GOP's Short: State Budget Needs Oversight, Too, If Hospitals Must Have It

A Sussex legislator has taken inspiration from a bill that would let the state oversee hospital budgets and the General Assembly should be forced to do that, too. Photo of LegHall by Charlie Megginson

A Sussex County state representative plans to introduce a bill that will hold lawmakers to the same rules its Democrat members want to set for hospitals: Holding budgets to benchmark.

State Rep. Danny Short, R-Seaford, and other Republicans have repeatedly said during House and Senate hearings and debates that the state wants to hold hospitals to a rule it won’t meet itself.

Two years ago, the legislature approved a state operating budget exceeding the state spending growth benchmark by 53%, Short said in a press release.

Last year, spending was 62% higher than the setpoint.

Lawmakers are on track for the upcoming FY 2025 to be at least 42% over the budget growth target, he pointed out.

Danny Short

“The arc of our state spending growth is unsustainable,” Short said, “and the state has been unsuccessful in adhering to advisory spending growth limitations.”

House Bill 350, now awaiting a slot on the Senate floor agenda, would create a board that could review and demand changes in hospital budgets to make them meet a benchmark set by the state, usually somewhere around 3%.

Dems and teachers say hospitals account for 42% of state spending on healthcare and Delaware hospitals charge the most in the region. Republicans, hospitals, nonprofit and business leaders say the state has no right to insert itself into a private business.

A benchmark in this case is a specific percentage that a budget is allowed to grow. In Delaware, that number is based on the state’s gross domestic product — the annual value of goods and services produced in a year and other financial data.

Since 2018, Delaware’s benchmark has ranged from 3% to 3.8%. It’s set by a subcommittee of the Delaware Economic and Financial Advisory Council, called DEFAC.

HB 350 supporters maintain hospital have only met that benchmark in 2020, the first year of the pandemic. But under a deal cut in 2018, hospitals agreed to keep it in mind, but they were not required by law to meet it.

Short is a member of DEFAC, a nonpartisan group that tracks the state’s expected revenues and expenditures to advise the governor and General Assembly.

By law, the state is limited to spending no more than a percentage of its anticipated revenues under Gov. John Carney via Executive Order 21. Carney issued the order after a Republican move in 2018 to set a spending limit that Democrats refused to support.

“The current limitation on state budget growth has two critical problems,” Short said in a press release. “First, it isn’t binding. It’s a guideline that has been repeatedly ignored. Second, because it was established by executive order, it will cease to exist after the Carney administration comes to an end in January.”

Senate Bill 270, sponsored by Sen. Trey Paradee, D-Dover, would codify part of Carney’s executive order, which requires money to be put into a budget stabilization fund that proved useful in 2020 when state revenues crashed. A chunk of it was needed to keep the fiscal 2021 budget whole.

Paradee is chair of the Joint Finance Committee, which writes the state budget based on the governor’s suggestions.

His bill would not make the benchmark binding.

Even Carney has called for that, noting that the General Assembly refused to pass his proposed constitutional amendment to do that in his 2024 State of the State address.

“It’s really pretty simple,” Carney said. “Delaware can’t compete in the future if we don’t have our budget in order. Right now, a future General Assembly or a governor could lead us down a path of uncontrolled spending. That would lead to higher taxes, and painful cuts. So, let’s not go backwards … I hope we can find common ground on this important priority for every Delaware taxpayer.”

Short’s Spending Accountability Act

Short’s State Spending Accountability Act would permanently establish the state spending growth benchmark by adding it to the state constitution.

The act would also create the Budget Accountability Review Commission, a public-private oversight panel that would ensure that the state budget doesn’t blow past its growth limits. Republicans previously have sought to create such a panel.

“My proposal builds on the reform bill that I supported six years ago by including an enforcement mechanism inspired by the hospital bill,” Short said.

He pointed to a press release from House Speaker Valerie Longhurst, D-Bear, about her hospital review board.

“We are not only taking decisive action to protect Delaware families but also addressing this pressing issue with the attention it demands,” Longhurst said. “This proven approach…will usher in crucial transparency and accountability to our hospital budgets.”

Short’s 11-member review commission would be expected to act just like Longhurst’s Diamond State Hospital Cost Review Board in aligning the state’s budget growth benchmarks and providing crucial transparency and accountability to state spending.

Under the bill, the members budget accountability board would include one representative of each county government, the chair of the Delaware Economic and Financial Advisory Council, state lawmakers, and representatives of the business community.

“Year after year, the state greatly exceeds the spending growth benchmark set forth by DEFAC,” said Senate Republican Whip Brian Pettyjohn, R-Georgetown, who will be the bill’s Senate prime sponsor. “Legislators and government should be held accountable, and this bill is necessary to do just that. It’s imperative that our government’s budget growth be responsible and sustainable.”

Short’s State Spending Accountability Act would reform the General Assembly’s process for writing the annual multi-billion state operating budget.

The budget-writing Joint Finance Committee would need to present its state spending plan for the new fiscal year, which starts July 1, in May and June, immediately following the final two state revenue estimates, to the Budget Accountability Review Commission.

The commission would review the proposals to ensure they do not exceed the state spending growth benchmark.

Under the bill, no budget could proceed to a vote in the legislature without the accountability commission’s approval.

Any approved budget amended after receiving authorization would be required to be resubmitted to the commission for another endorsement. Any budget exceeding the spending benchmark would be returned to the Joint Finance Committee for compliance revisions.

The JFC could make the needed revisions and resubmit the budget or appeal to the commission to exceed the spending cap based on extraordinary circumstances.

The commission could vote to exceed the cap with a two-thirds supermajority vote.

In cases where the JFC refused to observe the state budget growth benchmark, the commission would work with the Office of the Controller General to make its own revisions to produce a compliant budget.

Short plans to circulated the bill for sponsorship next week and expects the lawmakers backing the hospital control bill to support his measure,

“If we are intent on imposing state oversight to ensure that hospitals adhere to spending growth limits,” he said, “how can any legislator supporting that proposal hesitate to hold themselves to the same standard?”

GOP’s Short: State budget needs oversight, too, if hospitals must have it

Short’s Spending Accountability Act

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