|
The Delaware Economic and Financial Advisory Council says the housing market downturn and national economic slowdown, exacerbated by mortgage industry shakeups, will result in millions of lost revenue for the state.
Officials say revenue from personal income taxes, real estate transfer taxes, corporate and bank franchise taxes, and the lottery were all lower than anticipated.
Delaware Economic and Financial Advisory Council (DEFAC) revised its revenue projections Sept. 15, reducing earlier estimates by $140 million over the next few years.
For 2010, officials say about $91 million less in revenue is anticipated.
“Since January, the economy has been heading down. For the 2009 revenue forecast, we continue to see some softening in those numbers,” said Robert Scogletti, director of policy and external affairs at the state’s Office of Management and Budget.
Sen. Gary Simpson, R-Milford, is a DEFAC member.
“Those are the big ones: personal income and gross receipt. Lottery was not forecasted to do much. They’ve been down considerably – especially in the Wilmington area – because of competition with Pennsylvania,” Simpson said.
“When business is down, naturally, your personal income tax collection will be down,” Simpson said.
“The housing market is certainly a reflection too,” said Simpson.
Sussex affected
After Delaware’s finance council announced drastic revenue decreases for the state budget – including fewer transfer taxes – Sussex County’s libraries and roads are likely to suffer.
Simpson said the Minner administration was warned, but failed to do anything about anticipated decreases in revenue.
In the meantime, Delaware Technical & Community College has largely braced itself by anticipating the paltry projections, says Jerry McNesby, the college’s vice president of finance.
“Basically, there’s really no surprise in the slight decreases in revenue projected for the current fiscal year and until 2010. I think the college is in a good position to react to whatever comes our way,” McNesby said.
He said the college has deferred initiating new programs and cut some projects and reduced travel expenses for employees.
“We entered the current fiscal year realizing that 2009 and 2010 will have minimal, if any, growth in the state budget,” McNesby said. College capital improvement projects are also on hold, he said.
Thousands of unsold units
In Sussex County, DEFAC member Richard Derrickson said the housing inventory is now at 6,000 units and numbers are not going down. Officials say it will take at least two years for the housing market to improve.
“The forecast is not real rosy for the next year and a half. Looking at it, it is sub par,” Simpson said.
Sussex County Association of Realtors President Bill Lucks said more homes on the market means a longer time for the economy to improve.
“The problem with that is that we have a very large inventory. It’s been that way for a while. In a typical market, we have about 3,500 units available,” Lucks said.
“When we were in the ‘boom time,’ if you wanted a three-bedroom, two-and-a-half bath, we showed four or five houses. Today, we have 15 or 20,” Lucks said.
He also said transfer taxes are too high and that municipal budgets rely too much on them.
“In Delaware, we have one of the highest transfer taxes in the nation. Some states don’t even have one. To increase that would only add the length of time that properties are on the market,” Lucks said.
“We can read the paper and listen to the radio and realize that economic conditions are down. It’s going to be a real challenge now to fund schools, roads and libraries,” Lucks said.
Spend less, cut goverment
Simpson said officials were warned about declining revenues.
He said the Republican caucus sent a letter to Gov. Ruth Ann Minner in May.
“We foresaw a $150 million deficit in the 2008 budget. No action was taken at that time to see what the weak areas of government were,” Simpson said.
He said government has grown more than 6 percent over the past 15 years.
“It doesn’t make good sense when you see on the horizon things are going to start to turn,” Simpson said.
He said the only answer to an economic recovery is cutting back government.
“What I fear is that government’s first reaction, generally speaking, is to see where we can tax a little bit more without hurting. But I think we need to reengineer Delaware government,” Simpson said.
“The No. 1 issue facing Delaware today is fiscal responsibility. People say you can’t cut government, but you better darn cut it.
“You can’t tax your way out of it. Revenue is not the problem; spending is the problem,” Simpson said.
|
