Carney warns of rising healthcare costs

Gov. John Carney’s $6 billion budget includes one year of educator raises in a 4-year plan toward $60,000 starting salaries, but officials warn that healthcare costs are quickly eating up the revenue pot.

“Every dollar that we have to put in healthcare, we can’t put elsewhere,” Carney said during his Fiscal Year 2025 budget presentation. It’s his last presentation as governor, and one that shows more than 8% growth.

About $2 billion is being spent on healthcare for Medicaid, state employees and retirees, he said, an increase of $200 million over the past year. The state’s share alone is $1 billion, he said.

A pie chart of state operating costs shows those costs accounting for 39% of general fund growth, with state salaries and education costs at 45%.

“Healthcare costs will continue to crowd out other investments,” said Cerron Cade, director of the Office of Management and Budget.

On Medicaid, Carney said the state’s preferred reimbursement agreement with the federal government during the COVID years has not only ended, but the federal government took money away before the state could “unwind users” from the Medicaid rolls.

“That created a hit for Medicaid, and some really difficult estimates to develop there,” he said.

Still, Carney said the state is moving forward with suggestions by the Public Education Compensation Committee that recently recommended a four-year plan to increase educator salaries by 2% with an added $1,875 bonus. “This was driven by Maryland, which put that out a couple of years ago,” Carney said, referring to a $60,000 starting salary for teachers. 

“We have a lot of vacancies in teaching positions across the state. We need to be competitive.”

A 2% pay increase is slotted for all state employees.

Other investments include more than $135 million for early childhood programs, $52 million for economic development and nearly $130 million for environmental initiatives.

Specifically, $32.8 million is earmarked for clean water, and $24 million for shorelines and waterways – both include federal funding matches.

The budget sets aside $20 million for Aglands Preservation and open space, and $7.5 million for electric vehicle infrastructure.

Grants-in-aid has $66.5 million in funding, and $943 million is slated for the Bond and Capital Improvements Act. The budget allows for $91.8 million in one-time costs while maintaining $410 million in the Budget Stabilization Fund that Carney created over his eight-year term.

Although Delaware Economic and Financial Advisory Committee revenue projections are flat, Carney said budget stabilization efforts, benchmark spending targets and overall responsible budgeting helped create a fiscally sound budget.

“We’re clearly looking at a divide where we’re going to look to use the budget stabilization act if revenues don’t return to a higher level,” he said.