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LACK OF FOCUS NOT FUNDING: DELAWARE’S FY23 BUDGET

From: Kathleen Rutherford, Executive Director, A Better Delaware 

WILMINGTON, Delaware – In Governor John Carney’s budget presentation, he proposes a whopping $4.9B operating budget – 4.6% higher than the unprecedently enormous FY22 budget. Top spending priorities include education and workforce development –– two areas that have had marginal results despite increased funding year over year. Absent were any plans to reduce Delaware’s unfunded pension debt, reduce healthcare costs, or significant tax relief. More focus on delivering effective outcomes rather than increased spending would be more beneficial to Delawareans.

EDUCATION: Increased spending on education is not producing better results for our students. Spending per student in Delaware has increased by $5,000 ($13,000-$18,000) over the past eight years, while test scores have stagnated or declined. This year 26% of students tested from grades 3 to 8 were proficient in math, and 41% of students tested were proficient in English. The current proposed education budget focuses on spending – 10% of the allocation on infrastructure and approximately 70% for staffing following Delaware’s 80-year-old funding method.

Added to that pile of cash is Delaware’s supplemental federal funding that amounts to nearly $411M through the Elementary and Secondary School Emergency Relief Fund (ESSER). The DOE (Delaware Department of Education) can spend funds on programs to address learning loss due to remote learning during the pandemic. Our neighbors in Virginia spent $12,216 per pupil in the 2020-2021 school year, with 69% of their students proficient in reading and 54% proficient in math. Delaware’s educational focus is missing the mark.

WORKFORCE DEVELOPMENT: Delaware is not getting enough people back to work. Our state ended 2021 with 5.1 % unemployment, landing us in the bottom third of all states with 6,500 fewer people employed than in 2019, pre-pandemic. The Governor’s announcement of $50M in workforce development will not work if the plan does not focus on training for jobs that need to be filled now. Georgia shows us how to fill worker shortages without extra funding. This state had the fifth lowest unemployment rate in 2021 (2.8%) in the nation. Its Quick Start workforce training program is credited with getting people back to work by offering skills-based training to qualifying businesses at no cost, passing savings along to business owners who can reduce and, in some cases, eliminate training costs.

Helping the 75% of Delawareans who lost jobs in the early months of the pandemic who had a 12th grade or below education with only 49% of 12th graders proficient in reading and 28% proficient in math in the 2020-2021 school year would be a good place to start.

HEALTHCARE: Delawareans have suffered from high health care costs and limited access for years, something that the FY23 budget does not properly address. Medicaid is approximately 25% of our state’s budget and is expected to grow larger. Over half of Delaware’s Medicaid funding comes from the federal government, but that money is expected to shrink in the future, placing the burden on Delaware taxpayers. Delaware’s health care costs are already one of the highest per capita in the nation. The best path forward that Delaware could take would be to abolish the Health Resources Board. The Governor’s office and the Delaware Prosperity Partnership could work together with strategic funds to incentivize and entice new hospital systems to come to Delaware. This would improve access to health care at reduced costs, with quality outcomes.

PENSION DEBT: How long is our Governor going to ignore the elephant in the room? Year after year, Delaware’s ballooning pension debt is not addressed in the budget. Delaware’s overall financial condition worsened by 21% during the onset of the pandemic, mostly because of post-employment liabilities. A Truth in Accounting report from 2021 revealed that Delaware still has $1,819,158,000 of unpaid pension debt. With more than an $800M surplus, it is time to pay down this massive debt.

TAXES: While Governor Carney’s budget did include a 2021 unemployment insurance benefits tax exemption, this does nothing to help the workers who never took a day off during the pandemic or struggling small businesses. A 2022 study by the Tax Foundation shows that Delaware ranks dead last in corporate tax burdens and 44th in individual income taxes. With a burden of $31,300 per taxpayer. Several tax relief bills have been proposed this year which would make a 10% across-the-board cut to the state’s personal income tax rates; would reduce the corporate income tax by 30% and slash the gross receipts tax – sometimes referred to as Delaware’s hidden sales tax – by 50%. These proposals will collectively allow the taxpayer to retain more than $282M this year and more than $321M next year.

In the coming weeks, the Joint Finance Committee will conduct hearings where the Executive Branch will present their spending priorities which will eventually culminate as the General Fund Budget to be approved by the end of session on June 30th. Please contact your legislators in Dover and let them know why it is important for them to use these unprecedented resources more efficiently, enabling tax relief for you and your family.

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