In the wee hours of the morning July 1 Gov. Jack Markell signed Delaware’s 2010 budget into law, after the General Assembly spent upwards of 12 hours sorting out the $3 billion spending plan.
In order to reconcile an $800 million projected shortfall for the fiscal year that begins today, lawmakers wrote into the budget a slew of unpopular measures including a 2.5% pay cut for state employees, a personal income tax increase, a tax hike for corporations, an estate tax and millions of dollars in new fees.
Before signing the bills that make up the budget, the governor took time to praise those who helped it on its way to his desk, and criticize those who he said made the process more difficult.
“I’m pleased we were able to solve this historic budget challenge in a way that is fiscally responsible,” he said, adding later, “I’m disappointed that we didn’t get the bipartisan support we would have wanted.”
Markell said it was the House Democrats who understood the efforts needed to shrink the budget and raise revenue with tax increases, and that the Republican caucus worked against his proposals all along.
The governor lambasted Republicans for failing to support his plan to raise alcohol taxes by 50%, despite the fact that the House minority leadership assured the passage of several other tax increases by lending a critical party vote to the other side.
This session, Democrats were just one member shy of the three-fifths majority vote needed to pass revenue bills.
“It was the Democrats who made those tough calls … We couldn’t get two Republicans to vote for 2 cents on a can of beer,” he said, brushing off the fact that one Democrat, John A. Kowalko Jr., Newark South, also held back support for the bill.
To make up for the lost revenue that the increases would have generated, the Bond Bill Committee cut $4.8 million in school renovation funds from the bond package — a deal that was finalized well after midnight when it became apparent that the alcohol tax bill did not have the votes.
That episode was one in a series of events that brought the final budget to the governor’s desk shortly after 4 a.m.
Tax bills finalized
Early in the evening of June 30, the House voted on its last outstanding piece of tax legislation, a bill that increases corporate franchise taxes and is projected to raise approximately $124.7 million in the next year.
Most of the tax bills, including increases to the personal income and gross receipts taxes, were passed by the House on June 29, but Majority Leader Rep. Peter C. Schwartzkopf, D-Rehoboth Beach, chose not to run the corporate tax bill that day because sufficient support had not yet materialized.
After the bill was introduced Kowalko introduced an amendment that would have increased the corporate franchise tax even more for some of the state’s wealthiest companies, and resulted in an additional $7 million in revenue.
Schwartzkopf, however, said he viewed the amendment as unfriendly since it would have jeopardized a compromise struck with Republicans to ensure the bill’s passage.
House Minority Leader Rep. Richard C. Cathcart, R-Middletown, called the amendment out on a procedural question and had it struck down by the speaker, who held that Kowalko’s proposal altered the original bill too greatly.
Later, as the House Democratic leadership attempted to rally its troops and resurrect the twice-defeated alcohol tax, Kowalko remained steadfast in his position.
The representative said he was not pleased that party leaders ignored his efforts to raise more money through alternative taxation schemes like his corporate franchise tax amendment.
“I think I’ve been very open and honest on some of these compromises,” he said. “It’s fallen on deaf ears.
Later in the evening, the Senate passed the all of the House taxation measures with little discussion.
The tax bills made up approximately $206 million of the projected shortfall.
Budget bills pass
The bill for the state’s operating budget also originated in the House, where, before passing the measure, representatives debated the constitutionality of a statutory pay cut for lawmakers that mimics the 2.5% salary reduction applied to all other state workers.
Some legislators pointed out the fact that the state constitution prevents lawmakers from adjusting their own pay after they’re sworn in, but others said the measure would never face a constitutional test because no legislator would ever file a lawsuit to reclaim the reduced pay.
“Whether or not the constitution allows the cut, I think it would be unconscionable for any of us not to support a pay cut for ourselves,” said Rep. Joseph Miro, R-Pike Creek Valley.
When the bill moved to the Senate for consideration, Sen. Colin Bonini, R-Dover, declared his firm opposition to the proposal.
“I’m not going to support this budget, and I’m sure you’re all shocked,” he said. “We had an opportunity to reengineer government and shrink government.
“I would have cut with a knife. The governor said we should cut with a scalpel, and we ended up cutting with a toenail clipper.”
Sen. Nancy Cook, D-Kenton, co-chair of the Joint Finance Committee, defended the budget and said it does shrink government by incorporating a plan to reduce state personnel costs through attrition in the next year.
After approving the budget, the House and Senate also voted to approve the bond bill and grant in aid bill, the other two components of the budget package.
Cook said the grant in aid bill reflected a significant reduction in the amount of money the state will dole out to community groups.
“Generally speaking, the agencies were cut anywhere from 17 to 21%,” she said. “Senior centers were not cut at all, but all other agencies were.”
The grant in aid bill also contained a compromise provision that allows state agencies to formulate plans to give their staffs five days of leave to account for the 2.5% pay cut.
Bonini questioned the rationale of including a personnel payroll caveat in the grant in aid bill, but Cook said the move was not unusual.
“It’s not any different than any other year,” she said. “We put language in that amends the budget.”
The proposal, which is somewhat like a furlough, would give employees five days of mandatory leave equivalent to the 2.5% cut. However, unlike a furlough, the days would not be counted as unpaid and the lost wages would be spread out across the entire year.
Each state agency, including 24-hour departments like state police and corrections, would be responsible for presenting a plan that implements the five-day leave scheme for its workers without incurring overtime or staff shortages.
Dover —
