Markell budget proposal preserves some ’09 Delaware tax increases

Delaware Governor Jack Markell revealed his $3.7 Billion budget for Fiscal Year 2014 this afternoon in Dover.

The spending plan represents a 3.49 percent increase over the 2013 budget, which translates to $154 million.  Markell was quick to point out that a minuscule amount of that increase, $6.9 million or 0.19 percent are new programs.  Those new expenditures include expanded mental health services in middle schools for $3.3 million and six new State Police Troopers.

“The lieutenant governor and I, along with secretary Murphy, visit a lot of schools and one of the things that we hear most often from teachers and other school based personnel and administrators is they’re seeing more and more students with mental health issues and they’re seeing these kids younger and younger,” explained Markell. “We have an incredible gap in middle school. We have wellness centers at the high school level, in fact, I’m told that the number one service that’s requested at the high school wellness centers is in fact, mental health services. We have 54 family crisis councilors at the elementary school level. But, in the entire state of Delaware, we have three behavioral health consultants serving middle schools and that does not get the job done.”

Lt. Gov. Matt Denn added that the increase in behavioral health consultants will keep students that might be suffering from a mental illness on a consistent treatment schedule.

“It’s very difficult to get kids to maintain a treatment regimen with a private provider; to show up for appointments, to stick with a treatment plan, to take prescribed medications,” said Denn. “Having someone in the school is a huge asset in terms of getting a middle school age kid to stick with a treatment plan.”

One topic that was the subject of much discussion following Markell’s State of the State Address last week that is not included in the budget is a reform of the way teachers are paid.  In the State of the State, Markell briefly touched on his desire to improve starting pay for teachers and re-evaluate the pay structure for educators.  But because there’s no specific plan in place for how to do that, Markell’s budget doesn’t allocate any funds for that purpose.

“I do think that this is the time to take a look at our pay structure to be more competitive overall but, that’s going to take some work and there would have been no impact on the 2014 budget,” said Markell.

Public hearings on state agency budget requests begin next month and Sen. Harris McDowell, co-chair of the Joint Finance Committee, said teacher salaries could be one of the issues they address.

“I do see he’s maintaining the paraprofessionals in the classroom and the growth there is staying on track to meet our promises there and that’s good,” said McDowell. “We’ll have almost six months to massage this some more and see if we can re-work some things and maintain the very good structure the governor’s started with and yet maybe make some adjustments and that’s one I hope we would do.”

The bulk of the $154 million increase in spending comes in the form of increases in Medicaid payments of $35 million and personnel costs of $40 million.  That increase plus the loss of revenue from 2009’s tax increases that are scheduled to expire this year, would leave the state with a $56 million deficit in the coming fiscal year.  Markell says the gap in FY 2015 would be even more dramatic.

Because of that shortfall, Markell wants to prevent all four of the tax increases enacted in 2009 from expiring.  The increase in personal income tax, gross receipts, corporate franchise and the estate tax were scheduled to sunset or be eliminated this year. 

Under his plan, the personal income tax increase on those making more than $60,000 annually would roll back to 6.6 percent.  In 2009, the rate increased to 6.95 percent to help cover a historic shortfall in the state’s budget.  In 2011, the rate was cut to 6.75 percent.  If that increase was allowed to expire as scheduled this year, the state’s top tax rate would return to its pre-2009 level of 5.95 percent.  Markell’s proposal would roll the tax back from it’s current level to 6.6 percent, still more than half a percent higher than where it was four years ago.

For the gross receipts tax, Markell wants to reduce the rate by just one percent.  In 2011, the rate was reduced by three percent.  The rate was increased eight percent in 2009.  Manufacturing companies would see a cut in the gross receipts tax as part of an effort to spur economic growth.  The plan also calls for the monthly exclusion on gross receipts tax to be permanently extended from $80,000 to $100,000.

The budget proposal would also make permanent the increases in corporate franchise and estate taxes.

During his budget presentation, Markell stressed the way he’s trimmed state government during the four years of his first term.  The state faced a massive $800 million shortfall in the first year he was in office, and has had to make up $100 million shortfalls every year since.  Among the cuts of his first four years, Markell says he’s eliminated more than 1,000 state employee positions and reformed state employee health care and pensions.  

Yet despite the cuts in spending and increases proposed in the budget, the FY 2015 picture looks to be another $100 million short.  But, Markell says, that will be dealt with in the next budget cycle.