Levy Court commissioners will be completing work on next year’s budget without a key piece of information: knowing what the state’s final budget will look like.
Legislators in the General Assembly will be spending the next few months finding ways to cut spending and increase revenues to make up for a projected $350 million state budget deficit for Fiscal Year 2018.
But county commissioners are required to finish their budget work by April 25, even though the General Assembly won’t finalize the state’s FY 2018 budget until the fading hours of June. 30.
That means commissioners may have to go back to the figurative drawing board if legislators go along with a spending plan submitted in January by former Gov. Jack Markell.
In an effort to cut state spending, the budget proposed changing how the state shares real estate tax proceeds with counties. It also requires counties to bear the full cost of their paramedic services.
If legislators go along with these recommendations, Kent County could lose up to $2.2 million in state funding, Banta said.
“The law is very clear, we must have it done by the last Tuesday in April,” Levy Court President P. Brooks Banta said of the county’s budget. “Therein is the problem.”
But there’s another complication: although the legislature’s Joint Finance Committee is in the midst of budget hearings, Gov. John Carney’s office still is studying what changes the new governor might want.
“It is, at best, scary,” Banta said. “In using that word cautiously, I’m hoping Gov. Carey will scrutinize what’s been proposed with due diligence and at the end of the day realize some of those items need to be looked at very seriously.”
State Sen. Brian Bushweller, D-Dover, understands the county’s concerns, but also offers some hope.
“First, it’s important to note that Gov. Markell’s budget proposal was just a starting point,” he wrote in a Monday night email. “Whether any of the proposals will find their way into the final budget for FY 18 is very much up in the air.
“In fact, Gov. Carney has called for a ‘budget reset,’ which means we’re effectively starting from scratch,” Bushweller wrote. Carney is planning a series of community discussions on the budget, one of which is planned for Wednesday, Feb. 22 in Dover.
Cost matching may not happen
Kent County’s budget writing process begins in September and goes through a series of reviews by staff and the commissioners before mandatory hearings are held to gauge public approval or disapproval, County Administrator Mike Petit de Mange said.
It must be approved by the last Tuesday in April and goes into effect on July 1, the same day as the state budget.
Petit de Mange said the county’s public safety sector, which includes emergency medical services, the 911 call center and planning and operations, takes up a full one-third of the general fund budget
For the FY 2017 budget, that’s $9.4 million of the $27.1 million general fund budget.
To pay for the countywide paramedic system, Levy Court’s financial department bills the state at the end of each year and receives a rebate for the money spent.
When the paramedic system was established 25 years ago, the state covered 60 percent of the costs; it has been steadily reduced down to about 30 percent.
For the FY 2016 budget, that number actually was closer to 28 percent, since legislators set the price match at 2015 levels, Petit de Mange said.
If the current budget proposal is adopted, the county would receive no matching grant at all, requiring county taxpayers to foot the entire bill.
“If it were to happen today, we’d be looking at a $1.5 million matching grant that would be lost if they were to follow the proposal to eliminate it completely,” he said.
To make up the difference, Petit de Mange estimates commissioners would need to raise property taxes by about 5 cents per $100 of a property’s assessed value.
Commissioners also could opt for a smaller tax increase and then eliminate or delay other programs or purchases to save additional money.
Watching and waiting
The proposed budget also envisions a change to how much money the county would receive from taxes levied on property being bought and sold.
Currently the state receives in taxes about 3 percent of the purchase price of a piece of land; it gives half of that, 1.5 percent, to the counties for properties in unincorporated areas. The same amount goes to municipalities when the property is within a city or town limits.
The budget proposal would raise the state’s share to 4 percent, but reduce the county’s portion to 1.25 percent, Petit de Mange said.
“For Kent County, that totals about $800,000 in lost revenue it that were to occur this year,” he said.
To make up the difference, Levy Court commissioners may have to raise property taxes by two to three cents per $100 of a property’s assessed value.
The two possible property tax increases could increase the property tax rate from the current 30 cents to between 37 and 38 cents.
“What the taxpayer needs to keep in mind is that Kent County has done a very good job of managing the budget over the years,” he said. “We’re not heavily in debt, we cover our expenses and we can do things the community wants done.”
However, right now Petit de Mange describes the mood around county offices as one of “uncertainty.”
“Everyone is aware of the significant challenges the state faces in terms of the deficit,” he said. “We’re concerned, we’re watching it and we’re waiting to see what changes may come out and prospects about pushing costs onto local governments.”
Without any additional information, “Everything else is speculation,” Petit de Mange said.
Too early to tell
Bushweller suggests that budget hearings underway in the legislature’s Joint Finance Committee could result in savings that would make the county’s financial worries less immediate. But it’s too early to tell what may happen, he said.
“While that process is underway, I can’t commit to any hard specifics on what will be included in the final budget, only that it will look very different from what Gov. Markell proposed last month,” he said.
Bushweller added that because Delaware is so small, it takes on some of the financial burdens larger states routinely pass on to counties and cities. In fact, he added, the First State offers more state-level services than any other, except Hawaii.
“With that in mind, the JFC should take Levy Court’s concerns into account, along with those of the cities and towns, and try to tailor any budget reforms to the economic realities the counties face,” he said.
“Again, though, we’re at the very beginning of a probing JFC process,” Bushweller said. “Too many variables are still in flux to know exactly what the final budget will look like.”