NEWS:

State Spending Outpacing Revenues in Delaware, Elsewhere

According to a federal report released this week, state and local governments are spending money faster than they are taking it in.

Between 2007 and 2012, total expenditures for state and local governments increased by 18.2 percent, from $2.7 trillion to $3.2 trillion, while total revenue declined 1.1 percent over the same five-year period, from $3.1 trillion to $3.0 trillion.

Outstanding state and local government debt grew faster than both revenues and expenditures during this time frame.  The report noted that debt rose in every state, except for Alaska and Montana. 

The findings are from the 2012 Census of Governments: Finance - Surveys of State and Local Government Finances, which was issued Tuesday by the U.S. Census Bureau.

State Rep.  Deborah Hudson

Delaware's experience is apparently similar to those of other states over the period covered by the report.

Delaware's General Fund expenditures jumped $407 million between Fiscal Year 2007 and Fiscal Year 2012 -- a 13.1 percent increase.  Since Fiscal Year 2012, Delaware's spending has continued to climb, rising from $3.508 billion to $3.809 billion in the current operating budget.  Despite the forced braking on state spending caused by the recession, General Fund spending still increased $708 million, or nearly 23 percent, between FY 2007 and now (FY 2015).

While some sources of state revenue -- like proceeds from legalized gaming -- have been falling, expenses have been rising. 

Since FY 2007, public education costs have risen $217 million or 20.6 percent.  General Fund spending for the Department of Health and Social Services -- which administers Medicaid and other assistance programs -- has jumped $269 million since then.  Combined, the two departments account for nearly 69 percent of the state's General Fund increase over the eight-year span.

Delaware has matched higher spending with higher taxes. 

Last year, Gov. Jack Markell and General Assembly Democrats made permanent four "temporary" tax increases enacted in 2009 that had been set to expire.  The hikes in the personal income tax, the corporate franchise tax, the gross receipts tax, and the reinstatement of the estate tax will collectively generate an estimated $156 million for the state this fiscal year.

Earlier this year, Gov. Markell and his General Assembly supporters increased the annual tax on Limited Liability Companies, Limited Partnerships and General Partnerships from $250 to $300.  The minimum annual Corporation Finance Tax was also increased from $75 to $175.  Combined, the tax hikes are expected to produce an additional $51 million for the state's coffers.

More tax increases may be on the way.

Earlier this week, the non-partisan Delaware Economic Financial Advisory Council (DEFAC), whose mission is to accurately forecast state revenues, met to issue their first estimates since September.  DEFAC predicted state revenue for the current fiscal year would be $16.9 million less than was projected just three months ago.

At Monday's meeting it was also revealed that Gov. Markell has asked DEFAC to form a sub-committee to explore ways to increase state revenue.  

"The governor is charging this new sub-committee with suggesting ideas to bridge the gap between higher spending and faltering revenues," said State Rep. Deborah Hudson, R-Fairthorne, a DEFAC member.  

 "We're facing budgetary challenges on several fronts, but looking for new revenue should not be our automatic default," Rep. Hudson said.  "We should first be looking at increased efficiencies and ways to cut spending.  That's not easy, but I don't think we have any right to ask taxpayers for one more dime before we first explore every avenue for maximizing what they are already contributing."

The sub-committee is expected to issue its recommendations to the governor sometime early next year.

Delaware Health Care Reform Initiative Gets $35 million from Feds

A plan to reform the delivery of health care in Delaware is getting some financial support from the federal government.

The Center for Medicare and Medicaid Innovation (CMMI) announced the grant earlier this week.  The funding is intended to help states implement innovative approaches to delivering and paying for health care.

Work to develop Delaware's Health Care Innovation Plan began in spring 2013 with work by a group including physicians, hospitals, insurers, businesses, consumer advocates, educators, researchers and government officials.

Delaware's health outcomes rank below the national average in several categories, including diabetes, obesity, and cancer mortality.  However, Delawareans pay 25 percent more than the national average for health care.  

Currently, health care spending in The First State exceeds $8 billion per year for employers, consumers, and taxpayers combined.   Medicaid and the State Employees Health Plan consume nearly a quarter of the state's budget. 

Among the strategy's goals are to:

• Focus on strong coordination of care across multiple health care providers.
• Support primary care providers in delivering proactive, preventive care.
• Enable ease-of-access to medical history and prescription information across a patient's health care team.
• Support insurance carriers and others to adopt payment models rewarding quality, cost-efficient care.
• Create a "common scorecard" to provide information to providers on their performance and create incentives for improvement.
• Gather input from health care consumers to guide programs.

Supporters of the initiative claim it could potentially create more than $1 billion in cost-of-care savings through 2020.  

Half of the projected savings would reportedly be reinvested in health care delivery and the other half would support improved affordability. 

Click here to read a fact sheet on Delaware's Health Care Innovation Plan.