Budget smoothing plan has rocky start (Whipple)

A proposed amendment to the Delaware Constitution – which would have established new rules limiting budget increases in revenue surplus years and permitting access to balances in the newly established Budget Stabilization Fund (to replace the current Budget Reserve Fund, aka rainy day fund) in revenue shortfall years – was formally proposed on June 12.

The House bill (HB 460) was introduced by Rep. Quinton Johnson (D-Middletown) with the support of numerous co-sponsors (24 representatives, 9 senators) from both sides of the aisle,. It was supported by Governor John Carney, Finance Secretary Rick Geisenberger, and Treasurer Ken Simpler among others.

Prominent business leaders publicly lauded the bill, and there didn’t seem to be any opposition. The only apparent holdout was Rep. John Kowalko (D-Newark), whose News Journal column urged a pause in the action so the “intended and unintended consequences” of HB 460 can “be discussed with the entire General Assembly and the public over the course of the summer.”

Without necessarily buying all of Rep. Kowalko’s arguments, it struck me that there were several questions about HB 460 from a conservative perspective:

First, it represented only half of the budget smoothing plan as the accompanying tax changes – to put revenues on a more “sustainable” basis – hadn’t been disclosed. Shouldn’t the entire plan be put on the table before reaching any conclusions about it?

Second, it appeared that $232 million in the current rainy day fund – which at present can only be tapped under unusual circumstances, e.g., “an unanticipated deficit” – might become more readily available for future appropriations. Was that a good idea, and if so why?

Third, the proposed constitutional amendment included a series of obscure technical references, e.g., “Delaware population growth plus the growth in the implicit price deflator for state and local government purchases,” and computational steps that weren’t clearly described. Was there no way of expressing the intent of the new rules in a more understandable way?

On June 28, HB 460 was shelved without a floor vote by the Democratic leadership. The primary rationale, apparently, was that the General Assembly’s flexibility to appropriate funds might be undesirably curtailed.

Republican legislators blasted the decision to “block the passage of landmark budget reform,” going on to accuse Democrats of wanting “to preserve the ability to recklessly spend as much as they can find and then use the ensuing fiscal chaos to force tax increases as they did in 2017.” So much for bipartisanship!

It may be that there is merit in the budget smoothing plan, I’m not personally convinced one way or the other, but it might behoove plan supporters to use a different approach next year.

Don’t offer an airy proposal and ask the public to support it because all details have been approved by “the experts.” Instead, publish the entire plan, including concrete examples showing how the calculations would work.
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