Jonathan Starkey and Jon Offredo

The News Journal;

State budget writers completed a %243.8 billion spending plan last week

Lawmakers took no action on support for casinos or funding for transportation projects

Proposal uses %2440 million to balance budget that usually goes to road improvements

Lawmakers return June 16 to finish upcoming budget

Lawmakers who completed work on a $3.8 billion state budget last week left a couple big holes.

They did nothing to pay for additional road and bridge improvements, nor did they set aside funds to cut taxes for Delaware's casinos, two high-profile issues that will continue to consume time and energy as the General Assembly enters the final month of its legislative session this week.

Casinos are again warning of layoffs in the absence of a bailout.

And without a compromise to boost transportation funding, critical road improvements and other transportation system upgrades could go unfunded.

Election-year lawmakers oppose Gov. Jack Markell's plan to raise Delaware's gas tax, and authorize new debt, to fund $100 million in additional road improvements.

Jonathon Dworkin, a spokesman for the governor, said Friday that Markell is "continuing to talk about how jobs will be lost and safety improvements and needed congestion projects will be delayed if we do not address the long-standing shortage of funding for transportation projects."

The governor is open to a compromise, Dworkin said, and lawmakers have been discussing alternatives, including raising DMV fees and imposing taxes on wholesalers to avoid an election-year vote to raise gas prices with higher taxes.

Nevertheless, the budget crafted last week by the General Assembly's Joint Finance Committee relies, like Markell's spending plan from January, on $40 million typically used for road improvements to fund state spending increases.

Spending set to rise

Despite talk of belt-tightening, state spending is set to rise 2.4 percent next year, up 23 percent since Markell signed his first budget in mid-2009.

"I find it very distasteful to go to the public and say, 'Hey we want more money from you', but we can't cut our own budget," said Sen. David Lawson, a Marydel Republican and member of the Joint Finance Committee.

Higher mandatory spending on public education and Medicaid, the low-income health insurance program for the poor and disabled, put pressure on this year's budget. Higher Medicaid enrollment is projected to cost taxpayers another $24 million in the fiscal year beginning July 1, with higher student enrollment requiring nearly $19 million in new public education spending on teachers.

Budget-writing lawmakers and the Markell administration shifted money around in recent weeks to cover a budget gap – using tobacco settlement reserve funds, for example, to fund a children's insurance program and to fund an $8.6 million debt payment.

They also appropriated $4 million less for education programs than Markell envisioned in January, and cut administration proposals to enhance drug treatment, provide leadership tools for teachers and teach manufacturing skills to high schoolers.

$5 million less than expected

When it finished work last week, the Joint Finance Committee left about $5 million less than expected for lawmakers who will craft the state's next capital budget, which funds school construction, economic development and other building projects. The capital spending plan had been expected to receive less money than programs received from surplus money last year, with Markell recommending lower appropriations for open space and farmland preservation efforts, among other programs.

Capital budget hearings resume June 16, the same day that lawmakers will receive the final round of tax collection estimates before voting on the budget for the next fiscal year, which begins July 1.

Many remain optimistic that tax estimates, which have fallen in recent months, will rise in June, leaving lawmakers and the Markell administration with additional money to fund road fixes and other priorities.

Without additional funding, lawmakers run the risk that critical road projects will be delayed, with lawmakers continuing to oppose Markell's plan to raise the gas tax by 10 cents, and authorize additional borrowing, to pay for new transportation spending.

The Markell administration has warned that legislative inaction would indefinitely delay the widening of a congested stretch of Del. 1 between Tybouts Corner and Del. 273, the relocation of the Newark train station and the development of a Wilmington transit hub, among other projects. It would affect scores of additional planned upgrades in all three counties – everything from minor road maintenance projects and bridge repairs to larger interchange projects along Del. 1.

"It's a big hole, there's no doubt about it," said Rep. Quinn Johnson, a Middletown Democrat and co-chair of the capital budget committee.

Johnson said Markell's proposed $7 million plan to revitalize downtown development districts and the governor's economic development fund that he uses to entice businesses to create jobs in Delaware could be cut to pay for infrastructure projects that would more immediately create jobs.

"If any type of additional revenue is not obtained in some way or without cuts somewhere else, we're going to have to figure that out," Johnson said.

Casinos are again warning of their own problems and the need for government relief, which now appears unlikely despite support from Markell.

On the table is legislation that would cost the state $9.9 million in the first year and roughly $20 million annually once all components take effect in July 2015. The bill awaits a hearing in the Senate Finance Committee. The plan calls for lower taxes on casinos, with the state also picking up a greater percentage of casinos' vendor costs.

No changes mean cuts to the casino's payroll and marketing budgets and a potential $10 million decrease in revenue for the state, said Denis McGlynn, president and chief executive of Dover Downs Gaming and Entertainment and Dover Motorsports Inc.

"If anyone down there thinks I'm kidding, they haven't been listening to me over the last two years. This is serious stuff," McGlynn said. "It was my hope that they would have earmarked at least the one-year part of this."

The state relies heavily on gaming revenue to pay for public education, Medicaid and various other operating budget items. Casino tax revenue generated $172 million in fiscal year 2014, according to estimates. That's down from December's estimates of $180 million, and $238 million just four years ago. Estimates for fiscal year 2015 peg casino tax revenue to drop to $167 million.

Sen. Harris McDowell, co-chair of the Joint Finance Committee, said in an interview last week that budget writers could simply not find the money to help the casinos. "We'd like to do something if we could," he said, "the question is how."

Contact Jonathan Starkey at 983-6756, on Twitter @jwstarkey or at jstarkey@delawareonline.com. Contact Jon Offredo at (302) 678-4271 or at joffredo@delawareonline.com or on Twitter @jonoffredo.