- Associated Press - Thursday, January 29, 2015

DOVER, Del. (AP) - Gov. Jack Markell is relying on road funds and cuts to senior citizen tax credits to balance a proposed $3.9 billion operating budget for the fiscal year starting July 1.

The budget proposed by Markell on Thursday represents an increase of about 2.4 percent over the current year’s budget, but administration officials nevertheless said the spending plan was constrained.

“This is a very difficult budget,” Markell said.

To help balance the budget, the Democratic governor proposed cutting more than $12 million in property tax breaks for senior citizens. Currently, the state offers subsidies of 50 percent, or $500, whichever is less, to property owners ages 65 and older. The administration is proposing to cut the subsidy in half, to 25 percent, or $250.

“We are amongst the most popular places to retire, amongst the lowest property taxes, and this credit is not going to change that,” Markell said. “We are an extraordinarily affordable place to retire to.”

Officials said the proposed subsidy reduction acknowledges the long-term fiscal challenge from a rapidly aging population. They estimate that people over age 65 will account for a quarter of Delaware’s population by 2035, compared to 13 percent in 2000.

“Those numbers are not a maybe, they’re a given,” said deputy finance secretary David Gregor. “They’re going to happen. The demographics are going to change.”

Markell also is again proposing, as he did last year, taking $40 million from the transportation trust fund to pay for operational needs. The trust fund is supposed to be used only for transportation and infrastructure projects but has been raided repeatedly in recent years to balance the state’s operating budget.

Last year, Markell acknowledged that the trust fund faced serious financial challenges, and that Delaware’s infrastructure system required hundreds of millions of dollars in investments. His call for a 10-cent increase in the state’s gas tax to help address the problem went nowhere in the legislature, and he did not include a similar proposal in this year’s plan.

“I’ve heard from a number of legislators that they recognize that we need to do something,” said Markell, who described the transportation trust fund problem as an issue separate from the general fund budget. “I wouldn’t say we’ve coalesced around a single plan yet, but I’m hopeful that we will.”

In other moves to balance his proposed spending plan, Markell wants to cut the state’s strategic fund, which offers incentives to businesses in an effort to attract and retain jobs, by more than half. His proposal calls for $10 million, down from $22.2 million this year.

The administration also wants to divert about $7 million each from open space and farmland preservation programs to the general fund, as well as $5 million from an energy-efficiency fund.

The spending plan does not call for a new pay raise for state employees but does include $22.8 million for obligations that lawmakers committed to last year, including salary and pension increases.

The budget also includes more than $15 million to accommodate enrollment growth in public schools and about $10 million in new funding for various school-improvement initiatives. Markell also is proposing $4.5 million in new funding for substance-abuse treatment programs.

In addition to the operating budget, Markell is proposing a capital budget of $347 million for construction and road projects, about the same as this year. The $45 million in proposed grants to nonprofit groups and community agencies also is the same as this year.

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