, but it certainly doesn’t help the entire state appear as fiscally responsible as they like to portray themselves as. Shifting payments down should be accompanied by a statewide property tax reassessment — maybe revenue neutral the first year, but let each county (and Wilmington) raise revenues as they see fit with a better market basis.

  2. The ultimate in predictability, indeed.
    Screw the senior citizens.
    Screw the school districts.
    Screw the county and municipal governments.
    Screw the government workers.
    Screw the middle class and the working poor … and not necessarily in that order.
    Did I miss anyone?

    • cassandram

      I really am struck that this budget raises more in increased cigarette taxes than it does from people who actually have more money.

      • Sin taxes make people feel good and righteous. Why not a liquor tax? Hello? Gas tax? Let’s go for all the sins!

        • cassandram

          And I don’t care about the cigarette tax, really. I do care that all of this sustainability comes at the expense of middle class, working people and poor people. Since you mentioned a gas tax, why didn’t he include that? It isn’t a sin tax, but a use tax, and the DOT needs that money to fix roads. And all of those bike paths aren’t going to pay for themselves.

  3. It’s nice to know that Markell’s last budget still shows his commitment to equality – he wants people making $60,000 a year to be taxed exactly like people making $260,000 a year. Cheers to what’s left of Delaware’s middle class!

  4. 1.5% realty transfer tax was already pretty much the highest rate in the country by far.That alone would have the effect of dropping the value of all homes in DE by 1%

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