Carney’s budget is same old song

Gov. John Carney’s presentation on his proposed budget reminds me of the old song, “Here We Go Again.” It’s the same song, like a worn-out recording we’ve heard over and over.

Can you imagine if you planned to spend more than you earn? Your family and friends would think you were nuts! It would be like stepping off a cliff without a parachute. But that is precisely the risk the governor’s 2025 budget presents for Delaware.

The Delaware Economic and Financial Advisory Council was established in the 1970s to provide sound financial planning for the First State. It projects less revenue next year for Delaware, and its report should be of concern to all residents.

Gov. Carney cast aside DEFAC recommendations and proposed the largest increase in spending and the largest budget ever for Delaware. The governor was intentional in presenting a whopping 8% increase over last year’s budget. Delaware is now projected to spend over $6 billion next year. Ironically, last year’s budget was also an all-time high. Sadly, Delaware taxpayers will be on the hook to dig deeper into their pockets and do more with less while the state budget keeps adding to the cost of the government’s wish list.

The process is part of the problem. Each year, the governor’s budget contains door openers, an assumption that everything funded in previous years will be the starting point for funding the agency the next year. Each year, the doorway gets wider, and this means an expanded budget and increased spending. Significantly, rarely is there a cut in spending, or elimination of outlived programs. This year, DEFAC predicts Delaware revenue will not be sufficient to support the proposed spending increases. Clearly something must change. Taking the same path forward is not sustainable.

Did you ever wonder why Delaware’s economy is not growing? Increasing energy costs, expensive mandates and labor issues impact not only state spending, but also business revenue and personal income. Policies in these areas adversely affect Delaware’s primary sources of income – personal income tax, corporate tax and lottery earnings.

During a previous budget shortfall, the Legislature enacted the highest realty transfer tax in the nation. The promise that it, and other taxes that were increased at that time, would be reduced when our economy improved was forgotten, and several attempts to reduce those taxes recently have failed. At the same time, however, we had billions of surplus funds and enacted millions of dollars of new spending.

One positive step has been the establishment of a smoothing fund, also known as a stabilization fund. Although his own party blocked it in the Legislature, Gov. Carney, to his credit, recognized it was a good idea, and has been supportive and consistent in providing dollars to this fund, which should exceed $400 million this year. It may be the lifeline for next year to address the increased spending proposed in this budget. However, the provision is by executive order, and while this policy should outlast his term and encourage successors to continue the good practice, the Legislature should codify this sound fiscal policy and not put politics over policy.

Let us get specific and talk about dollars and sense. Delaware’s budget is burdened with group healthcare costs as well as increases in Medicaid. Big medical costs are a huge burden for a small state. For many years, Delaware incurred additional Medicaid costs. In the 2025 budget, Delaware’s healthcare costs are expected to exceed $2 billion. Yes, one-third of our budget goes toward healthcare costs. The prognosis is not promising for this chronic ailment that prevails over other needs. But changes in policy can help. The medical cost increases are symptomatic of the underlying issues of continually expanding Medicaid benefits, lack of pursuing fraud and abuse of benefits, and the burdensome mandates Delaware places on providers insuring Delawareans.

Another $2 billion is directed to education. We are among the highest-spending states on education, and among the lowest in student performance. Change is needed, but it is not more money.

The remaining $2 billion pays for all the other state services. That includes prisons, environmental enforcement, foster care, facility maintenance and state vehicles.

Sound fiscal policy requires creativity, balance, prioritization and sensible objectives. Sound policy is not simply more spending on the same old things.