Economic uncertainty makes Minner wary despite increased state revenue estimates
By PATRICK JACKSON
Dover Bureau reporte
04/23/2003
Gov. Ruth Ann Minner said Tuesday that slightly higher state revenue estimates are not enough for her to lift the state's hiring freeze or amend her plan for $144.5 million in new taxes and fees for next year.
Since January, the Delaware Economic and Financial Advisory Council, which provides revenue projections used in budgeting, has added $48.5 million to its $2.3 billion June estimate for the budget year that ends June 30. It also has raised by $25.7 million its estimate of revenues for the 2004 budget year, which starts July 1.
But Minner said her approach would be conservative. There is enough uncertainty in the world that she's not going to repeat the mistake made last year, she said.
Last June, predictions of an economic recovery led Minner to lift a hiring freeze she had declared in April, and to go along with raises for state employees in the 2003 budget. She also shelved a proposed increase in cigarette taxes. The expected economic rebound persuaded the budget advisory council to raise its revenue estimates for the 2003 budget, relieving the General Assembly of the need to make significant budget cuts.
But those forecasts fell apart after national accounting scandals caused the stock market to lose 20 percent of its value between June and September, resulting in lower revenues for the state.
In September, the council lowered its estimates, projecting a $95.2 million shortfall this year and a $134.1 million shortfall in the 2004 budget. Minner quickly imposed the hiring freeze and ordered $60 million in cuts to this year's budget.
"The economists I'm talking to say we're poised for a recovery later this year, but that there's still a lot of uncertainty," Minner said. "I don't want to come back later in 2004, if the economy goes soft, and face the same kinds of problems we have this year."
Minner said Tuesday that higher revenue estimates probably will allow her to hold to her January recommendation that $7.3 million from the operating budget be used to help pay for capital projects in 2004. She said the money probably would be used for school repairs and minor capital improvements.
"It's better to deal with those problems while they're small, instead of waiting until they become major problems," Minner said.
Minner said she also might reconsider some of the $155 million in proposed cuts in her 2004 budget, which the Legislature is considering and must adopt by June 30. She would not specify what cuts might be shelved.
Rep. Joe DiPinto, R-Wilmington West, said he understands her unwillingness to specify what proposed cuts she might withdraw.
"I think she knows some of her proposed cuts, like the one to Gov. Bacon, may be in trouble, and she wants to be careful and see what the numbers are like as we move closer to June," said DiPinto, co-chairman of the Joint Finance Committee, which prepares the budget bill for the Legislature.
Minner's budget proposes closing the Gov. Bacon Health Center outside of Delaware City, consolidating the staff and residents of the state-run nursing home into two other adult care facilities in Smyrna and Brandywine Hundred.
Minner's budget also envisions raising $144 million more next year by raising the cigarette tax by 26 cents, increasing corporate franchise taxes and business fees by 17 percent, reworking the state's profit-sharing arrangement with slot machine casinos, and re-establishing a Delaware estate tax independent of the federal tax, which is being phased out.
Minner said Tuesday she still thinks those initiatives are needed.
Rep. Deborah Hudson, R-Fairthorne, chairwoman of the House Revenue and Finance Committee, said her panel will hold hearings on the proposed tax and fee increases as soon as a request is made by House Minority Leader Robert Gilligan, D-Sherwood Park, the sponsor.
"I hope we get to it in late May or early June so the public has a chance to mobilize and let us know what they think," she said. "We will have open hearings on the entire package."
Reach Patrick Jackson at 678-4274 or pjackson@delawareonline.com.
