Markell urges drastic action on budget
Pay cuts for all state workers; casinos, sports betting urged

By GINGER GIBSON • The News Journal • March 20, 2009




With Delaware stuck in the worst recession in decades, Gov. Jack Markell has proposed a dramatic expansion of gambling that would position the state as a Vegas-style destination for sports betting, horse racing, riverfront entertainment and, potentially, table games such as blackjack and poker.
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In the first year, the sports lottery would generate a modest $55 million in additional revenue. But coupled with corporate and income-tax increases, program and benefit cuts, and an across-the-board payroll reduction of 8 percent, Markell told lawmakers, his plan would balance next year's budget despite a $751 million revenue h*** and an economy that worsens by the day.

Fiscal conservatives praised the proposed cuts, but a powerful stew of Republicans, social conservatives, unions, the state's horse-racing industry, and ready-for-battle National Football League lawyers were lining up against major provisions of Markell's first budget even before he presented the plan Thursday afternoon in Dover.

"As you know, our nation is confronting its most profound financial challenges in at least 60 years. And Delaware is not immune," Markell said as he began his address. "Our solution to this historic challenge is a balanced plan, guided by the principles that our decisions will be fiscally responsible, we will be compassionate by keeping our government's core commitments and we will spread our sacrifices so no one citizen or group bears a disproportionate burden of this challenge."

If lawmakers approve the gambling expansion, Delaware could rival Nevada, the Gulf Coast and Atlantic City in variety and number of gambling outlets. But first, Markell has to ask the Delaware Supreme Court for its opinion on state law and the constitutional limitations on games of chance and lottery gambling.

Markell said he wants to make Delaware a gaming destination, and he sees sports betting as a way to do that.

"The sports lottery is a competitive differentiation for Delaware that neighboring states cannot do," Markell said. Much of the revenue, he said, would come from bettors who come to the casinos for sports betting but also wager on the slots and the horses.
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Though some conservatives and professional sports leagues have stated their intention to fight the sports betting proposal, the pay cuts could turn out to be Markell's biggest fight.
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Under the proposal, all state employees, including merit employees, teachers and state police officers, would take an 8 percent cut in pay starting July 1, although teacher pay would be affected differently because 70 percent of their salaries comes from the state and the remainder from school districts and the federal government.

Markell is also asking all employees to pay a larger share of health-care benefits. Combined with the pay cuts, state employees would see about a 10 percent pay cut.

"To cut your infrastructure people's pay is crazy. They don't make enough to start with," said Rose Simons, 39, of Milford, whose husband is a science teacher at Cape Henlopen High School. "Frankly, if you don't start cutting larger amounts at the top and cut it proportionally, its not a shared sacrifice, it's stabbing your base."

Simons, who moved from Chicago last year when her husband accepted the position at Henlopen, said cutting those who make the least across the state will likely only drive up state costs more -- pushing teachers who are entry-level employees into government assistance to make ends meet.

"If you're cutting people to a point where your degreed people are going to end up on food stamps, it's not a shared sacrifice," she said. "Cut your six-digit people more."

Delaware has about 31,700 full-time employees, including teachers and other public school workers, plus thousands of part-timers -- making it Delaware's largest employer by far. Markell chose pay cuts over job cuts and furloughs -- selling the plan as a way to provide residents the same level of service at a lower price.

Pay cuts would save the state about $91.7 million next year, equal to laying off about 1,500 state workers. He said public input gathered from town hall meetings and his Web site showed most employees would rather share the burden instead of seeing co-workers laid off.
(3 of 4)

"I ask you today to challenge the prevailing wisdom that our hands are tied until the national economy improves," Markell said. "I ask you to help us create new solutions, by sharing your ideas with us on how to create a more efficient, effective, responsive and responsible government. I ask you to commit to volunteering during these difficult times, to strengthen our community through service."
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Other states have tackled shortfalls in different ways. California put all state employees on unpaid furlough for two days each month, and Gov. Arnold Schwarzenegger threatened to lay off up to 20,000 workers before reaching a budget compromise last month.

In Maryland, which eliminated 1,000 positions -- 700 through layoffs -- workers must take from two to five days of unpaid furlough before June 30.

Markell said the pay cuts would not be permanent, and is hopeful that when the economy turns around, employee pay would be the first thing restored.

The state pension would be unaffected, Markell said. Because they are calculated on a worker's three highest years of pay, it would not lower future pension payments.

Diane Donohue, president of the teachers union DSEA, said she is concerned about the pay cuts because education initiatives are asking teachers to do more, but now may be asked to do it for less.

Education Secretary Lillian Lowery said she understand teachers' objections, but that cutting salaries would be a better option than laying off workers.

"The fact of the matter is, the budget is trying to make sure we don't impact classroom teaching," Lowery said. "No one is going to be happy, but all state employees are sharing the sacrifice."

Constitutionally, the governor cannot change pay for elected officials or judges, set by a compensation commission. However, Markell said, judges and several elected officials have already said they will voluntarily lower their pay along with the rest of the state employees.

The collapse of the auto industry, downturns in manufacturing and the financial industry's upheaval have put Delaware's economy in a tailspin. The federal bailout and the Obama administration's stimulus package have provided some relief, but state revenues continue to fall.
(4 of 4)

Delaware's unemployment rate jumped to its highest level in nearly 25 years in January, to 6.7 percent. Just a year earlier, the rate was 3.9 percent.
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In the city of Wilmington, the unemployment rate hit a grim milestone, climbing to 10.1 percent from 6.4 percent a year earlier.

"More than most states, Delaware was exposed to cracks in the foundation of our national economy. Delaware's reliance on manufacturing and financial services made our hit particularly hard," Markell said. "This budget is as grim as the financial times we face. It pulls no punches, offers no gimmicks. It makes some tough choices, and makes them clearly.

"These cuts keep our state positioned for economic growth," he said.

Part of that growth will come in the form of six new taxes, including a hike in the personal income tax, gross-receipts tax and the corporate-franchise tax.

Most Delawareans who are not employed by the state will feel the proposed cuts when they buy cigarettes or alcohol or pay their taxes.

Two "sin" tax increases are also on the table -- raising the cigarette tax by 45 cents a pack and the alcohol tax by 50 percent.

The federal government raised its cigarette tax by $1 a pack April 1.

The plan calls for raising income taxes for people who make more than $60,000 by one percentage point, but only on money earned over $60,000. The governor's office estimates that will bring in $30 million next year and $78 million in 2011.

Spending and salary cuts will be included as amendments to the existing budget and considered by the Joint Finance Committee.

The tax increases and gambling proposals head to the General Assembly as bills in the coming weeks where lawmakers can amend the proposals and replace parts with other cuts or revenue generators.

Unlike his predecessor, Ruth Ann Minner, Markell didn't include meetings of legislative leaders in preparing his recommendations and many lawmakers, who were briefed about the proposal Wednesday, withheld comment on Thursday after the public announcement.

Sen. Anthony DeLuca, D-Varlano, said he saw no problem with the governor's approach up to this point because he had made only recommendations.

From "now on," DeLuca said, he expects to be more closely involved in the process.

hough some conservatives and professional sports leagues have stated their intention to fight the sports betting proposal, the pay cuts could turn out to be Markell's biggest fight.
Advertisement
Quantcast

Under the proposal, all state employees, including merit employees, teachers and state police officers, would take an 8 percent cut in pay starting July 1, although teacher pay would be affected differently because 70 percent of their salaries comes from the state and the remainder from school districts and the federal government.

Markell is also asking all employees to pay a larger share of health-care benefits. Combined with the pay cuts, state employees would see about a 10 percent pay cut.

"To cut your infrastructure people's pay is crazy. They don't make enough to start with," said Rose Simons, 39, of Milford, whose husband is a science teacher at Cape Henlopen High School. "Frankly, if you don't start cutting larger amounts at the top and cut it proportionally, its not a shared sacrifice, it's stabbing your base."

Simons, who moved from Chicago last year when her husband accepted the position at Henlopen, said cutting those who make the least across the state will likely only drive up state costs more -- pushing teachers who are entry-level employees into government assistance to make ends meet.

"If you're cutting people to a point where your degreed people are going to end up on food stamps, it's not a shared sacrifice," she said. "Cut your six-digit people more."

Delaware has about 31,700 full-time employees, including teachers and other public school workers, plus thousands of part-timers -- making it Delaware's largest employer by far. Markell chose pay cuts over job cuts and furloughs -- selling the plan as a way to provide residents the same level of service at a lower price.

Pay cuts would save the state about $91.7 million next year, equal to laying off about 1,500 state workers. He said public input gathered from town hall meetings and his Web site showed most employees would rather share the burden instead of seeing co-workers laid off.
(3 of 4)

"I ask you today to challenge the prevailing wisdom that our hands are tied until the national economy improves," Markell said. "I ask you to help us create new solutions, by sharing your ideas with us on how to create a more efficient, effective, responsive and responsible government. I ask you to commit to volunteering during these difficult times, to strengthen our community through service."
Advertisement

Other states have tackled shortfalls in different ways. California put all state employees on unpaid furlough for two days each month, and Gov. Arnold Schwarzenegger threatened to lay off up to 20,000 workers before reaching a budget compromise last month.

In Maryland, which eliminated 1,000 positions -- 700 through layoffs -- workers must take from two to five days of unpaid furlough before June 30.

Markell said the pay cuts would not be permanent, and is hopeful that when the economy turns around, employee pay would be the first thing restored.

The state pension would be unaffected, Markell said. Because they are calculated on a worker's three highest years of pay, it would not lower future pension payments.

Diane Donohue, president of the teachers union DSEA, said she is concerned about the pay cuts because education initiatives are asking teachers to do more, but now may be asked to do it for less.

Education Secretary Lillian Lowery said she understand teachers' objections, but that cutting salaries would be a better option than laying off workers.

"The fact of the matter is, the budget is trying to make sure we don't impact classroom teaching," Lowery said. "No one is going to be happy, but all state employees are sharing the sacrifice."

Constitutionally, the governor cannot change pay for elected officials or judges, set by a compensation commission. However, Markell said, judges and several elected officials have already said they will voluntarily lower their pay along with the rest of the state employees.

The collapse of the auto industry, downturns in manufacturing and the financial industry's upheaval have put Delaware's economy in a tailspin. The federal bailout and the Obama administration's stimulus package have provided some relief, but state revenues continue to fall.
(4 of 4)

Delaware's unemployment rate jumped to its highest level in nearly 25 years in January, to 6.7 percent. Just a year earlier, the rate was 3.9 percent.
Advertisement

In the city of Wilmington, the unemployment rate hit a grim milestone, climbing to 10.1 percent from 6.4 percent a year earlier.

"More than most states, Delaware was exposed to cracks in the foundation of our national economy. Delaware's reliance on manufacturing and financial services made our hit particularly hard," Markell said. "This budget is as grim as the financial times we face. It pulls no punches, offers no gimmicks. It makes some tough choices, and makes them clearly.

"These cuts keep our state positioned for economic growth," he said.

Part of that growth will come in the form of six new taxes, including a hike in the personal income tax, gross-receipts tax and the corporate-franchise tax.

Most Delawareans who are not employed by the state will feel the proposed cuts when they buy cigarettes or alcohol or pay their taxes.

Two "sin" tax increases are also on the table -- raising the cigarette tax by 45 cents a pack and the alcohol tax by 50 percent.

The federal government raised its cigarette tax by $1 a pack April 1.

The plan calls for raising income taxes for people who make more than $60,000 by one percentage point, but only on money earned over $60,000. The governor's office estimates that will bring in $30 million next year and $78 million in 2011.

Spending and salary cuts will be included as amendments to the existing budget and considered by the Joint Finance Committee.

The tax increases and gambling proposals head to the General Assembly as bills in the coming weeks where lawmakers can amend the proposals and replace parts with other cuts or revenue generators.

Unlike his predecessor, Ruth Ann Minner, Markell didn't include meetings of legislative leaders in preparing his recommendations and many lawmakers, who were briefed about the proposal Wednesday, withheld comment on Thursday after the public announcement.

Sen. Anthony DeLuca, D-Varlano, said he saw no problem with the governor's approach up to this point because he had made only recommendations.

From "now on," DeLuca said, he expects to be more closely involved in the process.
"I ask you today to challenge the prevailing wisdom that our hands are tied until the national economy improves," Markell said. "I ask you to help us create new solutions, by sharing your ideas with us on how to create a more efficient, effective, responsive and responsible government. I ask you to commit to volunteering during these difficult times, to strengthen our community through service."
Advertisement
Quantcast

Other states have tackled shortfalls in different ways. California put all state employees on unpaid furlough for two days each month, and Gov. Arnold Schwarzenegger threatened to lay off up to 20,000 workers before reaching a budget compromise last month.

In Maryland, which eliminated 1,000 positions -- 700 through layoffs -- workers must take from two to five days of unpaid furlough before June 30.

Markell said the pay cuts would not be permanent, and is hopeful that when the economy turns around, employee pay would be the first thing restored.

The state pension would be unaffected, Markell said. Because they are calculated on a worker's three highest years of pay, it would not lower future pension payments.

Diane Donohue, president of the teachers union DSEA, said she is concerned about the pay cuts because education initiatives are asking teachers to do more, but now may be asked to do it for less.

Education Secretary Lillian Lowery said she understand teachers' objections, but that cutting salaries would be a better option than laying off workers.

"The fact of the matter is, the budget is trying to make sure we don't impact classroom teaching," Lowery said. "No one is going to be happy, but all state employees are sharing the sacrifice."

Constitutionally, the governor cannot change pay for elected officials or judges, set by a compensation commission. However, Markell said, judges and several elected officials have already said they will voluntarily lower their pay along with the rest of the state employees.

The collapse of the auto industry, downturns in manufacturing and the financial industry's upheaval have put Delaware's economy in a tailspin. The federal bailout and the Obama administration's stimulus package have provided some relief, but state revenues continue to fall.
(4 of 4)

Delaware's unemployment rate jumped to its highest level in nearly 25 years in January, to 6.7 percent. Just a year earlier, the rate was 3.9 percent.
Advertisement

In the city of Wilmington, the unemployment rate hit a grim milestone, climbing to 10.1 percent from 6.4 percent a year earlier.

"More than most states, Delaware was exposed to cracks in the foundation of our national economy. Delaware's reliance on manufacturing and financial services made our hit particularly hard," Markell said. "This budget is as grim as the financial times we face. It pulls no punches, offers no gimmicks. It makes some tough choices, and makes them clearly.

"These cuts keep our state positioned for economic growth," he said.

Part of that growth will come in the form of six new taxes, including a hike in the personal income tax, gross-receipts tax and the corporate-franchise tax.

Most Delawareans who are not employed by the state will feel the proposed cuts when they buy cigarettes or alcohol or pay their taxes.

Two "sin" tax increases are also on the table -- raising the cigarette tax by 45 cents a pack and the alcohol tax by 50 percent.

The federal government raised its cigarette tax by $1 a pack April 1.

The plan calls for raising income taxes for people who make more than $60,000 by one percentage point, but only on money earned over $60,000. The governor's office estimates that will bring in $30 million next year and $78 million in 2011.

Spending and salary cuts will be included as amendments to the existing budget and considered by the Joint Finance Committee.

The tax increases and gambling proposals head to the General Assembly as bills in the coming weeks where lawmakers can amend the proposals and replace parts with other cuts or revenue generators.

Unlike his predecessor, Ruth Ann Minner, Markell didn't include meetings of legislative leaders in preparing his recommendations and many lawmakers, who were briefed about the proposal Wednesday, withheld comment on Thursday after the public announcement.

Sen. Anthony DeLuca, D-Varlano, said he saw no problem with the governor's approach up to this point because he had made only recommendations.

From "now on," DeLuca said, he expects to be more closely involved in the process.
Delaware's unemployment rate jumped to its highest level in nearly 25 years in January, to 6.7 percent. Just a year earlier, the rate was 3.9 percent.
Advertisement
Quantcast

In the city of Wilmington, the unemployment rate hit a grim milestone, climbing to 10.1 percent from 6.4 percent a year earlier.

"More than most states, Delaware was exposed to cracks in the foundation of our national economy. Delaware's reliance on manufacturing and financial services made our hit particularly hard," Markell said. "This budget is as grim as the financial times we face. It pulls no punches, offers no gimmicks. It makes some tough choices, and makes them clearly.

"These cuts keep our state positioned for economic growth," he said.

Part of that growth will come in the form of six new taxes, including a hike in the personal income tax, gross-receipts tax and the corporate-franchise tax.

Most Delawareans who are not employed by the state will feel the proposed cuts when they buy cigarettes or alcohol or pay their taxes.

Two "sin" tax increases are also on the table -- raising the cigarette tax by 45 cents a pack and the alcohol tax by 50 percent.

The federal government raised its cigarette tax by $1 a pack April 1.

The plan calls for raising income taxes for people who make more than $60,000 by one percentage point, but only on money earned over $60,000. The governor's office estimates that will bring in $30 million next year and $78 million in 2011.

Spending and salary cuts will be included as amendments to the existing budget and considered by the Joint Finance Committee.

The tax increases and gambling proposals head to the General Assembly as bills in the coming weeks where lawmakers can amend the proposals and replace parts with other cuts or revenue generators.

Unlike his predecessor, Ruth Ann Minner, Markell didn't include meetings of legislative leaders in preparing his recommendations and many lawmakers, who were briefed about the proposal Wednesday, withheld comment on Thursday after the public announcement.

Sen. Anthony DeLuca, D-Varlano, said he saw no problem with the governor's approach up to this point because he had made only recommendations.

From "now on," DeLuca said, he expects to be more closely involved in the process.