Gov. Jack Markell unveiled a budget plan Jan. 28 that includes no tax hikes, no fee increases and no plans for state worker layoffs.
The $3.17 billion spending plan calls for a laundry list of state spending cuts to help close an estimated $253.7 million revenue shortfall for fiscal year 2011.
Markell said the revenue gap represents a greater demand for state services in the face of the economic downturn and the loss of a substantial portion of federal stimulus money that helped fill an $800 million hole in last year’s budget.
“Just like a business or your budget at home, certain things cost more than they did last year. For example, the cost of healthcare continues to rise, which drives up the cost of our employee healthcare plans, our prison healthcare costs and the Medicaid program,” he said. “While the challenges before us were not as significant as last year’s historic shortfall, they are real.”
In his effort to balance the budget, the governor plans to use $59.8 million in federal funds and $39.7 million in table games proceeds.
But the bulk of Markell’s plan to offset the shortfall is $143.6 million in agency cuts, including everything from restructuring state agencies to axing $25,000 for beaver control.
Millions of cost-savings dollars are slated to come from initiatives the state already have implemented but will be fully realized in fiscal year 2011, including reductions to the state’s vehicle fleet and the elimination of roughly 1,000 state jobs through attrition.
Markell said the cost reductions generally won’t affect the level of service provided by state agencies, but there are a few cuts that the average citizen probably will notice.
Under the governor’s plan, the state would no longer mail tax instruction booklets to individuals and businesses and instead will work to expand online tax filing services. That measure is projected to save $110,000.
The governor also proposed reducing hours of operation at the EZPass customer service center and discontinuing the practice of mailing paper statements to EZPass users for a combined savings of $705,000.
State workers
To reduce personnel costs, the governor proposed savings of $1.6 million from raising healthcare and pension contributions for new hires at state agencies.
Budget Director Ann Visalli said the administration will meet with state employee groups over the coming months to discuss possible benefits changes.
While she wouldn’t list any specific scenarios for altering the benefits structure, she did say the state could raise the age at which new employees become eligible for pensions or lower the maximum state contribution for employee healthcare.
Michael Begatto, director of Council 81 of the American Federation of State, County and Municipal Employees, said he’d reserve judgment on the governor’s plans until his and other employee groups have had a chance to meet with the administration.
Markell’s budget also keeps the 2.5% pay cut for state workers instituted last year, as well as the five floating leave days for each employee that were added as part of a compromise.
Begatto said the pay cut issue still is open for discussion in the Joint Finance Committee, which begins meeting to revise the governor’s budget Feb. 1
“That’s the governor’s recommendation,” he said. “I’m not sure what the sentiment is across the hall [in the legislature] in an election year.”
While Markell’s plan proposes no layoffs of full time employees, the governor did say there may be reductions in hours for part time and seasonal workers.
Those workers may be reassigned from areas where consolidations or reductions are taking place, but they could be let go if there are no openings elsewhere, he said.
Republican Sen. Colin Bonini criticized the governor’s plans to reduce employee costs and said they don’t go far enough.
“This is a kick-the-can-down-the-road budget,” he said. “You need to cut personnel costs” to have any long-term savings in the budget.
Senate President Pro Tem Anthony J. DeLuca said the governor’s plan is “headed in the right direction.”
But, he said the legislature will take a hard look at some of Markell’s proposals, and the Joint Finance Committee process could be a tough one.
“I think everybody says ‘Not me,’ even if you’re not talking about layoffs,” he said. “Every time a position is going to move, there’s going to be discussion.
Education
The governor reiterated his commitment to consolidating so-called “backroom” costs within school districts and pushing as much money as possible into classrooms.
In addition to requiring more efficiency, Markell said he plans to restructure the school transportation system and shift some of the costs to local districts.
Currently, the state foots the bill for local school district buses and the districts are responsible for assigning the routes and administering the system.
“We need to inject more accountability into the cost of school transportation,” Markell said. “I firmly believe people tend to manage better when they are responsible, at least in part, for sharing the budget.”
In the plus column, the governor plans to fund 90 new teaching positions and teacher salary step raises.
Markell’s proposed bond bill, which totals $356.5 million, contains $98.8 million for school construction projects in the Colonial, Appoquinimink, Caesar Rodney, Smyrna, Lake Forest, Milford and Brandywine school districts.
The governor also has asked for bonds of $3 million each for Delaware State University, Delaware Technical and Community College and the University of Delaware in order to fund construction projects.
Of the University of Delaware’s share, $2 million in bonds is set aside for renovating facilities at the former Chrysler plant in Newark and turning it into a center for high-tech industry and research.
Capital spending
Markell said he wants to use the bond bill to fund initiatives that will promote job growth in the state.
He’s designated $13.9 million in capital funding for the state’s strategic economic development fund, which is used to give loans and grants to businesses.
The governor also wants to sell $10 million in bonds to fund improvements at the Port of Wilmington.
That money will come from a revaluation of the state’s “rainy day” reserve fund, which currently contains $10 million more than is constitutionally required.
Rep. Bill Oberle, R-Beecher’s Lot, proposed tapping that one-time money at a 3 a.m. budget-drafting meeting last July 1, when legislators were struggling to put together a balanced spending package.
At the time, attorneys from both party caucuses said tapping the rainy day fund might not be legal, even if the fund contains more money than necessary.
Oberle maintained his convictions and even stormed out of a bond bill committee hearing when the panel poised itself to cut school construction funding rather than take his advice.
Since then, lawyers from the governor’s office decided that Oberle was right and the over-capitalized rainy day can be tapped for the excess, but it will require a three-fifths vote of the legislature separate from a vote on the budget itself.
The proposed capital budget also contains some $45 million in bonds for construction projects, which the governor said have a direct impact on employment.
That includes $19.2 million for the Kent County Courthouse, $4.5 million in Housing Preservation funds, which have a federal matching component, and $16.1 million for agencies to purchase equipment and conduct minor improvement projects.
Email Doug Denison at doug.denison@doverpost.com
Dover —
