Lawmakers pass $4.1 billion budget for FY18

Grant-in-aid restored; increases in alcohol, tobacco, realty transfer taxes
July 3, 2017

Story Location:
411 Legislative Ave
Dover  Delaware  19901
United States

It took 48 hours of an unprecedented 72-hour appropriation measure, but shortly after creeping into July 3, Delaware’s lawmakers passed a $4.1 billion budget for Fiscal Year 2018.

After failing to pass a budget by the June 30 deadline, a short-term appropriation measure was signed July 1 by Gov. John Carney to fund state government at Fiscal Year 2017 levels for 72 hours. The state’s lawmakers resumed discussions Sunday afternoon to fill a $400 million shortfall.

A substantial portion of that shortfall was made up with a 1 percent increase in the real estate transfer tax. The increase is projected to generate $45 million in fiscal 2018 and approximately $72.9 million in fiscal 2019.

Sussex County Administrator Todd Lawson said he and his county administrator brethren from Kent and New Castle counties breathed a collective sigh of relief when legislators didn’t change how much of the tax counties would be receiving.

“We were certainly concerned,” said Lawson, recognizing a 20 percent cut to grant-in-aid, to $37.2 million. “It could have been a lot worse.”

As approved, the transfer tax, split by the state and the county, increases from 3 percent to 4 percent. The state gets the entirety of the addtional 1 percent, increasing its take to 2.5 percent, while the county share remains at 1.5 percent.

There had been public discussions of reducing the county’s take since January, when former Gov. Jack Markell introduced a budget with the same 1 percent increase, but the state getting 2.75 percent and the county getting 1.25 percent.

Coming in at $20.1 million, or 29 percent, of Sussex County’s $143 million budget for Fiscal Year 2018, the real estate transfer tax is the county’s single largest source of revenue. The next closest, property taxes, rings in at 24 percent.

Lawson said the county is happy with its 1.5 percent. He said 100 percent of the tax is put toward public safety measures.

“Where would we have started cutting?” he said.

Additional state revenue measures include $116 million through an increase in the corporate franchise tax; $11.6 million on a 50-cent-per-pack increase on cigarettes and other tobacco-related products; $5.2 million from a tax increase on beer, wine and spirits; and $4.5 million in across-the-board increases to the filing fees associated with Department of Insurance filings.

Speaker of the House Rep. Pete Schwartzkopf introduced the bills increasing the taxes on the realty transfer tax, alcohol and tobacco-related taxes. The alcohol tax is projected to raise $7.1 million in fiscal 2019. The tobacco tax is projected to generate $17.1 million in fiscal 2019.

In a prepared statement, Schwartzkopf said the positive result of passing this budget is both sides agreeing to maintain critical services to residents. But, he said, the state’s legislators ultimately fell short of making the changes needed for long-term growth.

“We must continue to work toward fixing the structural problems with our budget, both on the expenditure and the revenue sides. We have committed to several initiatives to study ways to make government more efficient and effective, and we must commit to addressing revenues, or we will continue to face these challenges. The people of Delaware expect and deserve more,” he said.

In addition to the revenue increases, savings and other reductions include an $11 million reduction in the Educational Sustainment Fund, from $22 million; $5 million by eliminating 200 vacant positions across state agencies; $2 million target savings in employee health costs; $1.6 million reduction by modifying double state share for employee health insurance rates.

The budget funds a number of the governor’s priorities, including $24.2 million to fully fund new teachers in Delaware’s classrooms to match enrollment growth; $16 million to fund pay increases for correctional officers; $7.8 million to fully fund growth in the Medicaid program for low-income Delawareans, Delawareans with disabilities, and seniors in long-term care; $4.7 million to maintain funding for early childhood education; $2.3 million to authorize new correctional officer positions; and $1 million to add funding for substance abuse treatment programs.

“The budget I signed tonight makes critical investments in education, healthcare, our environment, and in our correctional system,” said Carney in a prepared statement. “But going forward, we cannot be complacent. We must do more to put Delaware on a sustainable path forward.”

Senate Republicans released a statement shortly after Carney signed the budget.

“Today, we fulfilled our responsibility to the people of Delaware by passing a balanced budget that funds our government for the next fiscal year. By doing this, we assured that government remains open, and that critical services continue to be delivered,” read the statement. “While we certainly do not support everything that is in this agreement, we want to thank those who made it possible, especially our colleagues from both parties here in the Legislature. We have a long history of working across the aisle for the betterment of all Delawareans, and we believe that we continued that tradition today.”

Editor’s note: This story has been updated.