Governor Ruth Ann Minner's FY2003 Budget (Remarks)
January 24, 2002
Developing the FY03 budget and bond bill is something that I and my budget team spent a considerable amount of time doing – more than 40 hours of meetings over the course of December and early January. And let me tell you – it was tough.
There are many things we would have like to have done and which we left out. I mentioned some of those in the State of the State – a pay raise for state employees, for example, and funding for the second half of my initiative to put reading teachers in all public elementary schools.
But in the end we decided that we could not fund those things and many more. The reason is that I wanted to stick to the principles of fiscal responsibility that have kept Delaware in such good shape over the last two decades.
So today I propose to the General Assembly an operating budget for Fiscal Year 2003 of 2 billion, 352 million, 359 thousand dollars.
If you look at other states right now, you’ll find ones that are deeply in debt, making massive budget cuts, proposing to spend more than they will take in, or with revenues that will be lower next year than this year.
In contrast, Delaware’s revenues are still expected to grow a bit next year. We have made some modest cuts – without affecting services – and our budget remains in balance. Delaware is in relatively good shape because of the responsible decisions that have been made in the past. Like not exceeding our 98 percent spending limit or dipping into our Rainy Day Fund.
Those two decisions, which I announced in the State of the State, are part of the fiscally responsible stance I believe we should continue and are the basis of my FY03 operating budget. But I am also proposing a budget that has no layoffs and no tax increase.
The bottom line is that we have made tough choices in order to live within our means. The result is a budget without any major new initiatives and without increases in most areas. In fact, we have made permanent many of the cuts to the FY02 budget that we took in December.
As I said in the State of the State, the proposed FY03 budget grows by just over 2 percent, the lowest rate growth in a decade. So why, if we have no new spending initiatives and are actually cutting in some areas, is the budget growing?
When we sit down to begin writing the budget, we begin with a list we call “door-openers”: items that we would like to be first additions to the operating budget from the current year to the next because of planned or unavoidable expenses.
From FY02 to FY03, we had a list of door openers that we calculated at over $200 million. But we knew we would only have an increase of $50 million to the base budget to work with. That meant not only eliminating door openers, but cutting the base budget as well.
The costs that drove both our slight growth and our cutting are:
§ A $25.9 million increase in Medicaid expenditures
§ A $10 million estimated increase in the cost of employee health coverage
§ $6.5 million in salaries, those being step increases for teachers and some staff at Del Tech and contract-mandated increases for the state police
§ $5.6 million in debt service
§ $6.8 million associated with the opening of the new courthouse in Wilmington, including a considerable increase in energy bills for this larger building
§ $4.9 million to cover the increase in the number of children in schools
§ $2.5 million in childcare
Some of our original estimations of these costs were much higher – Medicaid and health care especially. But by taking a hard look at our expenses, we have found way to bring these costly items down and prevent even more dramatic pressure on the budget.
The bond bill this year is tight as well. Because of the lack of surplus money, we are proposing not to add cash to the bond bill for the first time since 1991. In order to make some room for the many capital projects we are facing, we also propose going back and using bonding authority that has approved in previous years but never used.
The FY03 proposed bond bill totals $348 million -- $185 million in road and transportation projects funded by the Transportation Trust Fund and $163 million in non-transportation projects.
Of the $163 million in non-highway projects, two-thirds --$108 million -- goes to school construction and renovation. The state is currently facing a total school construction bill of $189 million, so we are simply funding the projects that are in process and only funding as much as realistically can be used in FY03.
Outside of schools, we have funded other projects underway and have very few new projects that will begin. I have included $5 million in funding for farmland preservation and have fully funded the Strategic Fund at $10 million.
Finally, my budget maintains level funding for Grants-In-Aid, at $37.25 million.
These are the highlights of the FY03 proposed budget and, in some ways, it feels like we barely made it work.
As we work with the JFC and General Assembly over the next few months, there is the possibility that additional revenue may come on the table. If that happens, as I said in the State of the State, my first priority would be a 2 percent raise for state employees, at a cost of $22 million. I know many in the legislature agree with me on that priority.
There is also the possibility that things could tighten even more. We will see DEFAC meetings in March, April, May and June with the possibility of continued revenue estimate decreases.
If ever passed by Congress, a federal economic stimulus package could cost the state $15 or $20 million in revenue.
Finally, there are a number of school referendums up this spring that, if passed, could cause us to have to squeeze more into the bond bill.
In conclusion, while this has not been a fun budget, it is one that is fiscally sound and in which I believe we have made the responsible decisions. In that respect, I am very proud of it and I look forward to working with the JFC and the General Assembly on it over the next several months.
