State of Delaware Presentation to the Institute for Office of the Governor Local Government Leaders Fiscal Year 2018 Financial Overview Bert Scoglietti January 12, 2017 November 9, 2017
Agenda • FY 2018 Look Back • FY 2019 Budget/Finances • Other items affecting local governments 2
Extended End of Session Appropriation bills passed/signed. Session completed. X X X X X X X O “Continuing resolution” June 30 3
FY 18 Solution Expenditure reductions: Budget $195 million Shortfall: $377 million Revenue package: $182 million 4
FY 2019 Financial Plan General Fund Operating Budget $4,106.9 million Grants-in-Aid $37.2 million Bond and Capital Improvements Act * $590.0 million - State Capital Projects……………………..$272.2 million - Transportation Projects…………………..$317.8 million *The FY 2018 Bond bill was supported entirely with new bond authorizations and special funds. No general fund cash was appropriated in the Bond Bill. 5
Major elements of revenue package… Revenue Source Description FY 2018 FY 2019 ($ million) ($ million) Corporate Create a two-tier maximum $116.1 $116.1 Franchise tax and true up other rates to reflect inflation. Realty transfer Increase rate by 1% $45.6 $72.9 Tobacco Increase per pack and OTP $11.9 $17.8 rates. Treat e-cigarettes and moist snuff as OTP. Alcohol Increase for beer, wine and $5.2 $7.2 spirits Insurance Fees Across the board increase to $4.6 $4.6 fees charged by DOI Estate Tax Eliminates the tax entirely ($3.75) ($5.0) 6
…and highlights of the expenditure reductions Eliminate 200 FTEs $ (5,000.0) Reduced Senior Property Tax by $100 (5,000.0) Medicaid Savings/Cost Containment (8,075.0) Employee Health (3,600.0) Education Sustainment Fund (11,000.0) 1.5% Reduction to Districts/Charters (15,000.0) (16,700.0) Open Space/Farmland (@ 98%) Grant in Aid reduction (8,645.0) Programmatic/Operational Reductions (18,798.8) 7
Five Year Revenue Forecast ($ Millions) $4,800.0 6.0% $4,600.0 5.0% $4,400.0 $4,200.0 4.0% $4,000.0 3.0% $3,800.0 $3,600.0 2.0% $3,400.0 1.0% $3,200.0 $3,000.0 0.0% FY 17 FY 18 FY 19 FY 20* FY 21* June 2017 DEFAC Sept 2017 DEFAC Year on Year Growth based on Sept DEFAC *FY 20 and FY 21 June projections are from Sept 2016 DEFAC. 8
What does this mean for FY 19? • DEFAC projections showed 5.6% growth from FY 17 to FY 18. BUT, much of this is one time in nature, and realizing the revenue enhancements adopted in June/July. • If all of the available resources are built into the base budget, FY 20 budget would likely require base budget cuts to balance (projected revenue growth from FY 18 to FY 19 is 1.2%). 9
What’s Been Driving Growth? All Other, 9% Medicaid, 30% Salaries, 24% Pension, 12% Health Care, 25% Numbers reflect changes in actual expenditures from FY 11 - FY 17 8 91% of spending growth is in four categories: salaries, health care, pension and Medicaid.
Cabinet vs District/Charter employee growth 20,000 19,383 19,000 18,000 16,877 17,000 16,000 15,000 14,103 14,000 13,007 13,000 12,000 Cabinet Agencies Except School Districts School Districts 2009 2017 11
Public Ed. Enrollment Growth 137,500 136,709 135,517 135,000 134,442 132,841 132,500 131,029 130,102 130,000 127,944 127,500 126,271 125,000 122,500 120,000 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 12
Public Ed. Unit Growth Over Time 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 Regular Units Special Ed Units K-3 Basic Basic Intensive Complex 13
Driving Growth: Medicaid 230,743 235,000 228,046 224,198 217,658 212,693 207,067 193,633 173,769 176,250 of Medicaid Recipients 160,018 Monthly Average 117,500 58,750 0 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 14
Projected demands on FY 19 budget • K-12 enrollment growth. • Corrections • Retiree health, pension costs, and OECs. • Health Care. • Restoration of unfunded programs from FY 18. 15
Where do I find…..? Item Location FY 18 FY 19 Funded Request Municipal Street Bond Bill, DelDOT $5.0/ $5.0/ Aid/Community $17.68 $17.68 Transportation Funds Drainage Bond Bill, DNREC “Resource - $3.0 Conservation and Development” Libraries Bond bill, State $4.3 $6.7 Volunteer Fire/Ambulance Grant in Aid $4.7 Fund to Combat Violent Operating budget, DSHS Spec Crime funds SALLE/EIDE/Loc Police Grant in Aid $.5 Water/Wastewater Bond bill, DNREC $1.4 $1.4 Housing Develop Fund Op budget/Bond bill, DSHA $10.0 $10.0 Downtown Development Bond bill, DSHA “Urban $8.5 $8.5 Districts Redevelopment” Bayshore Bond Bill, DNREC $.5 $.5
Outside issues affecting budget HJR 8 (budget smoothing) State and School Local Funding Consolidation Task Force Task Force Federal Global Health Tax/Budget Benchmark Policy 17
Moving forward • Currently in the middle of budget hearings. (DelDOT 1:30 today !) • DEFAC will meet again in December, Governor will submit recommended operating and capital budgets January 25 • Budget will include investments in policy priorities identified in Action Plan for Delaware and State of the State. 18
Timetable – Legislative Budget Development • January 29 – February 28 (JFC/Bond Bill hearings) • May 14 – 17 (JFC/Bond Bill hearings) • May 21 – 31 (JFC Mark up) • June (JFC Mark Up continues, Bond Bill and Grant in Aid) • June 30th (Budget, Bond and Grant-In-Aid Bill passes the Legislature and Governor signs)
Other legislation – local effects • Leg website and session calendar – http://legis.Delaware.gov – http://legis.delaware.gov/SessionCalendar • Mandates – Parking, Land use • Charter changes • Task Forces • Changes to certain titles – Not just 9 and 22 • Budget/Bond/GIA epilogue • Executive Orders 20
HR1 – House Tax Reform • Among other effects, would : – Consolidate federal income tax brackets – Raise the standard deduction – Repeal numerous deductions – Reduce the corporate income tax rate – Eliminate private activity bonds • Being marked up in committee this week. House leadership to take it to full House by Thanksgiving. • The Senate Finance Committee is expected to release its proposal this week • If enacted, would it violate PAYGO and trigger automatic sequestrations? 21
Other issues • Other legislative initiatives: – Wilmington schools, marijuana legalization, racinos • Federal Budget • Census • Demographics • Longer Term Infrastructure issues – Water – Economic Development 22
Conclusions • State revenue forecast has improved for the coming year. Continue to focus on addressing needs in priority areas such as education, job creation, corrections, public safety, and containment of healthcare costs. • State needs to avoid committing all available resources towards the base budget to avoid future cuts. • Local governments need to understand budget timelines through the legislative session and take advantage of opportunities therein 23
Questions? 24
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