House Passes Revenue Bills, Fiscal 2018 Budget

DOVER – House and Senate legislative leaders reached an agreement Sunday night that will maintain critical services throughout Delaware and restore funding to dozens of senior centers, assistance groups, fire companies, paramedics and other nonprofits.

The deal includes restoring approximately $66 million in cuts to the fiscal 2018 budget, including the Grant-in-Aid bill, a $36.4 million package of grants to various nonprofits and volunteer fire companies. As part of the agreement, some previous funding reductions to county tourism, public education and various health and social services programs would be restored.

To pay for these programs, lawmakers passed three revenue bills that would generate more than $60 million for fiscal 2018. The proposals would increase realty transfer, alcoholic beverage and tobacco taxes.

The deal comes a day after the General Assembly failed to reach an agreement to close a balanced budget. The state has been operating under a continuing resolution since Saturday.

“We have met our constitutional obligation to pass a balanced budget, albeit a day late,” said House Speaker Pete Schwartzkopf. “We came into this year facing a $400 million revenue shortfall, and that challenge presented us with an opportunity to make some serious decisions to fix our structural problems with our budget.

“Unfortunately, we fell short in that goal. The positive result is both sides agreed on a budget that maintains critical services to our residents. With the revenue we raised, we were able to restore many of the cuts we initially had approved, including the Grant-in-Aid bill. But the budget also includes several painful cuts that will affect services to many Delawareans.

“We must continue to work toward fixing the structural problems with our budget, but both on the expenditure and the revenue sides. We have committed to several initiatives to study ways to make government more efficient and effective, and we must commit to addressing revenues, or we will continue to face these challenges. The people of Delaware expect and deserve more.”

House Bill 279, sponsored by Rep. Schwartzkopf, would increase the realty transfer tax paid on property sales by 1%. That would increase the tax to 4%, with the county governments retaining their 1.5% share of the proceeds. That increase is projected to generate $45 million in fiscal 2018 and approximately $72.9 million in fiscal 2019.

House Bill 241, sponsored by Rep Schwartzkopf, D-Rehoboth Beach, would increase the alcoholic beverage tax for the first time in 27 years, boosting rates for beer, wine and spirits by varying amounts. The increases would result in a 1-cent increase per can of beer, 13-cent hike on a 750 milliliter bottle of wine, and 15-cent raise on a bottle of spirits.

When sales taxes (which Delaware does not have) are factored in, the First State’s new excise taxes would still be significantly lower than all surrounding states’ total taxes on alcoholic beverages.

HB 241 is projected to raise $5.2 million in fiscal 2018 and $7.1 million in fiscal 2019.

House Bill 242, sponsored by Rep. Schwartzkopf, would increase tobacco and related product taxes and fees. Notably, the bill would increase the tax on a pack of cigarettes by 50 cents, hike the tax on moist snuff and other tobacco products, establish a tax on vapor products and increase tobacco retailer license fees to $150 every three years.

With sales taxes factored in, Delaware’s taxes on cigarettes still would be lower than surrounding states.

HB 242 is projected to generate $11.6 million in fiscal 2018 and $17.1 million in fiscal 2019.

“Unlike my home state of Illinois, Delaware legislators from both parties got together and put together and passed a balanced budget, removing speculation about whether we would fund critical services,” said House Majority Leader Valerie Longhurst, D-Bear. “It took longer than we had hoped, and both sides would have liked a different outcome, but we managed to get into a room, talk things out and figure out a path forward.

“We should be pleased we passed a balanced budget, but we also have to recognize the challenges we face and work to meet them head-on. As this session showed, this requires both sides to acknowledge the challenges we have and work together on them. We have an obligation to our constituents to fix these issues and put Delaware on a sustainable path forward.”