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Gov. John Carney outlined his proposal for a nearly $5.5 billion 2024 operating budget on Thursday, debuting new plans for tax relief and investments in housing and early childhood education.
Carney’s budget proposal marks a 7.4% increase over the current budget – nearly twice the normal rate of increase, though Carney says his plan continues to feed the budget stabilization fund to prepare for future revenue downturns.
The spending plan includes tax relief for lower- and middle-income Delawareans.
He calls for raising the standard deduction to $5,700 for individuals and $11,400 for joint filers starting in tax year 2024. Those deductions currently stand $3,250 and $6,500. Carney anticipates the change would simplify filing for 50,000 Delawareans, who would move from itemizing to the higher standard deduction.
He also wants to boost the refundability of the earned income tax credit in tax year 2023, pushing it from 4.5% to 7.5% of the federal credit. Carney says that would reduce the liabilities of some 20,000 Delawareans to $0.
The Carney administration says the changes will cost $24.9 million in the 2024 budget and $55.7 when fully implemented in 2025. It estimates 80% of those affected by the two changes would have adjusted gross incomes under $75,000.
Carney says he opted to forego additional tax relief in favor of pursuing nine percent raises for public school teachers.
“I just thought that a higher increase for our public school teachers would be a better investment and would have a more positive impact on our state than a minor tax cut that most people wouldn’t experience,” Carney said.
Carney debuted his planned investments in educator salaries earlier this month, nearly a year before the state’s Public Education Compensation Committee is due to issue recommendations for long-term changes to educator pay scale. He argues that more urgent action is necessary to compete with neighboring states to both recruit and retain teachers during a nationwide shortage.
He offered more education spending goals in his address on Thursday, detailing plans to spend nearly $30 million to expand access to early childhood education for lower-income families. While Carney noted that he would hope to use state dollars to boost salaries for early childhood educators, because most early childhood education centers are privately run, he noted that ensuring increased state investments translate to higher educator pay may require new transparency and accountability measures.
Carney’s budget proposal also includes a record $101.5 million for housing initiatives. Only $31.5 million of that total come from the state’s revenues; much of the rest comes from American Rescue Plan Act dollars. He proposes spending that funding to cover construction costs for affordable multifamily housing developers and the rehabilitation of vacant or blighted buildings, as well as a “preservation fund” to maintain existing affordable housing through repairs and financial restructuring. Particularly in Kent and Sussex Counties, a significant number of affordable housing units in the state rely on decades-old state subsidy agreements; when those agreements expire, the property owners have the option to rent the units at market rate, spurring Carney’s interest in adjusting subsidy rates to preserve affordable units.
Carney also included funding to for several yet-to-be-codified tenant protection programs in his budget, including dollars to support legal representation for tenants during eviction proceedings — a program that many Democratic lawmakers hope to launch in the coming year, pending approval in the General Assembly.
And with the number of retired state employees growing, Carney seeks to dedicate $51 million in one-time spending to start chipping away at the state’s $8 billion liability from retiree health care coverage — more than five times the amount set aside in recent budgets.
“It’s not a very big chip, if you will, in that big liability, which is essentially the promises the state has made to its state workers that when they retire, the state will cover their healthcare above what Medicare pays for,” said Carney.
More than a third of Carney’s total budget proposal would cover healthcare costs, including an additional $194 million for state employee healthcare and other post-employment benefits.
The budget also adds more than $100 million to cover growth in Medicaid coverage, but Carney notes that the Department of Health and Social Services is currently preparing for the costly process of transitioning thousands of Delawareans off of Medicaid as pandemic-era eligibility expansions expire.
“We were getting additional resources from the federal government for an expanded Medicaid population,” he said, but the state can’t disenroll the thousands of people who enrolled in Medicaid during the pandemic all at once. Instead, Carney said, the state will have to “gradually” review the eligibility of Medicaid recipients, during which time the state will also have to pay more to continue providing coverage to the larger Medicaid population.
Carney added that he hopes the gradual downsizing of Delaware’s Medicaid rolls prompts employers who relied on Medicaid to provide healthcare coverage to their employees during the pandemic to consider providing coverage to employees who lose their Medicaid coverage in the coming year.
Carney’s plan also includes a nearly $1.3 billion Bond Bill for capital projects, down slightly from the record $1.46 outlay this year. His proposal allocated $59.8 million for Grants-in-Aid, down from $69.4 million this year.
Other notable spending in Carney’s 2024 budget plans includes: