Senate Republicans Release Response To Governor’s Budget Proposal

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Senate Republicans Release Response To Governor’s Budget Proposal

Suggestions include fiscal framework changes, prevailing wage, Medicaid reform

Dover, DE – The Delaware Senate Republican Caucus today released a response to the budget proposals made by the Carney Administration in recent weeks.

“After taking time to examine the proposals made by the Governor, and speaking with many stakeholders and constituents, we are pleased to offer our contribution to the discussion,” said Senator Gary Simpson (R-Milford), the Senate Minority Leader. “We look forward to contributing in a positive manner to this conversation with the Administration and our fellow legislators over the next few months. We are confident that the end result will lead to a sustainable, stable future for the First State.”

Among the suggestions cited in the Senate Republican document, the full text of which can be found below, are:

–       A New Fiscal Framework

“We are open to discussing the specific method that would govern our spending moving forward, but aligning our spending as a percentage of the economy or as a multi-year average of population growth plus inflation will create the sustainable path forward that the Governor wants and that Delawareans deserve. We believe that there is no other way, and our caucus will be extremely hard-pressed to consider any revenue increases without a new fiscal framework.”

 

–       Eliminating the Prevailing Wage

“One area in which we can save money both for the state and for school districts, as well as municipalities, counties and other local entities, is to end the practice known as the ‘prevailing wage.’…The entities that would benefit the most from this change would be our local school districts and our cities and towns. In recent years, towns like Milford and Georgetown have had to delay or eliminate road or public works construction due to the overwhelming costs that the prevailing wage scheme adds. In today’s economy, and with today’s state budget, we can no longer afford to artificially inflate wages. We need to eliminate the prevailing wage in every possible instance, and in the process save ourselves tens of millions of dollars per year, a lot of which goes to workers shipped in from out of state.”

 

–       Reforming Medicaid

“Another area in which we can capture large savings is in our Medicaid program. States like Ohio and Indiana have worked creatively within Medicaid to bend down the cost curve while covering large numbers of people in their states and focusing on consumer-directed healthcare. Delaware has shown no desire or imagination when it comes to containing Medicaid expenses in recent years. The Governor has begun that process with his cuts to Medicaid’s dental provider rates in his proposal. But we believe there are millions more in savings to be had with the proper effort and desire, and we encourage the administration to dig deeper to find those savings.”

 

–       Changing the Culture of State Government

“There are no incentives at the program or department level to save money. The infamous “spend it or we won’t get the money next year” mentality is pervasive throughout state government. Despite a statutory requirement in the Delaware Accountability Act, we have no real metrics to tell us whether we’re doing a good job. We know that Delaware is one of the highest spending state governments in the country, and that our scores on things like student testing, crime, health outcomes and economic growth are at best in the middle of the pack. So we know we’re not getting a good value for our tax dollars. We just don’t know why. We need to change our culture to one of evidence-based policymaking, where thoughtful metrics about program success are developed and maintained, and legislative oversight and the budget process are focused on achieving superior value, whether measured by financial savings, data on outcomes, or lives impacted. After all, Delawareans deserve the best government we can give them.”

 

The full text of the Senate Republican response:

The State of Delaware once again finds itself in a familiar scenario – a nine-figure budget deficit, this time totaling nearly $400 million. Governor Carney and his team have worked for months on a potential solution to this crisis, and he has spent the last few weeks laying out his plan to the public.

 

Like the Governor, we in the Senate Republican Caucus want to work together and be part of the solution. And like the Governor, we have ideas of our own on how best to close the budget gap. We believe there are hundreds of millions of dollars in our state government that could be saved if we approached the culture of government differently.

 

But more importantly, we feel that now is the time to put into place a new financial framework that will prevent these regular budget crises from occurring in the future. Instilling the values of certainty, predictability and sustainability into our budget process will pay dividends for decades into the future, and position Delaware as an innovative state government worth emulating.

 

Throughout his public presentations of the administration’s budget proposal, Governor Carney and his team have often cited a report from the 2015 DEFAC Subcommittee on Revenue, usually to justify the proposed tax increases in his plan. While that report did advocate for certain tax increases (along with tax cuts, which are absent from the Governor’s proposal), the Committee also recommended the development of a fiscal governor and other fiscal framework changes to provide for a sustainable rate of spending growth in future budget years.

 

From the inception of the fiscal framework initiated during the Pete DuPont administration, our spending has been tied to revenue, specifically the spending cap of 98% of total revenue. This framework created positive outcomes like the balanced budget requirement, which is a linchpin of our crucial AAA bond rating. On the other hand, tying our spending to revenue meant that in the “good” years, when revenues were high, the General Assembly found plenty of new ways to spend. In subsequent years, when revenues failed to keep up, we were again faced with deficits.

 

In his speech to the General Assembly on March 30, the Governor said, “It’s within our power, this June, to put ourselves on a more sustainable financial footing.” We couldn’t agree more. But sustainability can only be found on the spending side of the ledger. Otherwise spending will merely skyrocket to keep pace with added revenue, as happened when our gambling revenues vastly outpaced expectations in the 1990s. Unless and until we can offer certainty in our spending growth, we will continue to find ourselves mired in deficit crises. There are hundreds of millions, if not billions of dollars, in additional programs and projects sitting on the shelves of legislators, just waiting to be spent when additional money is within their grasp.

 

With proper fiscal controls like the ones suggested by the DEFAC Subcommittee in place, and a predictable growth in government, we can use the extra revenues in the “good” years to fill a budget smoothing account. This way, in the lean years, we will have the money to draw on to maintain the necessary and predictable growth in the cost of services.

 

We are open to discussing the specific method that would govern our spending moving forward, but aligning our spending as a percentage of the economy or as a multi-year average of population growth plus inflation will create the sustainable path forward that the Governor wants and that Delawareans deserve. We believe that there is no other way, and our caucus will be extremely hard-pressed to consider any revenue increases without a new fiscal framework.

 

On the specifics of the Governor’s proposal, we support the call to reorganize the Department of Education from a top-down behemoth into a lean organization focused on supporting our teachers and school professionals. We believe there are great savings to be had in that restructuring process.

 

In his proposal, the Governor also suggests significant cuts to public education, in an effort to shift some of the funding to the local tax base and away from the state’s General Fund. While we applaud the Governor’s desire to make some difficult decisions, we believe more is needed to assist our local districts, some of which are facing increasing difficulty in passing referenda.

 

One area in which we can save money both for the state and for school districts, as well as municipalities, counties and other local entities, is to end the practice known as the ‘prevailing wage.’ Prevailing wage adds 18-20% to the cost of a construction job, which means that every fifth school or fifth mile of road would be free if we simply paid market wages like we do in most other industries.

 

Unskilled laborers, who are not permitted to operate tools or machinery, currently make on an annualized basis $89,400 in the prevailing wage program. Comparing this to the starting salary for a Delaware State Police officer ($55,000), a new teacher with a masters degree ($44,000) or a starting corrections officer ($32,000) reveals the need for significant reform in how we pay construction workers on state projects.

 

The entities that would benefit the most from this reform would be our local school districts and our cities and towns. In recent years, towns like Milford and Georgetown have had to delay or eliminate road or public works construction due to the overwhelming costs that the prevailing wage scheme adds. In today’s economy, and with today’s state budget, we can no longer afford to artificially inflate wages. We need to eliminate the prevailing wage in every possible instance, and in the process save ourselves tens of millions of dollars per year, a lot of which goes to workers shipped in from out of state.

 

Another area in which we can capture large savings is in our Medicaid program. States like Ohio and Indiana have worked creatively within Medicaid to bend down the cost curve while covering large numbers of people in their states and focusing on consumer-directed healthcare. Delaware has shown no desire or imagination when it comes to containing Medicaid expenses in recent years. The Governor has begun that process with the cuts to Medicaid’s dental provider rates in his proposal. But we believe there are many millions more in savings to be had with the proper effort and desire, and we encourage the administration to dig deeper to find those savings.

 

Finally, we need a culture change in our state government. There are no incentives at the program or department level to save money. The infamous “spend it or we won’t get the money next year” mentality is pervasive throughout state government. Despite a statutory requirement in the Delaware Accountability Act, we have no real metrics to tell us whether we’re doing a good job. We know that Delaware is one of the highest spending state governments in the country, and that our scores on things like student testing, crime, health outcomes and economic growth are at best in the middle of the pack. So we know we’re not getting a good value for our tax dollars. We just don’t know why. We need to change our culture to one of evidence-based policymaking, where thoughtful metrics about program success are developed and maintained, and legislative oversight and the budget process are focused on achieving superior value, whether measured by financial savings, data on outcomes, or lives impacted. After all, Delawareans deserve the best government we can give them.

 

In conclusion, the Senate Republican Caucus is committed to providing a sustainable, predictable future for our budget, combined with seeking out true, long-term cost savings and building a culture of effectiveness and value inside our state government. Only then can we deliver the government services that Delawareans deserve, and make the First State first once again. We look forward to continued conversations with the Carney Administration and our fellow legislators about these and other ideas to deliver a brighter future for Delawareans.