If you missed it, last week The News Journal ran an op-ed penned by Edward C. Ratledge, Director, Center for Applied Demography & Survey Research, University of Delaware, and Bill Osborne, Interim President, Delaware Public Policy Institute. The article was a good primer on just how large a challenge the General Assembly is facing, not only this year, but in future years, related to the state’s budget. A leading cause of our issues is Delaware’s aging population, an increasing number of retirees, and a relatively low number of younger workers here to replace those leaving the workforce. The article highlights the ramifications of these demographic shifts, notably:
- The baby boomers, those roughly in the 52-71 age group, number 250,000 in Delaware.
- The group that will replace the boomers is now 0-19 years of age. Births in Delaware peaked in 2007 at 12,000 annually. Since that peak, the number of births has moved slowly downward to 11,000 annually and births are expected to stay in this range for the next 30 years. Thus the 0-19 population remains in a narrow range around 232,000 in the next few decades. At the same time the 65+ population climbs from 159,000 today to 264,000 in 2050.
- Given the aging of the population and slower growth in the economy, there will be continuous pressure on the State’s budget. Pensions and health care costs for state employees and retirees (also the subject of a study by the Delaware Public Policy Institute in 2015) are both increasing faster than revenue
Added to the mix will be increased pressures to fund education, already a full third of Delaware’s budget, and expected to grow. Plus, the increased costs of Medicaid, which not only increases as our economy lags, but can also increase unexpectedly if the Federal share is reduced.
The takeaway from this article echoes what the State Chamber has been calling for the last two years: a structural change to state spending and revenue collection that mirrors in large part what the DEFAC Taskforce on Revenues came up with in 2015. While the downside is that the report’s recommendations are revenue neutral for three years, which is no help to the existing budget shortfall, it does decrease the state’s reliance on revenue items like abandoned property, lottery and other revenue streams not directly tied to the economy. Our hope during this Joint Finance Committee break is for an in depth look at how to start moving in this direction, with direct action items taken.