Early this morning the Delaware General Assembly hammered out a budget for fiscal 2018, albeit a few days late. While many lawmakers seem to believe they came to a “compromise” with “both sides” making concessions, there is little room for celebration.

A few days ago, the spectre of ending state funding of non-profits and volunteer fire companies, known as grant-in-aid funding, was touted as a possibility. Protesters filled Legislative Hall and social media rang out with calls for mercy. Finally, at around 6:45pm, a reprieve, of sorts, came from the Joint Finance Committee (JFC).

Instead of a complete return to existing funding levels, the JFC came back with $66 million in funding, including $37.2 million for grant-in-aid funding. This represents a 20% in funding from last year’s budget. The biggest losers in the deal were education and health and social services.

JFC 2017 funding
Credit: Matthew Albright

DHSS will endure 10% cuts in nearly all programs funded in the reinstated funding. But the biggest hit was dealt to the State’s Education Sustainment Fund, which was cut by more than half. The ESF fills a wide range of funding needs, including¬†math and reading¬†specialists, after-school programming and paying staff salaries over the summer. School districts across the state are already struggling with budget deficits, and many “pink slips” were issued in May, with the hope that some money was yet to be found.

Today, those hopes have fallen short.

Gov. John Carney had suggested cutting the entire $22 million from the ESF and instead allow school districts to go directly to homeowners for the money without requiring a referendum. This would have served only to force the districts to play the villain, which would do nothing to help the image problem currently hurting the public education system.

Income Taxes Unchanged, While Sales and Transfer Taxes Increase

The early question last night had been the source of funding for the $66 million in “returned” funding. There had been proposals for adding tax brackets at the high end in order to raise revenues. Corporate taxes were also considered for a time. Delaware currently does not find itself in a position conducive to asking corporations to pay more, with the TransPerfect case still lingering.

In the meantime, others were asking for a change in the state’s prevailing wage threshold.¬†https://dia.delawareworks.com/labor-law/prevailing-wage.php

While it seemed the decision was whether to “tax the rich” by increasing income taxes on those earning more or to hit the worker while allowing wealthy business owners to increase profits, there were other, less publicized options of the table.

The new revenues are intended to come from new “sin taxes” on alcohol and tobacco products as well as an additional realty transfer tax. Cigarette prices will have 50 cents per pack added while e-cigs will have a 5-cent bump. For alcohol, a six pack of beer will see a 6-cent increase, 750ml of wine goes up 13 cents, and the same size of hard liquor gets a 15 cent bump.

The realty tax seems to be causing bigger ripples. Currently there is a 3% tax on real estate transfers with the State and counties splitting the money 50/50. The additional 1% will be State money only.

While the Governor has called for “shared sacrifice” in the budget negotiations, it is clear that the poor and working poor will suffer the most, as usual. It should be noted that while Markell was adamant that the General Assembly get a deal, he himself has been enjoying a bike tour of the Western US.


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