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Carney pares back budget proposal amidst economic downturn

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Gov. John Carney is paring back his proposed budget for next year after his coronavirus restrictions on economic activity in Delaware led to sharp drops in revenue estimates, unprecedented unemployment filings and shuttered businesses.

Carney’s budget director told a legislative panel Tuesday that the administration plans to dip into a new reserve fund established two years ago and is no longer recommending pay raises for state employees.

In addition to drawing $76 million from the $126 billion “budget stabilization fund” and saving $33 million by withdrawing the pay raise proposal, the administration also is rescinding a proposal to contribute $233 million in general fund cash to Carney’s proposed capital budget for construction and road projects.

Meanwhile, $25 million in taxes on utilities and real estate transfers that were intended for open space and farmland preservation and for energy programs would be redirected to the general fund for operations.

The moves are part of an effort by the administration to reconfigure revenue streams and pare proposed spending for the fiscal year starting July 1 by a combined $455 million in order to balance a proposed operating budget and a grants package for nonprofit and community groups.

Before the coronavirus outbreak hit, Carney in January proposed increasing Delaware’s operating budget by almost 4% next fiscal year, boosting spending to more than $4.6 billion. He also proposed a record capital budget of $892.8 million for construction, maintenance, technology, equipment, economic development and environmental projects.

The panel that sets Delaware’s official revenue forecast noted late last month that revenue estimates for the current year were down by $325 million since January, and by $294 million for fiscal 2021. The panel will meet for a final time later this month before lawmakers wrap up work on the spending plan for next year.

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