Delaware Budget Process Robert L. Scoglietti Office of Management and Budget October 2, 2015

…or demystifying how $ are allocated in Dover

Agenda o  Budget Process

n  Revenue n  Appropriations

o  Other issues

Budget Process Revenue

Delaware’s revenue mix is unique o  Relatively low property taxes o  No sales tax (no local share)

n  State level gross receipts tax o  Corporations’ legal home

n  Reliance on related taxes & fees

o  Non-tax revenues -- lottery & abandoned property

Delaware Economic & Financial Advisory Council (DEFAC)

o  Responsible for preparing & approving THE revenue & expenditure forecast.

o  Members appointed by the Governor to serve at their pleasure.

o  Membership of DEFAC broadly represents both the public and private sectors of the State’s economy.

o  Two Subcommittees: Revenue and Expenditure o  Full Council meets 6x/year and ratifies estimates from

subcommittees

Types of Funds

General Funds

Appropriated Special Funds

Non-Appropriated Special Funds

Delaware Fiscal Year 2016 Revenue Forecast

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Personal Income Tax, 32.0

Public Utility, 1.3 Realty Tax, 2.2

Lottery, 5.0 Corp. Income Tax, 3.6

Other Tax Revenue 4.4 *Other Non-Tax, 4.7

**Incorporation Revenue, 25.4

Bank Franchise Taxes 2.2

Business Gross Receipts Taxes, 5.6

Abandoned Property, 13.6

*Includes Prior Year Unencumbered Cash Balance.

**Includes Corporate Franchise Taxes, Business Entity Fees, and Limited Partnerships & Limited Liability Corporations.

¢ ¢

¢ ¢

¢

¢

¢

¢

¢¢ ¢

Changing Revenue Composition

21.9%17.8% 16.7% 17.9% 15.8% 12.6%

39.4%

36.8%32.1% 30.7%

26.4% 32.0%

15.8%

18.9%21.3% 19.3%

23.6%25.4%

7.5%7.0%

5.9%6.1%

6.0%5.6%

5.7%5.4%

4.7%4.0%

2.7%3.6%

6.5% 9.2%15.2%

13.6%

2.2% 5.2% 8.1% 8.1% 8.5% 5.0%

6.2%4.4%

4.7%

1.7%

2.2%4.7%

3.1%2.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1995 2000 2005 2010 2016Fiscal Year

Pct

of G

ener

al F

und

Lottery

AbandonedProperty

Bank Tax

CIT

GRT

Franchise *

PIT

Other

* 2000-2016 Franchise figures include LP/LLC collections.

DEFAC Revenues FY 2010 - 2018

$3,235

$3,531

$3,359

$3,730 $3,730

$3,955 $3,951 $3,947

$4,059

3,000

3,200

3,400

3,600

3,800

4,000

4,200

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

DEFAC 9

$ M

illio

n

Budget Process Appropriations

Delaware’s Services are Concentrated at State o  All Adult and Juvenile Social Services

n  Public Health, Health, Mental Health, Child Support, Aging Services, Medicaid, TANF, Family Services, Unemployment, Vocational Rehab

o  All Prosecutorial, Public Defender, and the vast majority of Judicial services

o  All Detention (Pre-Adjudication), all Jail (2 years or less) and all Prison facilities

Delaware’s Services are Concentrated at State o  Approximately 70% of Public Education

funding (Operating and Capital) o  The majority of Transportation and Public

Transit Services o  Largest Police Force in State o  50% of Public Library Construction Funding

Legislation o  Bill

o  Amend Code

o  Appropriate funds o  Amend local government charter o  Direct someone to do something

o  Joint Resolution o  Direct someone to do something o  Only in effect during the General Assembly

o  Resolution o  Ask someone to do something o  Statement or declaration

o  Constitutional Amendment

Appropriations Legislation o  Appropriations:

n  Operating Budget n  Capital Budget (Bond

Bill) n  Grants – in – Aid

o  Epilogue (!)

Delaware’s Appropriations Legislation o  Operating Budget

n  Contains operating funding and position strength authorization for agencies, legislature, judiciary, higher education, education.

n  Funds and positions are appropriated by line item (Personnel Costs, Travel, Contractual Svcs, Supplies and Materials, Energy, Capital Outlay, Debt Service) or Program (Medicaid, International Trade, Assisted Living)

n  Budget is authored by Joint Finance Committee, requires simple majority vote

Delaware’s Appropriations Legislation (cont’d)

o  Capital Improvements Act (Bond Bill) n  Appropriates funds for major/minor capital

improvements for state agencies, public schools, Higher Ed institutions

n  Also appropriates funds for: o  DelDOT (TTF Capital program) o  Economic Development (Strat Fund, Port) o  Infrastructure /Land Use (Open Space, Farmland,

Water/Wastewater, Drainage) o  Specific Funds to Locals

Delaware’s Appropriations Legislation (cont’d)

o  Bond Bill (cont’d) n  Authored by Joint Legislative Committee on

Capital Improvements (Bond Bill committee), requires 3/4 approval of Legislature

Public Education, 33.4¢

Higher Education, 5.9¢

Services for Children, Youth

and Their Families, 4.0¢

Judicial, 2.4¢

Other Agencies, 15.1¢

Health and Social Services, 28.6¢

Correction, 7.3¢

Safety and Homeland

Security, 3.3¢

FY 2016 Operating Budget

18

Delaware’s Appropriations Legislation (cont’d)

o  Grants - In - Aid Legislation n  Appropriates operating funds to non-profit social

service agencies and fire/ambulance companies who provide services for Delaware citizens

n  Includes the annual subsidy for the county paramedic programs

n  Authored by the Joint Finance Committee, requires 3/4 vote majority for approval.

n  May see amendments to operating budget in this bill

o  98% Appropriation Limit n  Cannot exceed an appropriation of 98% of

estimated State General Fund revenue for each fiscal year

o  2% Set-Aside n  Can appropriate between 98%-100% in

emergency situations o  Rainy Day Fund

n  Balance of 5% of Gross General Fund Revenue n  Can only be appropriated by 3/5 vote

Constitutional and Statutory Spending Limitations

o  Debt Issuance n  Fiscal year general obligation debt issue may

not exceed 5% of estimated net General Fund revenue for that fiscal year

n  Total fiscal year debt service may not exceed 15% of estimated gross General Fund revenue plus Transportation Trust Fund

n  No new debt obligation can be incurred if the maximum annual debt payments exceeds the state’s cumulative cash balances

Constitutional and Statutory Spending Limitations

Governor’s Recommended Budget o  The Recommended Budget is

the Governor’s “Turn at the Plate” n  POLICY/POLITICS -

Opportunity to Show How Resources Will Be Allocated to Implement the Vision Presented in the State of the State

n  FINANCIAL - Opportunity to Present Financial Plan

n  STATE OPERATIONS - Must Provide for General Operations of the State

Governor’s Budget Development – Early Fall o  Validate financial principles o  Review Revenues, Sept. DEFAC is key o  Identify “Door Openers” o  Review Tax policy o  Provide framework for policy development

Door Openers n  Debt Service n  Employment Costs – Salary, Pension, Health n  Medicaid n  School Unit Growth n  Funding Legislative Initiatives n  Federal Mandates

o  MMIS o  Federal oversight (DPC, DOC)

Door Openers: Medicaid Eligibles

25

-

50,000

100,000

150,000

200,000

250,000

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15

173,771

193,633 207,067

212,693 217,658 224,198

Medicaid Average Monthly Eligibles

Average Monthly

113,

924

114,

276

115,

103

116,

277

117,

098

118,

419

119,

780

120,

591

121,

763

121,

921

6,56

7

7,58

0

8,51

2

8,62

6

9,17

3

9,52

5

10,3

22

10,4

38

11,0

78

12,5

21

100,000 102,500 105,000 107,500 110,000 112,500 115,000 117,500 120,000 122,500 125,000 127,500 130,000 132,500 135,000 137,500

05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

Enr

ollm

ent

School Year District Charter

120,491 121,856 123,615 124,903

126,271 127,944

130,102 131,029

132,841 134,442

Door Opener:Enrollment Growth: PK - 12th Grade

Excludes DAFB students

24 Charter Schools

19 School

Districts

26

Timetable – Governor’s Budget Development

o  August-September (Budget Guidelines/Target) o  October (Budget Requests From Agencies) o  November (Budget Hearings) o  December (Meetings with Governor, DEFAC) o  Early January (Budget Director reviews budget with

Cabinet Officials) o  Late January (Governor presents budget to Legislature)

Timetable – Legislative Budget Development

o  February-March (Joint Finance Committee, Bond Bill Committee holds Public Hearings)

o  April-May (Joint Finance Committee Mark-Up)

o  June (JFC Mark Up continues, Bond Bill and Grant in Aid)

o  June 30th (Budget, Bond and Grant-In-Aid Bill passes the Legislature and Governor signs)

Major Actors in the Budget Process Legislative Branch o  General Assembly

n  Sets appropriations for state government

o  Joint Finance Committee (JFC)/Joint Bond Bill Committee n  Reviews & marks up

Governor’s budget n  Proposes budget for

consideration by legislature o  Office of the Controller

General n  Counterpart to OMB n  Staffs to JFC & Bond Bill

Committee

Joint Appropriations Committees o  Structure

n  2 committees – JFC, Bond n  Chairs rotate n  6 House/6 Senate n  By politics, 8 D, 4R

JFC Markup o  “Governor proposes and the Legislature disposes” o  Use Governor’s Recommended Budget as blueprint o  Use Governor’s Budget as starting point for motions

n  Very important to get Gov Budget voted in, takes 7 to vote it out

o  Usually 10-15 major issues n  Salary n  Policy – enacted programs n  Operating n  Caucus members issues

FY 2015 Recommended Financial Plan

32

General Fund Operating Budget $3,908.4 million

Transportation Trust Fund Budget $344.9 million

Grants-in-Aid $43.0 million

Bond and Capital Improvements Act $456.3 million - State Capital Projects……………………..$247.9 million - Transportation Projects…………………..$209.3 million

Where do I find…..? Item Location Municipal Street Aid/Community Transportation Funds

Bond Bill, DelDOT

Drainage Bond Bill, DNREC “Resource Conservation and Development”

Libraries Operating and Bond bill, Dept of State Volunteer Fire/Ambulance funding Grant in Aid Fund to Combat Violent Crime Operating budget, DSHS SALLE Grant in Aid LEPC Operating budget, DSHS Water/Wastewater Bond bill, DNREC Housing Development Fund Operating budget, Bond bill, DSHA Downtown Development Districts Bond bill, DSHA “Urban Redevelopment” Tourism Operating Budget, DEDO (Executive)

Final Thoughts

Long Term Challenges

o  Infrastructure o  Revenue

n  Abandoned Property n  Lottery

o  Aging population o  What level of services do taxpayers want

and are willing to pay for?

Budget Development – Other Thoughts o  Budgeting is a process. Those who succeed are

experts in not only the policy but the process. o  Numbers always have to be correct. o  Show enough detail to get policy makers to

understand the issue but not too much to lose them. o  KNOW your issue but also know how it affects

people. o  Compromise and negotiation lead to more

constructive longer term relationships in Legislative Hall

Questions??