JULY 1, 2021 -- The governor on Wednesday signed the state’s three annual major funding bills into law: the operating budget, the capital budget, and the Grants-in-Aid Bill.
All three bills are for Fiscal Year 2022, which began today, and all set new records.
The amount of money the state government can spend is limited by law. State lawmakers cannot appropriate any more than 98% of expected revenue. Thanks to two massive federal aid bills and a recovering economy, the state was flush with cash. Since October, the anticipated amount of “spendable” revenue jumped by $1.025 billion.
OPERATING BUDGET
House Bill 250 is the new $4.771 billion General Fund operating budget. It is $246 million higher than the previous budget, a 5.43% increase.
More than a third of the budget (35.8%) is dedicated to public schools. In Delaware, the state pays approximately 65% of school operational expenses, with local taxpayers covering the remainder.
The second-largest budget expenditure is the Department of Health and Social Services (DHSS). The agency, which administers numerous state programs, including Medicaid, accounts for $1.288 billion or nearly 27% of total General Fund expenditures.
Combined, DHSS and public education account for about 63-cents of every dollar spent by state government.
CAPITAL BUDGET & LACK OF TAX RELIEF
The $1.35 billion measure is an increase of nearly 91% from the $707.9 million plan it replaced. The omnibus bill finances the state's major construction, renovation, and transportation projects. The plan enacted yesterday contains $246 million for school construction (including $65 million for education initiatives in the City of Wilmington), $386.1 million for road and bridge projects, and $45 million split evenly between DelTech, Delaware State University, and the University of Delaware.
In addition to the earmarked school spending, Wilmington is also benefiting from the following appropriations: $40 million for improvements to South Market Street, $5.75 million for the Grand Opera House, $5 million for the North Wilmington Public Library, and $6.5 million for the Riverfront Development Corporation.
Appropriations totaling $131 million were designated for new Family Court facilities to be built in Kent and Sussex counties.
The capital budget is often called "the Bond Bill" because borrowed money raised through bond sales typically finances a major portion of it. Due to this year's surplus revenue, less than 20% of the latest spending plan is paid for with bond authorizations.
State Rep. Lyndon Yearick (R-Camden, Woodside), the only legislator to vote against the Bond Bill, said he cast his symbolic vote to express his displeasure with the lack of any action by lawmakers to share the state’s bounty directly with citizens. In remarks made before the Bond Bill vote, Rep. Yearick noted that the measure eclipses by $487 million the $862 million record-setting capital budget enacted two years ago.
“[In 2019] we were at an all-time high record spending,” Rep. Yearick said. “Well, we sure blew past that. Everybody in this chamber will benefit from this bill, present company included right here, [yet] I rise in opposition to it. You can call me a hypocrite, you can call me whatever, but a [nearly $500 million Bond Bill] increase…and we’ve given back zero dollars to Delaware taxpayers in any type of tax relief.”
With the economy still recovering from the pandemic, and many businesses and individuals burdened by debt they incurred during it, Rep. Yearick said it was indefensible not to help them by enacting some form of tax cut, tax credit, or rebate.
House Republicans introduced several such measures, two sponsored by Rep. Yearick. The first, House Bill 172, would temporarily eliminate the state's portion of the realty transfer tax for certain first-time home buyers. The second bill, House Bill 158, seeks to create a $500 tax credit for low-income Delawareans. While neither bill was enacted, they will remain viable to be worked through the second half of the 151st General Assembly next year.
In remarks made from the House floor yesterday, State Rep. Jeff Spiegelman (R-Clayton) said he was concerned about the way lawmakers handled the unexpectedly large amount of surplus revenue. “We had a bunch of cash that goes to the Bond Bill...for 62 legislators to grab for the projects we care about, but I’m not sure that this is the healthiest way of doing this.
“Structurally, we’re just not set-up to handle a flush of cash, like we have now,” Rep. Spiegelman continued. “What I’d like to see in the future would be some manner of cap on how much cash can go into the Bond Bill in one-time payments in order to limit…what is commonly referred to as pork spending.”
Joint Bond Bill Committee member, State Rep. Mike Ramone (R-Pike Creek South), told his House colleagues that while he was gratified that the plan he helped draft included funding for addressing long-deferred building maintenance and dredging issues, he was disappointed tax reductions were not given serious consideration.
Earlier this year, Rep. Ramone introduced House Bill 108 to restore the $500 senior citizen property tax credit. Four years ago, the credit was cut to $400. The bill would return about $4.4 million annually to qualifying Delaware seniors. The measure has bipartisan support and has been pending action in the House Administration Committee since late February.
Rep. Ramone’s second proposal, House Bill 71, seeks to decrease the realty transfer tax in Delaware by 25%. In 2017, the tax was effectively raised from 3% of the purchase price of a property to 4%. (Local governments are responsible for three-eighths of this total, with the state accounting for the remainder.) This bill would reset the state’s take to its pre-August 1, 2017 level, restoring the effective combined realty transfer tax to 3%.
“We should consider having an environment where, when we have extraordinary funds coming to the Bond Bill, a certain amount of that is guaranteed to be returned to the people,” Rep. Ramone said. He noted the value of Bond Bill expenditures tends to fall unevenly on Delaware citizens, benefiting some more than others. By contrast, he said restoring the senior property tax credit or reducing the cost of purchasing a home might have helped many citizens in a more direct, tangible way.
GRANTS-IN-AID
The Grants-in-Aid Bill (House Bill 265) allocates more than $63.2 million mainly to assist hundreds of non-profit organizations performing work benefiting Delawareans. Included in the bill are $7.06 million for volunteer fire companies, $8.26 million for senior centers, and more than $431,000 to help organizations serving veterans. The measure also includes $13.9 million to subsidize emergency medical services (paramedics).
This year’s GIA bill is $8.75 million larger than the previous allocation, a 16% increase.
SUPPLEMENTAL APPROPRIATIONS
Also signed yesterday was a supplemental appropriations bill, House Bill 251, containing $221.1 million in "one-time" spending. This measure includes funding for a $1,000 bonus for state employees, a $500 supplement for state retirees, money to expand the use of body cameras to all Delaware police agencies, and contingency funding to finance certain pending pieces of legislation should they become law. Any money not used will be returned to the General Fund at the end of the fiscal year.
Lastly, the plans enacted on Wednesday set aside $286 million in new savings to prepare for future economic and revenue downturns.
