In the last week, I’ve heard two presentations from the Office of Management and Budget on how they’re starting to put together next year’s budget, the November public hearing schedule (they start on November 22nd, and can be found here), and how DEFAC’s forecasting will be critical at their December meeting.
To date, DEFAC has estimated a $167 million revenue shortfall for FY2017. What remains to be seen this fall are how “door openers” will impact that number. Door openers include the final student enrollment numbers public schools report to the state, the final Medicaid numbers and, this year, the prorated raise amount for state employees. The best guesstimate on these additional increases are in the $150 million range, meaning budget writers need to find between $300 and $400 million in order to meet budget.
Shifting to how the state spends its money – 73% of the FY2016 budget is allocated to employee salaries and health care, pensions, Medicaid and debt service. Without cuts to personnel or programs, these numbers will increase next year. The largest growth of public sector employees are in education, as student enrollment in public schools continues to rise as more kids are transitioned from private/parochial schools back to public (1,500 students are added on average per year). Over 228,000 are eligible for Medicaid (over 25% of Delaware’s population). Revenue growth in FY17 is expected to be 1.5%, and FY18 will see 0% growth as currently forecast.
These are all items the State Chamber has talked about for the last few years—specifically on the need for there to be structural changes to how the state collects and spends money. Many of these ideas were highlighted in the Delaware Business Roundtable’s Growth Agenda, and we support their immediate adoption. This next year will be another difficult money year, with no easy solutions, but the business community, including the State Chamber, has proposed ideas on how to invest in economic development, make Delaware more attractive to outside entities, and to help turn our economy around. We hope the 149th General Assembly will discuss and debate these issues recognizing that without action, our budget will continue to suffer.