DEFAC Forecasts Stormy June

by James DeChene

When members of the General Assembly return from break on June 7th, they will be facing a $70 million budget shortfall between current revenues and the governor’s proposed budget.  The Joint Finance Committee will meet this week and next to continue to iron out what funding will look like this year.  It is important to note that the funding wish list in front of JFC totals roughly $160 million, meaning there is almost a quarter billion dollar gap between what legislators have requested above the governor’s recommended budget and what they can afford.
The even more troubling, yet under-publicized, piece of DEFAC’s May meeting forecast is for the negligible economic growth, less than 1% each year, over the next three years.  This may be the textbook definition of a flat economy, and is troubling for its long term impact on future budgets.  The problem with a flat revenue projection is the state still faces dramatic increases to its costs, most notably in health care expenses, without seeing commensurate growth in available revenues.  Close to double digit increases are expected each year for the foreseeable future in that space alone, not to mention potential 30% increases in state funded construction projects if HB 283 is passed this year.

The members of JFC have a tough task in front of them, made more difficult by an election year.  The last few years have seen last minute funding battles for programs totaling less than one half of one percent of the overall budget, and this year will most likely be no different.  Difficult choices will need to be made not only this year, but also by the next governor and general assembly, on how to jump start Delaware’s economy.  The State Chamber, the Delaware Public Policy Institute, The Delaware Business Roundtable and others have ideas we will bring forward for discussion and debate.  Building off of the Delaware Public Policy Institute’s study on public employee compensation (found here), expect more focus on areas for successful economic growth and development.  We understand there are no easy answers, but we also know that employers across the state have faced similar choices and have had to make their own difficult decisions to adapt and survive.