Delaware’s Budget Is Set
(Dover) Two days after missing a deadline to have a state spending plan in place, Delaware legislators and Gov. John Carney reached a consensus on a new balanced budget.
- The state FY 2018 operating budget enacted in the early morning hours of July 3rd is $4.1069 billion or just 0.56-percent higher than the budget it replaced.
- The majority of the $364 million budget gap was bridged with spending cuts ($192 million or 52.75-percent of the shortfall). New tax revenue accounted for 47.25-percent or $172 million.
- Of the new tax revenue, more than two-thirds (66.3-percent) came from an increase of the corporate franchise tax on large companies – a move that will raise $114 million in new revenue annually without impacting Delaware’s desirability as a venue for incorporation.
- It contains no changes to the Personal Income Tax and preserves the ability of homeowners, those making charitable donations, and others to continue using itemized deductions.
- A proposal to increase the eligibility age (from 60 to 65) to exclude the first $12,500 of retirement income from taxation was eliminated.
- It includes money to fully fund pay scale increases and reduce forced overtime for the state’s correctional officers. Chronic short-staffing and fatigue were both cited as causal factors in a prison riot and hostage-taking incident at the James T. Vaughn Correctional Center in February that led to the murder of a correctional officer.
- It restores funding to the Grants-in-Aid Bill to continue assistance to non-profit agencies at 80-percent of FY 2017 levels.
- It restores funding for the 22 State Police Troopers patrolling Sussex County.
- The governor’s recommended cut to the Educational Sustainment Fund was reduced by half. School districts will not have the ability to recoup that money via a tax increase not subject to a referendum.
- Initiatives were started to look at ways to curtail Medicaid costs, explore the consolidation of Delaware’s public schools, and create a new mechanism to limit the state’s “growth and crisis” budgetary swings due to changing economic conditions.
- The Realty Transfer tax, which is levied on the sale of a home and typically spilt between buyer and seller, will be increased from three percent to four percent. The revenue flowing to counties and municipalities from the tax will be unaffected.
- The tax on a pack of cigarettes will be raised by 50-cents per pack (half the dollar per pack sought by Gov. Carney). A new, small tax will be levied on the sale of vaping liquid (five cents per milliliter).
- The tax on alcoholic beverages (beer, wine, and spirits), which has not been raised in 27 years, will be increased. Even with the bump, Delaware’s tax on all alcoholic beverages will be significantly lower than the taxes on the same products in all three neighboring states.