By PATRICK JACKSON
Dover Bureau reporter
09/04/2003
State officials said Wednesday they have found $24 million in extra money for this year's $2.4 billion budget because of a mistake in calculating the increase in corporate franchise fees enacted this spring.
Budget officials failed to consider the fact that corporate taxes are effective on Jan. 1 of each year, meaning the increase enacted in June was retroactive to Jan. 1. In effect, the 2004 budget - which covers a period from July through June - will receive 18 months of franchise fees at the higher rate, not the 12 months budgeted.
The extra $24 million will be certified on Sept. 15 when the Delaware Economic and Financial Advisory Council meets. The council of business, government and academic experts establishes the revenue estimates the state must use in its budgeting.
Word of the "found money" brought a call for extra compensation for state workers, who are scheduled to receive no raise in the 2004 budget. The 2004 budget is the first since 1992 not to include a raise for state workers. A 1 percent pay hike for state workers is estimated to cost $22 million to $25 million.
That idea brought immediate caution from Gregory Patterson, a spokesman for Gov. Ruth Ann Minner. Minner could not be reached Wednesday.
"It's the kind of number that looks like a raise," Patterson said. "But this really is one-time money and you don't want to build pay raises on that."
Michael Begatto, the head of the American Federation of State, County and Municipal Workers, said he would like to see some of the windfall go to state workers, even if it's in the form of a one-time bonus.
"I can understand not wanting to make a continuing encumbrance for wages and benefits out of what is one-time money," said Begatto, the union's executive director. "But I'm hoping to talk to the governor about the idea of a one-time bonus. She's talked about how much more state workers have been asked to do because of the hiring freeze, and I think that would be a fair reward."
Minner last fall imposed a freeze on state hiring for all positions except those deemed essential, such as state troopers, nurses or prison guards. She did that because the sluggish economy made it appear as if state revenues would fall short of expectations and possibly lead to a budget deficit.
The 2004 budget adopted in June was about 2.2 percent larger than the 2003 budget, the lowest growth rate in 12 years. It included about $140 million in spending cuts and about $144 million in tax and fee increases, including the higher corporate franchise fee.
Patterson said any suggestions for how to handle the extra revenue would be discussed.
"I think the governor would rather be able to give a pay raise than a bonus," Patterson said. "But what we do with this will be something we discuss with the General Assembly, the same way we would discuss the use of any other one-time money."
This isn't the first time state officials have failed to calculate the retroactive impact of a business tax increase.
Finance Secretary David Singleton and Secretary of State Harriet Smith Windsor said in a letter to legislators that the same error happened in 1984 and 1991, the last two times corporate franchise taxes were increased.
"If you're going to have this kind of a mistake, it's always good to have it work out in your favor," said Rep. Joe Di Pinto, R-Wilmington West, co-chairman of the Joint Finance Committee, which prepares the budget bill each year. "There hasn't been much serious discussion about what to do with this yet. But I'm sure lots of people are going to have ideas as we get closer to January."
Reach Patrick Jackson at 678-4274 or pjackson@delawareonline.com.
