U.S. Markets open in 3 hrs 35 mins

Del. governor proposes $3.7 billion spending plan

Randall Chase, Associated Press

DOVER, Del. (AP) -- Delaware Gov. Jack Markell on Thursday proposed a $3.7 billion operating budget for the fiscal year starting July 1, an increase of about 3.5 percent over the current year's budget.

The Democratic governor's proposal includes about $40 million in increased spending for personnel costs, and $35.8 million in additional spending for Medicaid.

Markell also proposed about $7 million for new initiatives, including $3.3 million to expand mental health services in public schools and $2.2 million for after-school and summer programs to keep at-risk youth out of trouble.

As part of the spending plan, Markell proposed keeping increases in corporate franchise and estate taxes that were approved in 2009 from expiring as planned. He also proposed keeping higher personal income and gross receipts taxes from expiring, or "sunsetting", but with slight downward modifications in the tax rates.

"We are keeping a significant part of the revenue that would have gone away had all the sunsets stayed in place," Markell said before his proposal was released, noting that allowing the tax increases to expire would have meant "painful" budget cuts. As it stands, the proposed budget already includes cuts in funding for farmland preservation and open space programs and does not include any general salary increase for state employees.

Lawmakers will use Markell's proposal as a starting point in fashioning a budget for fiscal 2014. The legislature's joint finance committee begins its budget hearings on Monday.

While balancing the proposed budget for the upcoming fiscal year, Markell's plan still leaves a deficit of more than $100 million in fiscal 2015, based on current projections. Markell noted that budget deficits have been a recurrent challenge for his administration since he first took office in 2009.

"It is no surprise that we are likely to face an additional gap next year," he said.

In addition to the operating budget, Markell is proposing $423.5 million in spending for capital expenses, slightly less than he proposed for the current year last January. The capital budget targets $293 million for construction projects, equipment upgrades and economic development, and $184 million for transportation improvements. He also proposed $43 million in grants to nonprofit groups and community agencies.