Gov. Carney proposes record $4.6B budget

Gov. John Carney presents his proposed fiscal year 2021 budget during a Jan. 30 press conference. | PHOTO COURTESY OF GOVERNOR’S OFFICE

DOVER – Gov. John Carney’s fiscal year 2021 budget proposal includes a record-setting $4.63 billion operating budget and $893 million capital budget appropriation, as well as a 2% pay increase for all non-unionized state employees.

Despite those record spending levels, Carney, who established an operating budget growth rate in 2018 rather than allocating all available funds projected each year, noted that this year’s budget continues on that path. His proposed spending is once again under the Delaware Economic and Financial Advisory Council’s benchmark growth rate of 4%.

The budget also includes $233 million in one-time funding of capital projects and saves an additional $35 million in reserves “for when revenues soften,” pushing that total saved during his tenure to more than $161 million.

“It’s a very different approach than what we’ve taken over the last 40 years,” he said at a Thursday, Jan. 30, press conference detailing the budget. “That [previous] approach has served us well, but it puts us behind the 8-ball when the economy dips down and we’re forced to cut spending and raise taxes. We don’t want to do that.”

The governor emphasized that he took office with a $350 million to $400 million deficit that had to be closed with spending cuts and tax increases.

“Things are a lot better today,” Carney said. “But we’re putting together a budget today in good times that understands that potential exists in the year ahead.”

In terms of spending, the business community will be watching several initiatives in the governor’s budget that aim to help businesses relocate to Delaware and grow here.

Carney detailed the $50 million that he announced during his State of the State address last week for economic development projects.

In new initiatives, the budget includes a $10 million incentive for the development of lab space in the state.

“We have scientists who are working on their ideas and figuring out ways to commercialize them, but there’s not space in Delaware for them to graduate into,” he said. “This money incentivizes colleges, universities, and the private sector to develop that kind of space so that startup companies that are in our innovation lab space at the STAR Campus or the Experimental Station don’t graduate to space in Pennsylvania. We want them to start in Delaware, stay in Delaware and grow in Delaware.”

Another $10 million will be allocated for a Site Readiness fund, which would allow the state to quickly convert existing properties to meet the needs of prospective employers, and $10 million more to the Transportation Infrastructure Investment Fund, which similarly clears traffic-related issues for development.

“There’s a big effort to get Ready in 6, meaning six months to a year which is the target we’ve heard out there, this will enable us to get sites ready to go,” he said of the initiative being led by the Delaware Business Roundtable to make the state more competitive with neighbors in attracting prospects.

He is also proposing $20 million to replenish the state Strategic Fund, overseen by the Council on Development Finance, that supports business retention and expansion through grants and low-interest loans to significant projects, as well as the EDGE grant program that supports small businesses.

In education spending, Carney is also proposing about $200 million in school construction projects statewide, with $50 million of that earmarked for the Christina School District where a new school would be built on the East Side to replace The Bancroft School – it would be the first new school in the city in at least 50 years. That proposal, which would be fully funded by the state rather than a traditional district-state split, has drawn the ire of school districts in Sussex County where needs also exist.

Meanwhile, Carney noted that the shuttered Elbert-Palmer Elementary School is to be leased to Gulftainer, the new operator of the Port of Wilmington, and the International Longshoreman’s Association, which will run a workforce training facility there.

“The ILA has already signed up 500 potential new members for the jobs coming there,” he said.

Carney is also proposing a 2% pay increase for all non-unionized state employees and fully funding step increases for educators. Educators have received 2% pay hikes in each of the last two years while most other state employees have received $1,000 increases.

“What this does is try to create a level of uniformity across the pay plan to address all of our state employees,” he said.

Supporting a push by lawmakers, Carney is proposing to roll the state’s drinking water, wastewater and drainage projects into a single trust fund. In FY 2021, he’s allocating $45 million split evenly in revolving funds for clean water and drinking water, as well as $5 million for resource, conservation and development. All told, between state and federal monies, the Clean Water Trust Fund will hold about $120 million, Carney said.

“A lot of this money flows south, but the communities that need it most are the hard-to-service, low-income communities particularly in Sussex County,” he said.

In what he termed “quality of life” spending projects, Carney is proposing $20 million to continue investments to preserve open space and farmland across Delaware, $14 million to clean up and restore abandoned properties, $5.6 million to continue to encourage private investment in municipalities through Downtown Development Districts, $8.3 million to enhance public safety communication systems, $4 million for state prison security cameras, and $4 million to improve local roads.

Finally, grants in aid, which benefit fire companies, veterans homes and nonprofits, remains unchanged from last year at $55.1 million. A one-time supplemental appropriation of $9.9 million is also geared toward election security costs and response to disasters, such as the tornado that struck Laurel last year.

The annual budget is just in its first steps, with the General Assembly’s Joint Finance Committee and Joint Committee on Capital Improvement set to begin its review and deliberations over its proposals. Actual changes by lawmakers will come in May, with a deadline to approve the budget of June 30, the last scheduled day for the roughly six-month legislature.

With a budget surplus, the debates over the budget will be very different that three years ago when fights over spending cuts and tax hikes delayed its passage until July 3. Lawmakers will likely be reviewing for ways to limit the growth of the record-setting state budget.

By Jacob Owens

jowens@delawarebusinesstimes.com