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Although
the amount of General Fund money available for the year
beginning July 1 has grown 5.6% since the beginning of the
calendar year and 2.8% since Governor Ruth Ann Minner submitted
a proposed budget based on a late-January forecast to the
General Assembly, budget director Jennifer Davis said after the
council's meeting that "the governor's proposal still stands at
this point."
Minner
asked the General Assembly to approve a 17% increase in fees
companies and partnership pay to incorporate in Delaware, double
the tax on cigarettes and 'uncouple' calculation of state
inheritance tax from the federal tax, which is being phased out.
Davis
said those 'structural' changes in the state tax system are
still necessary to assure future stability although the budget
crisis "is less draconian now than it was in [last] September."
Steven
Cochrane, senior economist with West Chester, Pa.-based
Economy.com, told the meeting on Apr. 21 that Delaware is one of
19 states his firm considers to be still in recession, but it is
widely agreed that state government finances here are, on
balance, in better shape than most of the other states.
As
Delaforum previously reported, the advisory council voted to
revise upward from March levels both its revenue and spending
forecasts for the current fiscal year and to increase its
revenue projection for fiscal 2004. It cannot forecast next
year's spending until the Assembly approves the budget, probably
in late June.
The
council sets the official appropriation limit at 98% of
projected revenue plus the expected balance at the end of the
fiscal year. That amount now stands at $2,255 million, up from
$2,345.1 million in March and $2,318.6 million at the time of
the governor's budget proposal.
The cash
balance is expected to total $94.7 million. That would be down
from $481.8 million a year earlier as a result of having spend
more than was taken in during the present fiscal year.
With the
economic outlook apparently brightening, the advisory council's
revenue forecast is expected to be increased again at the
council's May meeting. By how much, of course, remains to be
seen. That session is scheduled for the day before the
Assembly's Joint Finance Committee is to begin to prepare the
final version of the budget bill.
Davis and
Secretary of Finance David Singleton said the Minner
administration is prepared to work closely with the legislature
to come up with a mutually agreeable product. "We're going to
take a hard look at revenue categories [and] the governor will
decide what adjustments she wants to make," Davis said.
Budget-writing in Delaware for the past quarter century or so
has traditionally been a bipartisan exercise.
Cochrane
said that, with the presumed completion of the war in Iraq, the
nation is poised for the long-awaited economic recovery. "If we
don't have another shock out there, I think we're on our way,"
he said. He noted, however, that previous forecasts of an
imminent turnaround had proven to be premature, largely as a
result of international uncertainty.
Although
Delaware appears to be lagging the nation in regard to a
recovery, he predicted that, when it starts here, it will
accelerate rapidly. About 85% of the state's growth rate is
directly linked to the national economy," he said.
Specifically, his firm sees the recovery beginning in earnest at
mid-year. Singleton said the advisory council's revenue
estimates for fiscal 2004 are in line with that scenario. "Our
numbers already accept an assumption that the economy will
improve," he said.
He noted
that income this year is now expected to total $2,371.5 million.
That is below $2,425.7 taken in in fiscal 2002, but higher than
the $2,364.8 million that the council forecast last June.
As
previously reported, one revenue stream that has exceeded
expectations this year is the state's escheat income from
abandoned property. Following a U.S. Supreme Court ruling, in a
case that pitted Delaware against New York, that money held by
corporations for which they are unable to find the owner revert
to the state of incorporation, Delaware has gone after large
corporations with a combination of audits and voluntary
compliance. That program is now expected to bring in $210
million, up from $156 million last fiscal year.
Singleton
said the largest-ever payment from a single source, $47 million,
came in in January, 2003. Last autumn, Governor Minner rescinded
a request that public schools 'return' some state money to help
meet that anticipated budget shortfall as a result of the
state's having received other escheat payments. Singleton
declined comment on a report that two or three other significant
settlements are in the final stages of negotiation.
He
acknowledged that most of that money comes from banks and other
financial services companies but said that other companies have
significant amounts accumulated over a span of years .in the
form of such things as uncashed dividend checks and accounts
payable for which recipients cannot be found.
He
dismissed a suggestion that escheat enforcement directed against
major corporations could hurt Delaware's reputation as a
business-friendly locale for incorporation. "Companies
understand it is not their money," he explained, but added that
some did not realize that they were required to turn it over to
state government.
Minner
earlier had said that her proposal to increase incorporation
fees was understood by and acceptable to the corporate
community.
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