Recession takes toll on state's revenue
By Patrick Jackson
DOVER - Members of the Delaware Economic and Financial Advisory council Monday said the state's expected income has dropped by $30.9 million because of the recession.
Council members also estimated the money available for the 2003 fiscal year which starts July 1, will be $113.7 million less than their June estimate of $2.47 billion.
Without special action by the General Assembly the state can spend only 98 percent of the money available to it.
By law, the council - made up of financial experts from government, academia and the business community - sets the revenue estimate the state must use in its budget planning process. December's estimates are important because they are the ones Gov. Ruth Ann Minner's budget writers must use to work out the spending package that will be presented to lawmakers in January.
Minner, who will meet with her financial advisers today to review the state's options, said the lates drop didn't surprise her. She is expected to provide more specifics on her administrations plan later this week.
Revenue estimates have been dropping since last December because of the economic slowdown. Those falling numbers forced Minner to make two rounds of cuts as the current budget was being drafted.
In October, most departments were asked to look for savings totaling up to 2 percent of their budgets to provide further maneuvering room and to put that money on hold in case it is needed.
To cope with the dropping revenue, Minner said it's likely some departments will be asked to return some of that money.
"We'll also keep lookin for places to cut," she said. "We're trying to save money by combining some services if we can, and we'll keep doing that as well."
Minner said she wasn't looking at tax increases, layoffs or an overall state hiring freeze. But, she said, she would keep her options open in case the economy continues to struggle.
Budget Director Peter Ross said his job of trying to carry a $33 million cushion from the current budget year to 2003 "just got $17 million harder," refering to Monday's drop fromOctober's revenue projection.
Despite the drop in projected revenue, the state's cash flow is growing which helps, said Finance Secretary David Singleton. That grown, though, is coming at a slower rate than expected.
"By some measures, we're better off than 38 states," he said. "But the economy is in a recession and that means we're all feeling some pain."
In Delaware, the biggest hits in both the current budget and the 2003 revenue estimate came from personal and corporate income taxes, both of which are falling as a result of the recession, which has brought layoffs and a reduction in company profits.
No lawmaker at the session said it's time to look at taxes as a way out of the current situation.
"I'm not sure where the bottom (of the recession) is," said State Rep. joe DiPinto, R-Wilmington West. "I'm sure the administration will do more cutting and I think we'll take a look at the department request and how the economy is before we do anything."
DiPinto, co-chairman of the General Assembly's budget writing Joint Finance Committee, said he's convinced there will be no surplus cash to help pay for capital improvement projects. Based on Monday's numbers, the state will be able to take out $118.1 million in bonds for non-highway capital projects such as school construction next year.
Sen. Nancy Cook, D-Kenton, the finance committee's senior member, said the administration is doing the right things to address the budget problems.
"The system is in place. It's working right and they're responding to it," she said.
Note: Reach Patrick Jackson at 678-4274 or pjackson@delawareonline.com.
