As we head into the critical final week of this year’s legislative session, we have a generational opportunity to begin to fix a budget crisis that has seen a $400 million deficit in 2017 followed by a $400 million-plus increase in spending in 2018. These massive fluctuations in revenue and spending are not good for Delawareans, including those who I represent in the 7th Senatorial District.
A plan has been proposed through House Bill 460, after years of careful discussion among stakeholders. This plan would “smooth out” Delaware’s budget rollercoaster by instituting a few new rules.
I was fortunate to represent the Senate Minority Caucus on the panel that drafted this plan. While serving on this panel, I learned a great deal about how states like Minnesota, Massachusetts, and Virginia use this budget smoothing process to encourage steady, sustainable growth for their state’s budgets and the responsible use of their state’s revenues.
I applaud State Treasurer Ken Simpler, Governor John Carney, and multiple members of each party in the House and Senate for their support of HB 460, which is the constitutional amendment to implement this budget smoothing process in Delaware.
This plan is simple. In years like 2018, where there is a lot of extra revenue, we would stash a good portion of it away in a savings account, so that in years like 2017, we wouldn’t need to raise taxes or cut services in order to pay the bills.
The savings account would be limited to 10 percent of the state budget. It would be partially funded with the 5 percent that is already in our “Rainy Day Fund,” which has never been used.Working with our friends at the Pew Charitable Foundation, the panel learned that 10 percent would cover 90 percent of all possible budgetary crises, including the one Delaware faced in 2009.
Unfortunately, in recent days, those who prefer the unsustainability and volatility of the current system, along with the huge spending and tax hikes that accompany it, have presented some misinformation surrounding this plan. I hope to clear that up here.
This is a stealth attempt to create a “balanced budget amendment.”
Not so. HB 460 does not require the budget to be balanced annually. Our Constitution already requires us to balance our budget annually. This has been the case for many years.
HB 460 would “force the services and programs of the most vulnerable Delawareans onto the chopping block.”
Also not so. HB 460 is far more likely to allow the state to continue funding programs in bad times. If HB 460 had passed in 1998, for instance, the budget cuts of 2017 would not have been necessary. The money would have been available in the smoothing fund so that important social supports like the Prescription Assistance Program and others cut in 2017 would have remained in place.
Claim: HB 460 will “establish regressive taxation policies that will hurt working families and individuals, small businesses, and those on fixed incomes.”
Fact: HB 460 mentions revenue reform, which is being discussed separately. However, those discussions involve means-testing some taxes, which is the opposite of regressive. In a state with no sales tax, which imports $1 billion of our revenue from out of state, it’s quite a leap to call any of our current or proposed taxation policies regressive.
HB 460 is being rushed through the process. HB 460 was introduced last Tuesday, passed out of committee the next day, and was on the agenda for a vote by the House the day after.
Fact: As of today, HB 460 has been in the House for five legislative days following its committee hearing, and still has not come up for a vote. Also, the accusations of rushing are meritless. The panel that recommended this legislation met over months and months, with the participation of a member of each caucus of the General Assembly. This plan has been mentioned in the news many times over that period. Any claims that HB 460 has been proposed in some surprise maneuver are simply false.
I fully support HB 460, as does the governor and a large percentage of the legislature. It puts certainty and predictability back into the budgeting process, which results in a better Delaware.
We should create a budget process that is more prudent and predictable. I know that for some, the drastic tax hikes and bad policy born of budget crises is simply business as usual and to be expected.
Delaware deserves more than business as usual.
(Opposing view is under the letter written by the Rep. John Kowalko and titled: "Don't buy the corporate spin. 'Budget smoothing' means budget cuts".