- Associated Press - Thursday, January 30, 2014

DOVER, Del. (AP) - Gov. Jack Markell on Thursday proposed an operating budget for the upcoming fiscal year that is 3 percent higher than this year’s budget and relies on tax hikes and funding shifts to cover expenses, including a pay raise for Delaware’s state government workers.

The Democratic governor is asking lawmakers to approve a $3.83 billion operating budget for the fiscal year starting July 1. He also is proposing a capital budget of $461 million, about $37 million higher than the one he proposed last year. It includes about $93 million for school construction and renovation, and $207 million for transportation projects. The governor also is recommending $45 million in grants to nonprofit groups and community agencies, slightly higher than the $43 million he proposed last year.

“In our view, this is a financially responsible budget,” Markell said before unveiling the plan to state lawmakers.

To help pay for the spending plan, Markell is proposing higher taxes on business entities. He also wants to redirect $40 million from Delaware’s transportation trust fund and use it for general fund expenses, even though he has said in recent days that it’s time to stop complaining about the “sorry shape” of the transportation trust fund and fix the underlying problems.

On Wednesday, Markell proposed boosting the trust fund with a 10-cents-per-gallon increase in Delaware’s gas tax and $50 million more in annual borrowing to pay for $500 million in additional spending on roads and bridges over the next five years.

Established in 1988, the transportation trust fund initially was used only as a pool of funds for construction projects. But officials began siphoning money from the fund in 1992 to help pay for transportation department operating expenses, resulting in less money available for construction and a backlog of transportation projects. While calling for higher gas taxes and more borrowing, Markell has said little about the underlying problem of siphoning money from the transportation trust fund, which relies on gas taxes, tolls and motor vehicle fees. He noted that moving DelDOT operating expenses from the trust fund to the general fund would require cuts in other general fund spending.

Meanwhile, the operating budget he proposed Thursday includes a 1 percent, across-the-board pay raise for state workers, who went without a pay raise this year.

“I’m sure a lot of people would like more than that,” said Markell, whose proposal would cost taxpayers about $15.6 million next year. Overall personnel costs, including pension contributions and adjustments to teacher pay, would increase by about $33 million over the current year.

Spending on Medicaid would increase by $24 million, and debt service payments would rise $17 million as part of $126 million in additional spending on existing programs. That includes $19 million more to meet school enrollment growth, which administration officials said was a good sign.

“More and more families are choosing to send their kids to the public schools,” said Markell, who has undertaken various efforts to improve Delaware’s public education system, including expanding early childhood programs and using federal Race to the Top funding to pay for school improvement initiatives.

To help pay for his operating budget, which includes $7.4 million for new programs, Markell is proposing to increase the annual tax on limited liability companies and business partnerships from $250 to $300. He also wants to increase the minimum annual corporation franchise tax from $75 to $175. Officials said those moves would generate $51 million more in revenue.

Secretary of State Jeffrey Bullock, who oversees Delaware’s Division of Corporations, noted that about 90 percent of revenues from those sources come from businesses outside of Delaware, which is the legal home for more than 1 million business entities, including more than half of all publicly traded companies in the United States.

“They will be exported taxes,” Bullock said. “They will not have to be paid by Delaware companies.”

Copyright © 2016 The Washington Times, LLC.

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