State lawmakers are considering a proposal that would reduce the drastic swings in Delaware’s budget process.
Last June, members of the Delaware General Assembly went into a rare legislative overtime to figure out how to resolve a nearly $400 million budget shortfall. This year, lawmakers have the opposite problem. There’s expected to be a fierce debate over how to spend an extra $350 million in revenue.
A new bipartisan proposal hopes to reduce that drastic seesaw from budget shortfall one year to windfall the next year. On Tuesday, 31 co-sponsors joined Rep. Quinton Johnson, D-Middletown, as he introduced HB 460, a bill to amend the Delaware Constitution and overhaul the way the state handles its budget.
“This constitutional amendment will help ensure our commitment to making responsible, long-term decisions about our finances,” said Gov. John Carney, D- Delaware. “We’ve been focused since taking office on addressing our long-term challenges, on responsibly investing one-time revenue, and on making sure we don’t spend beyond our means.”
The amendment would create a Budget Stabilization Fund that would amount to 10 percent of the state’s General Fund Revenue. That’s double the size of the state’s Budget Reserve Account, which is currently kept at five percent. Since its creation nearly four decades ago, the reserve account, also known as the “rainy day fund,” has never been used. It was designed to help the state deal with a financial emergency.
Under the amendment, the rainy day fund would transform into the Budget Stabilization Fund. That fund would be tapped into during lean years like 2017 and funds would be added to it during years where there’s extra revenue like this year. “In years when those revenues come in above what we consider to be the sustainable benchmark, we’re going to harvest them. We’re going to keep them. We’re going to put them in a savings account,” said state Treasurer Ken Simpler, who backs the proposed amendment. “When the revenues come in below that benchmark, we’re going to take them out and use them.”
That benchmark level of revenue, called the Benchmark Appropriation Limit, would be determined by an index of economic growth factors as calculated by the Delaware Economic and Financial Advisory Council.
Simpler said the move would eliminate the need to make big budget cuts to agencies and nonprofits in lean years, which is what happened in 2017. “It also means that in years of excess, like right now, we can put money away for a day that’s going to be coming in the not so distant future when we need it.”
Any amendment to the Delaware Constitution must be approved by a two-thirds super majority of two consecutive General Assemblies. That means lawmakers have little more than two weeks to get the first leg approved. If that doesn’t happen, the earliest the amendment could be approved would be 2021.
“This is the most important thing we could be doing right now,” Simpler said. “I don’t say that lightly.”