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January 29,  2010

Cutting government costs seen
helping to balance state budget

Proclaiming "no [new] taxes, no layoffs, no additional pay cuts," Governor Jack Markell submitted a proposed fiscal 2011 state budget which relies on "more efficient government" to close more than half of a $253.7 million gap to remain in balance.

An extensive list of "efficiencies and savings," totaling $143.6 million, range from merging divisions within the Departments of Education and Natural Resources & Environmental Control to switching from weekly to bi-weekly grass cutting at the Department of Health & Social Services Holloway campus.

Ann Visalli, director of management and budget, refused to be pinned down on which of the 47 moves will require legislation, which will be ordered by the governor  and which will be at the discretion of cabinet secretaries and other officials. She did say that "none of this is wish list; they're part a balanced budget."

Pressed at a news media briefing the evening before Markell formally unveiled his budget proposal on Jan. 28, she acknowledged that some opposition to specific items can be expected. "Some people are going to be uncomfortable with these recommendations -- that's part of the process," she said. Anything removed from the list must be replaced by something else with an equal or larger pricetag, she explained.

"It's our budget and we're going to get it done," she said.

In his introduction to the briefing, the governor said that, while Delaware "is not immune" to the effects of the so-called 'Great Recession', its reputation for fiscal responsibility -- as evidenced by its sustained triple-a bond rating -- stands it in better stead to cope with financial problems than many of its sister states.

Moreover, he added, "the challenges are not as significant as last year's [budget] shortfall, but they are [still] serious."

Markel called the proposed $3,171.3 million general-fund budget and the $356.5 million capital budget "balanced and responsible."

The general-fund budget is 2.5% higher than the one for the current fiscal year, which ends June 30, but Visalli said that comparison is misleading because federal stimulus money is being used to finance some things that otherwise would have had to be paid for out of the state budget. Absent further stimulus legislation, the amount estimated to be available for fiscal 2011 will be $123.5 million, down from $233.7 million this year.

Despite the pressures, Markell said his proposed budget preserves core governmental services as a time when it is necessary to respond to recession-driven increasing demand for services. What's more, he added, Delaware in the coming fiscal year will continue to peg spending to 98% of anticipated revenue, keep its 'rainy day' emergency fund intact and fully fund its employees' pension liability. "Other states have tapped into their pension plans" to make ends meet, he noted.

While gubernatorial budgets by their nature reflect the executives' priorities and programs, the one Markell handed the General Assembly clearly embodies the themes he has repeatedly harped on since taking office last January -- jobs creation through aggressive economic development and unstinting support of public-school education, while eliminating waste and inefficiency in state government.

He said the eclectic list of proposals affecting state agencies was compiled from suggestions and ideas received from state employees and the general public. The list demonstrates "we're serious about finding efficiencies and reducing the cost of government," he said.

Visalli said the proposed budget toes the line drawn by Delaware Economic and Financial Advisory Council in its December revenue estimate. The nonpartisan council, which includes persons with recognized professional expertise in the field of finance, will meet again in March, April, May and June and the Assembly is bound by law to accept its June figures as the basis for the budget it must enact by June 30. The interim reports will guide the Assembly's Joint Finance Committee as it crafts a final version.

Visalli said she would not accept as necessarily true that the nearly 18-month-long downward trend in council forecasts -- driven mainly by a significant falling off of receipts from the personal income tax -- will continue through the spring.

The proposed budget provides for $9.3 million in "additional reduction in personnel costs associated with complement reduction in the current fiscal year." That means vacancies created by retirements and other normal attrition are go unfilled. The rationale behind the division mergers in Education and Natural Resources, Visalli explained, is to position personnel to cover the functions of vacated positions. Also indicated is using fewer part time and seasonal workers.

The 2.5% pay cuts effected this year by giving state employees five unpaid 'holidays' will remain in effect during the coming fiscal year, she said.

Persons hired after Jan. 1, 2011, will be required to pay a larger share of the cost of their health-care insurance and pension plan. Budget documents made public do not provide any details about that. They do note that resultant 'savings' will increase in future years as those people gradually constitute a larger portion of the state workforce.

Both the governor and Visalli emphasized that proposed budget's education component  is focused on reductions in 'back-office' spending while "protecting the classroom." It calls for "driv[ing] public education administrative efficiencies through consolidated procurement and purchasing" to the tune of nearly $1.5 million. The governor had said he does not favor forcing consolidation among the state's 19 public school districts.

The budget document does not specify how the limited consolidation is to be accomplished. The apparent intention is to have districts get together to determine how to do that. Visalli spoke of providing incentives to encourage that. "We support it; we don't control it," she said.

The proposed capital budget provides that school districts with capital projects underway are to be allowed to proceed with them. Brandywine, which intends to begin construction of a new Brandywood Elementary School building, is among districts listed in the proposal.

The largest component of the capital budget is directed toward restoring Delaware Economic Development Office's strategic fund, which is used to "provide customized financial assistances" to businesses seeking to locate facilities in Delaware or significantly expand operations in the state.

Visalli said that, with interest rates at historic lows, now is not the time to skimp on capital projects, which are mostly financed by sale of bonds. "The bond bill is a lever for job creation. ... We have a huge opportunity to make some capital investments that would, five or 10 years ago, cost a lot more," she said. "We can use capital money to create jobs at the lowest cost ever."

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