Reduce senior tax breaks? Lawmakers push back

DOVER – Lawmakers on the General Assembly's powerful Joint Finance Committee pushed back against Gov. Jack Markell's plan to cut $12.6 million in property tax breaks for seniors to help balance his $3.9 billion budget.

Markell proposed cutting in half the $500 state subsidy paid to seniors to offset property tax bills. But as budget hearings began in Legislative Hall on Tuesday, lawmakers showed little appetite for going along with that plan.

"This is going to be one issue that's going to be difficult to get through this body," Sen. Bruce Ennis, a Smyrna Democrat, told Markell administration budget officials.

Ann Visalli, Markell's budget director, briefed Joint Finance Committee members on details of the governor's budget. Over the next five weeks, agency directors will come before the committee to discuss program funding. Lawmakers will work through June 30 to balance the budget that takes effect July 1.

Markell last week unveiled his $3.9 billion recommended spending plan, which grows spending 2.4 percent above current levels. The governor's budget cuts senior tax breaks and diverts $40 million from the Transportation Trust Fund to pay for more teachers, higher health care costs for public workers and higher payments on state debt.

Under current Delaware law, the state pays 50 percent of senior property owners' school taxes up to $500. Markell's proposal would reduce the credit to 25 percent up to $250. Delawareans aged 65 or older can claim the tax, so long as they've lived in the state for three years.

Without changes, the subsidy would cost the state $23.6 million this year, a figure expected to rise with the state's senior population to $46.4 million a decade from now.

Sen. Harris McDowell, a Wilmington Democrat and co-chair of the Joint Finance Committee, sponsored the law in 1999 creating the tax breaks.

"I'd hate to see it get whacked," McDowell said during Tuesday's hearings.

There is already a push to means-test any reduction to the senior tax credits. Two Democratic lawmakers on the budget committee suggested Tuesday that the state should explore giving a more significant break to seniors with lower incomes, while potentially lowering the subsidies for seniors with greater means.

"My person who lives in a mobile home is going to take the same hit as the person who lives in a McMansion," said Sen. Karen Peterson, a Stanton Democrat. "There seems to me to be a fairer way to do it."

Republican Rep. Joe Miro, of Pike Creek Valley, said lawmakers should be "very careful" in reducing tax benefits for seniors moving to Delaware. Seniors are critical to the state's economy, Miro said. Miro urged his colleagues to consider "what the negative impact may be," if seniors do not move to Delaware from other states. "If they are not buying homes," Miro said. "If they are not spending money at the restaurants."

Miro and Sen. Brian Bushweller, a Dover Democrat, also questioned what impact Markell's proposal to reduce tax benefits for seniors would have on the ability of any school district to pass a referendum.

Markell last week called his budget proposal "very difficult," pointing to revenue forecasts that predict the state will collect just $18 million more than it budgeted in the current fiscal year. The governor's plan includes no general salary increase for state workers, and very little investment in new programs.

Markell is asking lawmakers to spend $4.5 million on additional residential beds, withdrawal management and other programs to combat substance abuse. The governor's budget also includes $9.5 million for public education programs, many previously funded with federal Race to the Top dollars.

The Delaware Economic and Financial Advisory Council will produce four more revenue estimates before lawmakers complete work on the budget in June, meaning more money could be available in coming months.

Contact Jonathan Starkey at (302) 983-6756, on Twitter @jwstarkey or at jstarkey@delawareonline.com.