State passes pared-down FY ’21 budget that axes readiness funds
DOVER – The Delaware General Assembly completed its work on the fiscal year 2021 budgets over the past week, delivering something that is smaller than what Gov. John Carney proposed in January due to the impact of the COVID-19 pandemic.
Among the cuts imposed on the annual budgets were several initiatives that aimed to speed up Delaware’s ability to provide space for employers.
The governor proposed a record-setting $4.63 billion operating budget and $893 million capital budget appropriation that was ultimately undone by the financial havoc wrought by the COVID-19 pandemic. In the months since the virus spurred widespread shutdowns of state businesses and limited commerce, Delaware has seen a revenue forecast decline of more than $530 million.
Over the last days in June, state lawmakers approved a $4.54 billion operating budget, about 2.1% larger than the last fiscal year due almost entirely to fixed “door opener” cost increases like pensions, debt service and school enrollment funding. Even though it fell short of Carney’s original proposal, the operating budget is still the largest in the state’s history.
Mike Jackson, director of the state’s Office of Management and Budget, described the FY 2021 budget as one where “no one loses, but no one really wins.”
One reason why the budget was able to largely match the FY 2020 appropriation level was that state officials used half of the Budget Stabilization Fund, which was created under Carney’s tenure to plug smaller budgetary gaps through an annual 2% savings program. Lawmakers were able to use only $63.1 million from that fund to offset losses, while also not touching the state’s long-protected “rainy day” Reserve Fund.
“In a year such as this, to be able to continue to maintain that level of discipline, but also fully funding the state’s ‘rainy day’ fund is a pretty remarkable achievement,” Jackson said at a June 30 press conference where Carney also signed the budget bills.
The operating budget did not include any layoffs or furloughs for state employees, and in fact funded $21.8 million in step pay raises for state educators, troopers, and deputy attorneys general, among others, that was once on the chopping block.
The state’s annual bond bill totals just under $708 million, a decrease of about 18%, or $155 million, from the current year. It includes $364 million for transportation-related projects and $344 million for other needs, such as state facilities.
Among the initiatives cut in the bond bill were the Site Readiness Fund and the Laboratory Development Fund, both of which were originally proposed to receive $10 million. The former would have allowed the state to quickly convert existing properties to meet the needs of prospective employers while the latter aimed to incentivize colleges, universities, and the private sector to develop lab space for startup companies to move into, keeping jobs in state.
Bob Perkins, executive director of the Delaware Business Roundtable, a non-partisan, volunteer consortium of state CEOs that is spearheading the Ready in 6 initiative to improving permitting and fast track project approval for employer prospects, said he was disappointed to see the programs cut.
“The decisions that apparently were made show almost a disinterest in making wise long-term decisions,” he said. “I think we may be at a point where we’re using the short-term crisis as an excuse to not think about the long term.”
When the pandemic eventually subsides, Perkins notes that states will be competing vigorously for any and all job prospects amid a battered workforce facing high unemployment rates. If Delaware doesn’t improve its processes to make itself more attractive to employers, the state may watch jobs go elsewhere, Perkins warned.
“What Delaware really needs right now, in addition to solid, careful management of the pandemic, is to take steps to be able to jumpstart our economy and get back to a process of economic growth,” he said. “That wasn’t done and didn’t appear to have been a goal of the recent operating budget and bond bill.”
Among readiness efforts, the state did fund the Transportation Infrastructure Improvement Fund (TIIF) with another $5 million in bond funds. That program, which recently recommended its first eight recipients for nearly $9 million in funds, supports employers that create or retain jobs by funding transportation-related projects.
The bond bill also includes a $2 million increase, totaling $14.5 million, for Delaware’s Strategic Fund, the taxpayer-backed fund that is used to incentivize job creation or retention in the state. The allocation fell short of Carney’s original goal of $20 million for the fund though.
The Strategic Fund has drawn some controversy in recent years for doling out millions to companies worth billions, and in fact its overseeing authority, the Council on Development Finance, approved a $2.5 million grant to Barclays Bank the day that the legislature approved the bill. Rep. John Kowalko (D-Newark), a longtime critic of the fund, was the lone dissenting vote against the bond bill due to the Strategic Fund.
“I will not let my taxpayers suffer this endless circle of stopping once at the tollbooth, giving money to the toll to continue on our way around the circle again to come back to the tollbooth again to put the money in the richest corporations’ pockets,” he said.
Finally, grants in aid, which benefit fire companies, veterans organizations, and nonprofits, was cut by about $645,000 from last year’s $55.1 million. The vast majority of that cut came from one-time allocations that typically support new projects by nonprofits rather than continuing services.
Sheila Bravo, president and CEO of the Delaware Alliance for Nonprofit Advancement, said that her members were pleased that the state was largely able to match last year’s funding allocation.
“Recognizing the difficult times and what the state has to juggle with all their expenses, we were glad to see the support for the nonprofit sector,” she said. “I think that there are some nonprofit executives that are able to sleep a little bit better … Their reserves are starting to dry up so this funding couldn’t come at a better time.”
The budget deliberations marked the end of a unique legislative session, where lawmakers only met in person for nine of 43 scheduled days due to the pandemic. After about three months of no meetings, lawmakers returned to their work through virtual meetings that were livestreamed over the internet.
Aside from the budget bills, legislators considered very few other bills, with notable exceptions being policing reform bills that arrived in June amid the Black Lives Matter protests across the state.
One of the most notable business-related bills to not pass the legislature this year was Senate Bill 250, which sought to raise clean energy goals through 2035. Its sponsor, Sen. Harris McDowell, is retiring this year after 44 years in the State Senate.
The bill received a late lobbying push from McDowell, who wrote Delaware’s original Renewable Energy Portfolio Standards Act in 2005 and hoped to see its extension as one of his final bills in the General Assembly. At its core, the bill sought to increase the percentage of renewable energy produced in Delaware moved from 25% in 2025 to 40% in 2035. It was also laden with other detailed proposals on community solar arrangements to get to that goal though.
The bill had its critics, as the Delaware Municipal Electric Corporation, which represents nine Delaware municipalities that operate power plants, lambasted McDowell’s late session push. DEMEC primarily criticized the timing of the bill, which came when public input was nearly impossible thanks to remote legislative hearings and five years before the current law is set to expire.
Through business-related legislation passed early in the session, restaurants can now allow leased dogs on outdoor patios. Another bill repealed Kent County’s ability to impose a hotel tax that benefited the DE Turf complex, following criticism about ties between the business and the bill’s sponsor, Sen. Trey Paradee.
By Jacob Owens