Delaware Republicans have come up with an unusual idea: raising taxes. House Republicans sent a proposal to Gov. Jack Markell that includes a plan to raise personal income taxes and corporate franchise taxes in an effort to spare 8 percent salary cuts for state workers – a remedy Markell proposed in March as a way to close an $800 million budget shortfall.

The Wednesday, May 20 missive was also sent to each of the 12 members of the Joint Finance Committee, who are scratching away at budget line items while the General Assembly is in recess until Tuesday, June 2 – over four weeks before lawmakers must balance the state’s 2010 budget.

The Delaware Economic and Financial Advisory Council, increased the budget shortfall estimate by Monday, May 18, an additional $20 million based on personal income taxes received since April 30. Some lawmakers say the state received less revenue because of tax refunds paid out, exacerbated by higher-than-usual unemployment rates.

Markell said about $155 million of one-time-only federal stimulus funds will go toward closing budget gaps along with $52 million in revenue from the recently passed sports-betting legislation.

House Republicans say their plan, together with the federal funds and sports-betting revenue, will reduce the budget gap from $800 to $240 million. Their proposal includes raising personal income tax by 1 percent for those who make $60,000 or more and increasing the tax by one-half percent for those making less than $60,000. It also includes reforming the state purchasing system.

Rep. Joe Booth, R-Georgetown, who sits on the Joint Finance Committee (JFC), said, “We’ve had longer days in JFC compared to the last two years. Obviously, the problem is much greater than last year. It doesn’t look like an economic turnaround is going to give us help.” He also said the JFC was most recently charged with whittling away $240 million from the budget.

Booth said the committee is going to recommend saving $850,000 by cutting out-of-state travel for state agency employees.

“We’re starting to clip things where it will be noticeable,” he said.

Even employee recognition programs, including certificates for longevity, will be cut, said Booth. “That’s not going to be a great amount of money, but, like I said, it’s noticeable.”

Booth said the JFC would also save $1.2 million through bond and debt restructuring.

“The other thing we did is called ‘switch funding,’” he said.

Lawmakers are switching funds from one account to another to reduce the burden on the general fund, he said.

Booth said grant money for HIV/AIDS treatment was taken out of the Delaware Department of Health & Social Services line item and, instead, put into a federal grant line item – a move that will save the state $145,000.

“We thought a great deal about the 8 percent pay cut proposed by the governor. The emotions ran very high by committee members.

“It’s probably a good thing the public couldn’t see what was going on,” said Booth, referring to the closed-door meeting. Booth said he does not favor cutting employee salaries.

Markell, JFC discuss pay cuts

The JFC met with Markell Wednesday, May 20, to discuss state employee pay cuts. “We came to an understanding at least to the complexity of the problem,” said Booth. He said the state could avoid pay cuts by not staffing 1,200 unfilled positions that have been budgeted for. He also said the General Assembly fully funds 12,000 of the state’s 34,000 jobs. “The bulk of the other positions are teachers and school district-level positions, where we partially fund them,” he said. About 20,000 jobs are formula-driven, he said.

Booth criticized the Markell administration, saying that it keeps repeating that government should be cut but is doing nothing to make cuts. Under the previous governor, the state had about the same amount of budgeted, yet unfilled jobs, said Booth.

“You would think the number of vacancies would increase,” he said. Booth also warned that about 100 state workers retire each month. “These are positions we keep filling even though we have a hiring freeze. The discipline has not been shown by the administration in regard to employment numbers,” said Booth.

Joe Rogalsky, communications director for Markell, said, “The governor has been pretty clear that state government has to get smaller. Clearly, not filling certain positions would get us there. But you have to look at what’s open; you just can’t say, ‘We’re not filling new positions,’” he said.

Rogalsky said Markell is looking at cutting jobs on a position-by-position basis. He also said 8 percent employee pay cuts are still being considered. “That’s still in the governor’s proposal, but he’s still very interested in improving on that. That is something the JFC and General Assembly will look at in the budget,” he said.

Despite tensions, Booth said Markell had kind words about the Republican leadership’s plan, calling the budget process a bipartisan effort.

“Everyone recognizes that some of the issues are beyond JFC’s control. For revenue raisers, it takes a majority vote in the House and Senate,” said Booth.