Pete: Legal pot won’t fly; budget clarity more elusive

June 6, 2017

Between now and the end of June, Pete Schwartzkopf will be doing a lot of counting. Counting votes and counting dollars. "I may be a screw-up in some ways in Dover, but I'm one of the best when it comes to counting votes," he said.

That's probably why Schwartzkopf has held one of Delaware's most powerful positions for the past several years - Speaker of the House of Representatives in Delaware's General Assembly. The position is especially powerful when you have a state led by a Democrat governor, John Carney, and the House and Senate both have Democratic majorities.

Schwartzkopf, of Rehoboth Beach, represents the 14th Representative District.

His knack for counting votes is why he's confident legalization of recreational marijuana, which he opposes, won't pass. Because the legislation creates a new criminal statute, he said, it requires 28 votes to pass the House before it can go on to the Senate. Schwartzkopf sees too many no votes for that to happen. There are at least 14 Republicans in the House who will vote no, he said, and five or six Democrat representatives, including himself, who will vote no. That leaves only 22 or so yes votes in the 41-member House. "I think it will go down by five or six votes."

He's far less clear on the path forward for closing the state's $400 million budget deficit. "I know we will come together on our budget by the end of the legislative session on June 30, and that's all I will be working on until then. But it's not happening on my timetable, and that's what's frustrating." Not the pressure, not the stress - the frustration.

Schwartzkopf hailed the compromising and nonpartisan effort that led to agreement to raise corporate franchise taxes on the nation's Fortune 500 companies incorporated in Delaware. "That doesn't affect any of us individually in Delaware but will raise $116 million. That cuts the deficit from $400 million to $300 million. To get there, we had to get Republican support. To get Republican support, we had to vote to eliminate the estate tax, which this year is generating about $1.9 million and is very unpredictable. Giving up $1.9 million to get $116 million is a deal I'll take any day. The corporate franchise taxes are far more predictable."

Fifteen out of 16 Republican representatives joined the 25 Democrat house members to pass the franchise increases. "When our Democrat members saw that happen, several of them changed their thinking and supported eliminating the estate tax. That's the way it's supposed to work. People working together for the overall good of the state."

But that still leaves $300 million to address either with budget cuts or additional revenues.

And that's where the pain starts.

When the state's Joint Finance Committee last week started cutting into areas beyond $50 million in generally supported cuts identified by the governor, Schwartzkopf's phone started to ring. "Citizens, legislators from both sides of the aisle. And members of Joint Finance too. People were getting upset. Some of the cuts involved layoffs, terminations. People's livelihoods at stake. Children to feed," he said.

"I got together with Joint Finance Chair Melanie Smith and said let's hold off on the cuts for now. Why upset people unnecessarily a month before the budget is passed? We don't know yet whether other revenue measures will be passed which would avoid some of those cuts. Why have people worrying for a whole month, maybe saying things they shouldn't because of the stress, when the cuts may never happen. It just didn't make sense to me."

Schwartzkopf used his power to back off the cutting process for the time being. "They were talking about cuts to agriculture, farmland preservation. That wouldn't make the Sussex legislators happy. And cuts to the accommodations taxes that help our chambers and the critical tourist economy. Cuts to beach replenishment funding, and that would be foolish because those funds leverage federal dollars.

And cutting funding for the state school board. People wanted to wait, and I agreed. We may have to cut more eventually, but why upset people now before we know for sure?"

Time is running short

In another two weeks though, unless agreement is found on raising revenues, the cutting process will have to start again. "We can't wait until the very end. It all has to be written up and passed by both houses."

In the big picture, Schwartzkopf looks at the more than 40 percent of state revenues that comes from corporate-related fees and taxes from outside Delaware borders. "We're using other people's dollars to balance our budget." He also looks back to the mid-1990s when the highest income tax rate for top earners was 19.8 percent. "Now it's 6.6 percent."

He clearly supports fractional increases across a number of brackets as a way of stabilizing Delaware's revenue structure. "The proposal on the table would raise $67 million this year - because it would only be on half a year's income - and then an additional $250 million next year when it went into full effect."

Other revenue measures are also on the radar screen: increasing the age at which senior citizens could take a $12,000 income deduction from 60 to 65, over five years; means-testing a $500 tax credit for seniors so that only those who really needed it would receive it. "That alone would probably save the state about $15 million. And I've had people on my side of Sussex talking about a sales tax. They see 7 million tourists coming through Rehoboth and Dewey each summer. That would create user-generated income, but it will never happen."

He said Republicans are generally opposed to any tax increases and want to see cuts approach the $200 million mark. "At least that gives me a target, but it's going to be tough. And it would be nice if they would give us a list of proposed cuts. But they won't.

"I know as the majority party, it's our responsibility to get the budget passed. But the Republicans' ace in the hole is the fact that we need their votes in the Senate to pass any revenue measure. With our majority in the House I can technically pass a revenue measure if I can hold everyone together. But in the Senate, we need some Republican votes.

"If we can't get their support on any more revenue measures and we have to end up cutting $300 million to balance the budget, I think everyone will know who to yell at."




  • Accomplished writers appear in the Politics column every Tuesday on a rotating basis to explore the dynamic world of politics at the local, county, state, national and world levels.

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