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Simpler proposes Grand Bargain for Delaware

Plan for revenue and spending reforms to be unveiled in December
November 9, 2017

State Treasurer Ken Simpler Jr. says Delaware must ensure citizens are getting the most bang for their bucks.

“The system is broken,” Simpler said. “At the heart of every organization, it is your financial systems that let you know what your priorities are. It is your financial systems that tell you how you’re doing. How you are performing. The manner in which we are comporting ourselves is simply not acceptable.”

Simpler is calling for revenue reform combined with spending discipline as part of what he called a Grand Bargain, an effort he wants done this upcoming legislative session. He said he wants to deliver certainty for the business community.

“We have to get this revenue picture and this spending picture aligned,” Simpler said. “What I care about is what we’re getting. Return on investment.”

He said the endgame in Dover is merely to balance the budget, but that is not enough. The state is spending 98 percent of what it takes in, with 2 percent left over as a contingency, Simpler said.

Simpler suggested instead of focusing only on year-by-year fiscal planning, the state begin looking at long-term sustainability with reliable growth. He said the state has no mechanism to save money in the good times so it can be put away for the bad times.

“That’s why we’re always in crisis mode,” he said.

Simpler said Delaware has two kinds of revenue, local revenue and exported revenue. The former is revenue contributed by residents of Delaware, such as property taxes, while the latter is money brought in by things such as collecting money on abandoned property and franchise taxes. Simpler said Delaware revenues are growing much slower than exported revenues.

“When things are good, we love to give things away to people. Hey, you get to be 60 years old, we’re going to give you $500 personal tax credit. You want to come to Delaware and live here, we’re going to exclude the first $1,200 of retirement income,” he said.

Yet these giveaways weaken the base, he said.

“The actual revenues we get from the base are growing at a rate less than the base.”

Simpler said the state needs to reconstruct its revenue portfolio so it is less volatile and better matches the growth of the tax base. At the same time, he said, the state needs to be more efficient in its spending.

“Conservatives and progressives, Democrats and Republicans, I have not been in a living room yet where I say, ‘Who wants a crappy bargain?’ Who wants to spend more than what they get for it? Getting a good value is a political consensus issue,” Simpler said.

He said the state has a low tax burden but high spending. At the same time, state services are average to less than average in areas such as healthcare, education and infrastructure.

“At the end of the day, simply being content to waste other people’s money is not a compelling argument,” Simpler said.

He said his office is now forming a plan to have a more stable system, with revenue reform and spending discipline. Simpler said he plans to present his proposals in early December to be introduced when the state Legislature comes back into session in December.