House Republicans Call for Budget Reforms

Following this week’s reported revenue projections, some may think that the state was the recipient of an early Christmas present.  However, our caucus sees this revenue as the hard-earned dollars of the people of Delaware.  We will work to ensure these tax dollars are maximized and used efficiently to improve the quality of life for all citizens of the state.

The Delaware Economic and Financial Advisory Council (DEFAC) released its December revenue forecast (on Monday, December 21st) and the numbers look very encouraging for our economy.  For the current fiscal year, revenues are up another $88.4 million over September’s figures, while for next fiscal year, revenue projections have increased another $79 million.  As of this week, the bump in revenues now totals $167.4 million.

One of the reasons this report is so encouraging for policymakers is because earlier in the year the expectation for next year’s budget cycle was anything but promising.  We ended our legislative session on July 1st with the state facing at least a $150 million budget shortfall.

As we reported in June, however, House and Senate Democrats were touting higher taxes exclusively as the solution to meet those budgetary challenges.  In fact, Democratic lawmakers introduced House Bill 196 late in the session, which would have raised income taxes on a select group of taxpayers and would have collectively imposed an additional burden on taxpayers of $123 million annually.

Now, six months later, as we suspected, our revenue outlook has improved, so much so that we have been able to make up the projected shortfall.  Yet, had we been quick to hit the tax increase button, as some in the legislature were suggesting in June, we’d be stuck with higher taxes for the foreseeable future with the need for them no longer existing.

Between now and the end of next June, when we must have a budget in place, we can expect multiple revisions to the revenue forecast.  But, as we head into this budget cycle and as the Governor prepares his Fiscal Year 2017 spending plan for lawmakers to consider, we hope several factors will be considered in light of the most recent uptick in revenues:

  • Because of the volatility of the revenue sources where the increases occurred this time around – including with Delaware’s corporate franchise, lottery, and escheat taxes – we need more consistent, viable revenue sources.
  • As the Delaware Expenditure Review Committee finishes its comprehensive look at state spending and finalizes its proposal on cost-cutting solutions for the state, we must make sure there is follow-through on key items that indicate an ongoing commitment to government efficiency.
  • Those specific proposals should include measures to cut government costs through a centralized procurement program for public schools; meaningful reforms to address Medicaid fraud; a further restructuring of our state workforce through attrition and a redefining of job duties; and a program that rewards someone for a cost-saving idea that is implemented in the state.
  • As we patiently wait for the longer term effects of several major corporate restructurings in Delaware to play out, including the merger of DuPont Company with Dow Chemical, we must continue to evaluate the competitiveness of our corporate tax structure to ensure Delaware remains an attractive spot for businesses to locate as we work to grow and rebuild our workforce.

This week’s economic report provided the legislature with the encouragement that we’ve desperately needed for a while now.  The revenue projections are certainly being received as a breath of fresh air.  And, while we use common sense combined with cautious optimism in moving ahead over these next several months with work on our next state budget, we need to stay focused on the long term task at hand.

One encouraging revenue forecast does not a thriving economy make.  In fact, some in the legislature may be tempted to begin finding new government programs to fund, thinking that the revenues will continue to improve and that now may be the time to grow our budget even more.  But, we are committed to being cautious and not jumping into a flurry of new programs.

Ensuring that our state government operates as efficiently and effectively as possible can be achieved.  Through the implementation of the ideas stated above, we believe more economic growth is inevitable in Delaware.  We remain committed to the reform ideas we have offered and believe the latest uptick in the revenue estimates is the basis on which we can significantly build our government reform effort.

State House Republican Caucus Leader Danny Short, R-Seaford, and State House Republican Caucus Whip Deborah Hudson, R-Fairthorne

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