Amendment proposes "smooth" state budgets (Karl Baker)

There was a good deal of talk about a bipartisan “budget smoothing” proposal last month, but a dearth of information about the specifics. State panel pitches budget limits, Scott Goss, 5/16/18. Now one of the key details – the text of a proposed amendment to the Delaware Constitution - has been revealed.

Introduced by Rep. Quinton Johnson (D-Middletown) with the support of numerous sponsors & co-sponsors (24 representatives, 9 senators) from both sides of the aisle, HB 460 is reportedly in synch with a plan recommended “last month” by “a panel of economists and state political leaders.” Finance Secretary Rick Geisenberger makes the case for the bill in
this story, and Governor John Carney is quoted that the proposed “constitutional amendment will ensure our commitment to making responsible, long-term decisions about our finances.”

The apparent intent of this carefully orchestrated rollout is that HB 460 will sail through the General Assembly (2/3 approval required in both chambers), setting the stage for a second vote in 2019 that would make the amendment effective. After all, how could anyone be against “responsible, long-term decisions?” But we would suggest considering the proposal carefully before “jumping on the bandwagon.”

One concern is the transfer of the accumulated funds in the Budget Reserve Account (aka “rainy day fund”) to a newly created Budget Stabilization Fund. Balance in the BRA can only be tapped (with a 60% supermajority vote) under unusual circumstances, e.g., “an unanticipated deficit," and the balance has built up to $232 million (some 5% of the annual state budget). Under the proposed amendment, it might be possible to gradually draw down this amount with a simple majority vote.

Additionally, the “budget smoothing” features of the proposed rules seem inordinately technical for a constitutional provision, e.g., calculating “Benchmark Appropriation” amounts based on equal weightings of the 3-year average of (1) Delaware personal income growth, and (2) Delaware population growth plus the growth in the implicit price deflator for state and local government purchases. Further muddying the waters, the initial index factors in the Constitution could thereafter be changed by statute (with a 3/5 vote). Even assuming the budget smoothing proposal has some merit, there must be a better way to implement it.

Another oddity is a statement in the synopsis of HB 460 that isn’t reflected in the bill detail, namely a recommendation that “any final adoption of the structural budget reforms included in this Act be accompanied by statutory enactment of structural reforms to the Personal Income Tax by broadening the tax base” as has been recommended by the DEFAC Advisory Council of Revenues. Wonder what that’s all about.
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