Fiscal Year 2005 Budget Proposal by Governor Ruth Ann Minner
January 29, 2004
Let me begin by discussing the environment within which this budget proposal was created.
You’ve heard me say often that Delaware fared much better than other states through the national economic recession. We started cutting the budget early and we cut it often. We were innovative in reducing purchasing and health care costs. We reduced the size of state government by taking more than 430 positions out of the general fund.
As we anticipate an economic recovery, we still face external pressures on our budget and revenue: the climbing cost of health care for our employees, our retirees and those citizens we care for; costs being shifted and imposed by the federal government; and the potential loss of more than $100 million a year in state revenue when neighboring states approve slot machines.
There also are pressures from within. The tight budgets of the last few years have created pent-up demand for state spending. As I have said before, this pressure in the past has led to tremendous budget growth in the first state budgets following recessions, up to 11 percent.
Given the revenue and budget pressures of the next few years, as well as the constant responsibility of government to restrain spending while serving the people well, it would be irresponsible to propose – or to pass – a budget with growth of that magnitude.
I do, however, wish to make wise investments in key areas so that we can improve the lives of our citizens. Only by both restraining growth and committing to new initiatives in key areas, we can thrive in the new era of opportunity I spoke of last week in my State of the State.
Therefore, today I am pleased to present my Fiscal Year 2005 operating budget and bond bill proposals. The operating budget I am proposing totals $2.56 billion, which would represent growth of less than 4 percent – 3.97 percent, to be exact, over my FY04 budget with the pay bonus added.
The bond bill proposal totals $593 million, with $274 million going to transportation and $319 million – including $183 million in cash – going to school and state government construction and other capital projects. The package also includes the $50 million in federal fiscal relief, all wisely spent in targeted areas.
This budget and bond bill package reflects my focus on four issues, the same four issues I talked about last week: schools, jobs, the environment and fighting cancer. Let me highlight some of the spending plans in each of these areas.
For schools, my operating budget includes $3.9 million to finally complete my vision of having a reading resource teacher in every public elementary school. These funds allow the placement of reading teachers in the 68 schools that do not currently have them. I will be very happy to see this worthy initiative completed.
One million dollars from the federal fiscal relief would be set aside in anticipation of the costs associated with implementing full-day kindergarten in Delaware by 2008. The federal funds are also the source of the $9 million I intend to send directly into Delaware’s classrooms to be used to purchase textbooks, technology or other needed classroom supplies.
In the operating budget is $50,000 for the pilot year of the Delaware Teacher Corps, my proposal to bring new teachers into public schools by paying their college costs. As I said in my address last week, we will target new math and science teachers in the middle and high schools in the first year of this program.
The operating budget also provides $300,000 to eliminate the current waiting list in adult education and workforce training. Right now there are 800 adults on that list. I have been involved in adult education for years and can tell you the economic downtimes are when adults want to go back to school and update their skills so they can remain employable. I want to make sure we provide that opportunity to everyone who wants it.
The operating budget includes $6.6 million in new money to accommodate additional students in our schools next fall. And the bond bill includes $119 million for new school construction and school additions.
These expenditures will keep Delaware schools on the path of continuous improvement and ensure that every Delaware student is prepared for college, for work and for life.
In the area of creating jobs, I announced last week a “New Economy Initiative” that will provide a jumpstart to Delaware’s economy as the nation recovers from the recession. It includes $30.5 million in state funds that will leverage an additional $15.5 million in federal and private funds.
While I will unveil more of the details in a few weeks, some key items in the New Economy Initiative include a new Delaware Competitiveness Fund designed to assist keystone companies of our state economy remain, well, competitive; venture capital to invest in emerging companies; seed funding to assist new technology-based small businesses; and $10 million for the Strategic Fund, which will continue to provide incentives to create and retain quality jobs.
Also in the New Economy Initiative will be funding for a research program, clean energy research, and clean energy manufacturing.
We will continue to bolster the state economy with investments in the Wilmington Riverfront and in the Port of Wilmington. In addition, we are working on an innovative partnership with New Castle County that would enhance the Riverfront even further and hope to announce that soon. And at the Port, we signed a new lease with Volkswagen this morning and we look forward to our continued relationship with VW and the good jobs that relationship provides.
In the area of the environment, I am proposing to commit more than $22 million from the bond bill to a new Green Infrastructure Program. As I said in the State of the State, we will partner with environmental organizations to preserve undeveloped land, continuing our success in that area.
We have some possible purchases on the horizon and I believe they are critical to maintaining our quality of life in the future and preserving a Livable Delaware.
The bond bill also includes $15 million for water supply and flood mitigation initiatives, namely the purchase of land in Glenville to avoid potentially fatal floods and to create a water retention area that will relieve flooding issues all the way up the Red Clay Creek to the Pennsylvania line.
Fighting Delaware’s high cancer rates is something that has been a hallmark of my administration and, as I said last week, I propose to double the funding for implementing the recommendations of the Cancer Council to $10 million next year.
Some of this new money – about $1.5 million – would go to pay for cancer treatment for those without health insurance. This action, funded out of the federal fiscal relief, would drive down our cancer death rate and would build on our efforts to better diagnose cancer victims.
As I said last week, no Delawarean should die from cancer because they make too much money for Medicaid but not enough to afford health insurance. I sincerely hope that we can make Delaware a leader in fighting cancer in this way.
Schools, jobs, the environment and cancer – these are the areas where I have said we should focus our efforts for the next several years while restraining growth, and this budget and bond bill proposal is designed to do that. But let me take a moment to highlight a few other significant items, as well.
The budget includes $30 million for a pay raise for employees in state agencies, schools and higher education. For the state agencies, this plan would add 2 percent plus $500 to the base salary of these employees. This structure means that those at the very bottom of our state pay scale would receive a raise of more than 5 percent. For more than 70 percent of state employees, it would mean a raise of between 3½ and 4½ percent.
This salary increase will help employees keep up with the cost of living and keep the state competitive with the private sector and with surrounding states. I hope the General Assembly will agree with this raise, especially the need to help those at the lower end of our pay scale. The pay plan also includes $5 million in step increases for schools and higher education.
Also in the area of pay, I propose devoting an additional $1 million in the operating budget toward implementing the recommendations of a recent task force on pay for correctional officers. This money will be used to increase the salaries of correctional officers on top of the state employee pay raise, recognizing the hard and dangerous work these men and women do.
This operating budget includes mandated costs, including: an additional $25 million over FY04 to cover the increased costs of providing health care to residents of our state through Medicaid; an added $17 million to cover the increased costs of employee health care; an additional $11 million to cover increased costs of retiree pensions; and an extra $21 million to pay the debt incurred by bonds from past years. Combined, these mandated items total $74 million and represent the bulk of the increase in the FY05 budget.
For the first time in two years, my budget proposal would provide an increase in the rates the state pays to those organizations – mostly non-profits – that provide social and health services to state clients. These organizations have tightened and cut their budgets along with the state through the recession and it is time to ease some of the burden on them as well. I propose $3.4 million in the operating budget to increase these rates.
In the tradition of wise fiscal policy, I propose using $28 million in cash to pay off some of our higher-interest rate bonds, thus reducing our state debt load and saving money on future interest payments.
I also propose capping the revenue from abandoned property that is allowed to go to the state’s general fund. Abandoned property revenue has grown tremendously in recent years due to increased audit and collection efforts, but is one of the state’s most unpredictable revenues.
My proposal would cap revenue from abandoned property going to the general fund at the current level. Any growth and additional money from abandoned property would go into a fund that would be tapped once Maryland and/or Pennsylvania approve slot machines in those states.
Out of the federal fiscal relief, we will put $19 million into an Innovative Technology Fund aimed at technology projects. At least $12 million will be used to fund what we have called the “next generation” of the state’s 800-megahertz emergency radio system. It will be spent based on recommendations that will be made by a working group of radio users in May.
Six million dollars of the federal relief funds will be added to the Housing Development Fund in order to boost access to affordable housing and low-income housing.
The bond bill proposal includes $2.56 million towards the construction of a veterans home for Delaware, adding to the $500,000 that the administration put in last year’s budget for planning the home.
Ten million dollars from the bond bill will begin the process of renovating the Kent County Courthouse and the neighboring O’Brien Building, with the eventual plan of building an addition to Dover’s courthouse complex.
One million dollars of the federal money will be put into an innovative Advanced Planning Fund, a Livable Delaware initiative designed to improve school siting.
The operating budget includes $500,000 for community-based drug treatment programs, more than doubling the current funding and enabling the Department of Correction to treat an additional 325 people.
Finally, I am recommending that the FY05 grant-in-aid bill be funded at a level of $38.5 million. As you know, these funds are distributed entirely by the General Assembly.
This has been a long list, I know. But as I have said, it is targeted toward the key areas of schools, jobs, the environment and cancer, while continuing to manage state government responsibly and provide services the people of Delaware need.
I want to note that if you subtract the mandated increases in health care, pension and debt service along with the pay raise proposal, the increase in this budget is three-quarters of a percent. I believe that says a lot about our efforts to cut costs and restrain growth.
I want to thank my budget and finance team as well as my staff for the months worth of effort that went into this budget proposal. I now present it to the members of the General Assembly and ask them to join with me in improving the lives of Delawareans in these ways.
I’d like to ask Lt. Gov. John Carney to make a few remarks and then we will take questions. Thank you.
