00:00:00.920 - 00:00:13.170

Male voice 1: Well, life is not always fair. Male voice 1: Definitely the other senators and Male voice 1: the other House members knew of the involvement and all Male voice 1: of my recommendation were that

00:00:13.170 - 00:00:22.070

Male voice 1: there was no conflict of Male voice 1: interests, since there was no personal gain. Male voice 1: So I just have to, you know, Male voice 1: I have to live with my conscious and my actions

00:00:22.070 - 00:00:35.100

Male voice 1: and so do they. Male voice 2: Senator are you bitter at this point? Male voice 1: No, absolutely not. Male voice 1: It takes a lot to get me bitter.

00:00:38.940 - 00:00:55.520

Female voice 1: I don't know if this was asked, Senator. But what is next? Female voice 1: Is your resignation, does it need to be accepted or its just is? Male voice 3: His resignation is effective... [Audio cuts off] Male voice 4: Grandfather as of two o'clock

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Male voice 4: this morning. That's why we're gathered here. [Applause] Male voice 4: It was easy. [People chuckle a little]

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Male voice 4: I wish to welcome all of you Male voice 4: all of you here for the announcement of Male voice 4: the candidates that will be Male voice 4: presented to the Republican Party convention,

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Male voice 4: tomorrow, and they are Male voice 4: seeking the endorsement Male voice 4: of the Republican Party. Male voice 4: We have three candidates for three offices.

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Male voice 4: As to their quality, Male voice 4: we feel rather strong Male voice 4: that they will be truly representative. [Audio cuts off] Female voice 2: Ben and backward clock Cohen centers

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Crowd of people: Aye Male voice 5: Those no? Male voice 6: No. Male voice 5: The motion is carried, the bill moves forward. Madam Clerk? Female voice 2: Mr. Speaker, Female voice 2: House bill number 717, introduced by

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Female voice 2: Representatives Petrilli, Taylor Female voice 2: Carey, Reynolds, Female voice 2: Caulk, and Steele. Representatives Female voice 2: Anderson, Bennett, Boykin, Brady, Barnes, Buckworth,

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Female voice 2: Clarke, Corrozi, Davis, D. Ennis, Female voice: Fallon, Free, George, Gilligan, Female voice: Hebner, Houghton, Jester, Mack, Maroney, Oberle, Outten, Female voice 2: Plant, Quillen, Roy, Sills, Smith, Soles, Spence,

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Female voice 2: Van Sant, West, Wingate, female voice 2: Senators Bair, Bane, Female voice 2: Knox, and Neal. An act Female voice 2: entitled The Tax Reduction Act 1986,

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Female voice 2: Which amends Chapter 11, title 30 of Female voice 2: the Delaware code Female voice 2: relating to Female voice 2: the reduction of personal income tax rates.

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Female voice 2: Mr. Speaker, this includes the Female voice 2: reading of House Bill number 717 Female voice 2: by title only. Male voice 4: Mr. Petrilli, on the Bill. Representative Joseph R. Petrilli: Thank you, Mr. Speaker,

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Representative Petrilli: I have an amendment. Male voice 4: Please present that. Male voice 4: Please number this House Male voice 4: Amendment number one to House Bill 717,

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Male voice 4: Madam Clerk. Female voice 2: Mr. Speaker. Female voice 2: House amendment number one to House Bill 717 Female voice 2: introduced by Representative Petrilli. Female voice 2: Mr. Speaker, this includes the reading

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Female voice 2: House Amendment number one to Female voice 2: House Bill 717 Female voice 2: by title only. Male voice 4: Thank you.

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Male voice 4: You are on the Amendment, Mr Petrilli. Representative Petrilli: Mr. Speaker, Representative Petrilli: this is a technical change, Representative Petrilli: corrects a statutory reference in Representative Petrilli: the original bill. I ask for it's

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Representative Petrilli: adoption by voice vote. Male voice 4: All those in favor of House Male voice 4: Amendment number one to House Bill 717 Male voice 4: please indicate the saying aye.

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[Many voices say aye} Male voice 4: Oppose, no. Male voice 4: House amendment one to Male voice 4: House Bill 717 declared passed the House.

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[Gavel strikes] Male voice 4: Now, part of the bill. Male voice 4: Mr. Petrilli Representative Petrilli: Thank you Mr. Speaker. Male voice 4: Sitting right here. Representative Petrilli: This is the 10 percent tax cut bill.

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Representative Petrilli: There's been discussion over Representative Petrilli: the last few weeks where Representative Petrilli: we went ahead in the future. Representative Petrilli: This piece of legislation affects

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Representative Petrilli: all citizens of the state of Delaware. Representative Petrilli: It drops the rates 10 percent, Representative Petrilli: brings our top right down sir, to 8.7%. Representative Petrilli: I believe there may

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Representative Petrilli: be some questions on the issue. Representative Petrilli: I'll prepare to try to address them at this time. Male voice 4: Mr. George. Representative Orlando J. George, Jr.: Mr. Speaker I don't have a question, I just have a comment,

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Representative George: if I may. Representative George: Mr. Speaker there are a lot of ideas Representative George: floating around this hall on Representative George: ways to cut taxes.

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Representative George: Certainly all of them are worthy ideas. Representative George: Personally, this is my favorite. Representative George: Cutting personal income taxes, Representative George: I believe is the best way to

00:04:33.260 - 00:04:42.110

Representative George: go because as Mr. Petrilli stated, Representative George: it impacts just about everyone Representative George: in this state. Representative George: Everyone who pays an income tax

00:04:42.110 - 00:04:48.950

Representative George: will get a benefit from it. Representative George: I think it's a worthy proposal. Representative George: I think the House ought to pass it. Representative George: I do believe that there's going to be

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Representative George: a meeting of the minds in this Representative George: in this building within Representative George: the next week or so to Representative George: hammer out what the

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Representative George: final package is going to be. Representative George: But I think the House needs to pass this and Representative George: hopefully send it to the Senate and up to Representative George: the Governor's desk for

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Representative George: his signature. Male voice 4: Thank you. Mr. Oberle. Male voice 4: Mr. Bennett. Representative Edward J. Bennett: Thank you, sir. Representative Bennett: Mr. Speaker, I have

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Representative Bennett: some questions of sponsor or Representative Bennett: if Secretary Buxbom Representative Bennett: or if a representative from the administration is here. Representative Bennett: My questions, Mr. Petrilli

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Representative Bennett: involve the impact the fiscal year 88. Representative Bennett: The... My understanding Representative Bennett: the 10 percent PIT cut Representative Bennett: only, the numbers developed cost fiscal

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Representative Bennett: year 87 $17.2 million, Representative Bennett: and fiscal year 88 $40 million. Representative Bennett: I've heard a lot of discussion about Representative Bennett: numbers and how one arrives at numbers.

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Representative Bennett: I guess I'd like to Representative Bennett: try to determine that what we're Representative Bennett: doing today is responsible. Male speaker 4: Mr Petrilli can you respond?

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Representative Petrilli: The numbers are approximately correct. Representative Petrilli: The numbers I have, sir, Representative Petrilli: $17.1 million for 87. And Representative Petrilli: $38 million for the full year of fiscal 88.

00:06:06.200 - 00:06:15.360

Representative Petrilli: But I believe we're close. Representative Petrilli: Can we afford it? Representative Petrilli: I believe the answer is yes. Representative Petrilli: As DEFAC indicated yesterday,

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Representative Petrilli: and I think the arguments are there Representative Petrilli: to satisfy that, we have a Representative Petrilli: fifty million dollar rainy day fund. Representative Petrilli: We have over $20 million

00:06:29.870 - 00:06:40.480

Representative Petrilli: in what we call a 2% set aside. Representative Petrilli: We have an unencumbered cash balance Representative Petrilli: of $60 million. Representative Petrilli: Essentially more than covers

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Representative Petrilli: some future concerns. Representative Petrilli: Now certainly we cannot get Representative Petrilli: into all those readily, Representative Petrilli: but there are opportunities for us to

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Representative Petrilli: make adjustments in any case. Representative Petrilli: What we did realize and Representative Petrilli: DEFAC of courses is Representative Petrilli: some reduction if you will

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Representative Petrilli: in PIT. But that PIT Representative Petrilli: came from a different perspective. Representative Petrilli: That PIT reduction mainly came Representative Petrilli: from estimated tax and

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Representative Petrilli: tax with final return. Representative Petrilli: Quite frankly, the withholding piece Representative Petrilli: of it is in a growth projection, Representative Petrilli: which to me is a very positive sign.

00:07:18.180 - 00:07:24.860

Representative Petrilli: If you care to have Representative Petrilli: some further discourse from Representative Petrilli: the Secretary of Finance, Representative Petrilli: he may be able to provide

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Representative Petrilli: you some additional information, Representative Petrilli: but I'm not sure what detailed information Representative Petrilli: I can provide for you this Representative Petrilli: time other than what I've just said. Male voice 4: Mr. Bennett.

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Representative Bennett: Thank you, sir. Well, sir, Representative Bennett: you mentioned two areas Representative Bennett: as having money available. Representative Bennett: That is the rainy day fund,

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Representative Bennett: which has strings and the 2% set aside, Representative Bennett: which we have never been able to conquer, or Representative Bennett: figure out how to get into that fund. Representative Bennett: So there's two areas

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Representative Bennett: where really we have money set aside, Representative Bennett: but we cannot use it unless we have Representative Bennett: a sharp revenue downturn or Representative Bennett: sharp revenue loss in

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Representative Bennett: the case of the rainy day fund, Representative Bennett: which means going into the rainy day fund. Representative Bennett: And they use those numbers to justify Representative Bennett: this 10 percent tax cut I don't...

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Representative Bennett: I don't think are relevant. Representative Bennett: Yes, we have the money, but Representative Bennett: something catastrophic has to happen. Representative Bennett: And for us to stand here today.

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Representative Bennett: And we do something 10% and say, Well, Representative Bennett: we can justify that because Representative Bennett: we have set aside funds in the future. Representative Bennett: I guess I have a problem

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Representative Bennett: with. I got some numbers. Representative Petrilli: Mr. Speaker... Representative Petrilli: if I may, I am sorry. Representative Petrilli: Go ahead. Mr. Bennett. Male voice 4: Mr. Bennett. Representative Bennett: Well, so I was just going to relate to

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Representative Bennett: Mr. Petrilli, I have some numbers that Representative Bennett: show that if we pass this Representative Bennett: tax cut we will be in the Representative Bennett: 98% to the tune

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Representative Bennett: of almost $15 million in fiscal year 88. Representative Bennett: Which would mean that we'd Representative Bennett: have a problem. We would either force Representative Bennett: our self into the rainy day fund

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Representative Bennett: or try to finagle something Representative Bennett: to get in the 2% set aside. Representative Bennett: And I don't think we want to do that. Representative Bennett: We more or less mortgage a future

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Representative Bennett: because we have those funds available. Representative Bennett: And the assumptions that I have drawn have Representative Bennett: come from the Monday meeting. That's Representative Bennett: yesterday's meeting at DEFAC

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Representative Bennett: and they've been updated. Representative Bennett: What I've, what Representative Bennett: really these numbers are Representative Bennett: from the Controller General's office.

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Representative Bennett: There our numbers. Representative Petrilli: I'm not sure if I follow Representative Petrilli: your argument. Maybe you Representative Petrilli: can take me a little further. Representative Petrilli: I did not say that

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Representative Petrilli: we could we pass Representative Petrilli: a 10 percent tax cut because we have Representative Petrilli: a rainy day fund and 2% set aside. They are Representative Petrilli: as anybody knows, are for

00:09:38.690 - 00:09:48.920

Representative Petrilli: a major downturn in Representative Petrilli: our revenues. But we do have growth. Representative Petrilli: We have a significant growth. Representative Petrilli: And the money is essentially there.

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Representative Petrilli: But if you would like to break Representative Petrilli: me down a detail of Representative Petrilli: where you feel that Representative Petrilli: those numbers are

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Representative Petrilli: inaccurate I'd certainly be glad to listen. Male voice 4: Mr. Bennett. Representative Bennett: Thank you, sir. Representative Bennett: Well, I'm assuming a 7 percent tax growth, Representative Bennett: less of $40 million

00:10:04.480 - 00:10:18.890

Representative Bennett: tax cut that's been proposed here. Representative Bennett: That's consistent with DEFAC. Representative Bennett: And I show revenues Representative Bennett: at the 90 percent level of 972.3

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Representative Bennett: fiscal year 88, with assuming Representative Bennett: budget growth consistent Representative Bennett: with what happened in 86, Representative Bennett: 87 of 6.3,

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Representative Bennett: just growing the base budget by 6.3, Representative Bennett: exclusive of what we've added Representative Bennett: in the House bill 360 or Representative Bennett: the proposed budget for

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Representative Bennett: 87. Exclusive of those numbers then it would Representative Bennett: be adjustments for salary increases Representative Bennett: for a public school teachers, Representative Bennett: the proposed hay,

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Representative Bennett: personnel change bringing individuals Representative Bennett: up to the minimums. Representative Bennett: Building on that Representative Bennett: some other things such as speeding up

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Representative Bennett: the Blue Cross coverage for Representative Bennett: initial state employees, Representative Bennett: those kind of things. Representative Bennett: And I come up with a line of 986.7

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Representative Bennett: exclusive of the add-ins that Representative Bennett: occurred in the last week Representative Bennett: or two in the base budget for 87. Representative Bennett: And this is expenditure.

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Representative Bennett: Expenditure levels are grossly understated. Representative Bennett: I guess I want more specifics, Representative Bennett: if Mr. Buxbaum has them or if there is Representative Bennett: someone available that I

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Representative Bennett: could ask some questions, Representative Bennett: sir. I'd appreciate that. Male voice 4: Mr. Golding was in the chamber. Male voice 4: I don't see him at the moment.

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Representative Petrilli: Mr. Speaker I ask for Representative Petrilli: personal clearance of the floor for Representative Petrilli: Secretary Buxbaum. Secretary Buxbaum: William E. Buxbaum, Secretary of Finance.

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Male voice 4: Question Mr. Bennet? Representative Bennett: Yes, sir. Mr. Buxbaum Representative Bennett: what do you perceive to be Representative Bennett: the 98% figure in fiscal year 88?

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Secretary Buxbaum: Obviously, Mr. Bennett we Secretary Buxbaum: really don't have a 98% figure for 88. Secretary Buxbaum: You've got to make Secretary Buxbaum: some assumptions as regards what

00:12:13.550 - 00:12:22.700

Secretary Buxbaum: the growth will be in Secretary Buxbaum: all the sectors of the economy and how Secretary Buxbaum: that will impact the total revenues. Secretary Buxbaum: We have made any number

00:12:22.700 - 00:12:36.170

Secretary Buxbaum: of alternative calculations. Secretary Buxbaum: And you can indeed, I won't... Secretary Buxbaum: I'm really don't think it would Secretary Buxbaum: be productive to argue the point

00:12:36.170 - 00:12:46.280

Secretary Buxbaum: on the basis of figures because I Secretary Buxbaum: have made figures that show a deficit, Secretary Buxbaum: if you include the tax cut, Secretary Buxbaum: I put together figures that show

00:12:46.280 - 00:12:53.300

Secretary Buxbaum: a comfortable surplus depending Secretary Buxbaum: on what the growth rates Secretary Buxbaum: are that are assumed Secretary Buxbaum: in underlying the growth

00:12:53.300 - 00:13:03.380

Secretary Buxbaum: of the tax base in general. Secretary Buxbaum: We've had a long history. Secretary Buxbaum: If I may discourse for just a moment, of Secretary Buxbaum: considerably overestimating the,

00:13:03.380 - 00:13:09.620

Secretary Buxbaum: the negative effects. Secretary Buxbaum: of past tax cuts. Secretary Buxbaum: And we have a general tendency to do that. Secretary Buxbaum: And I favor that

00:13:09.620 - 00:13:18.050

Secretary Buxbaum: more or less conservative approach, Secretary Buxbaum: but not conservative to Secretary Buxbaum: the extent that it would preclude, Secretary Buxbaum: our doing some things that are thought

00:13:18.050 - 00:13:25.990

Secretary Buxbaum: to be in the overall general welfare. Secretary Buxbaum: If you assume, for example, Secretary Buxbaum: a real growth rate in Secretary Buxbaum: this economy and of

00:13:25.990 - 00:13:36.500

Secretary Buxbaum: other tax revenues Secretary Buxbaum: and the range of three or four percent. Secretary Buxbaum: Our numbers show that you can Secretary Buxbaum: finance this tax cut

00:13:36.500 - 00:13:46.460

Secretary Buxbaum: and still have in fiscal 88 Secretary Buxbaum: budgetary growth... Secretary Buxbaum: Something in excess of Secretary Buxbaum: the anticipated rate of

00:13:46.460 - 00:13:53.720

Secretary Buxbaum: inflation, something I Secretary Buxbaum: think appropriately in excess. Secretary Buxbaum: Now, if we're talking Secretary Buxbaum: about... if we're talking about

00:13:53.720 - 00:14:02.790

Secretary Buxbaum: conserving enough money to Secretary Buxbaum: have continuous year after Secretary Buxbaum: year increases of Secretary Buxbaum: six or seven or more percent

00:14:02.790 - 00:14:09.710

Secretary Buxbaum: and the operating base, Secretary Buxbaum: then I have to agree with the point. Secretary Buxbaum: I think you're making, is that Secretary Buxbaum: we really can't afford

00:14:09.710 - 00:14:19.580

Secretary Buxbaum: and shouldn't be contemplating Secretary Buxbaum: probably any kind of tax cut. Representative Bennett: What kind of growth Representative Bennett: are you anticipating in

00:14:19.580 - 00:14:30.440

Representative Bennett: a net revenue picture Representative Bennett: as a percent? And what do you define as... Secretary Buxbaum: Well I would say that if we, Secretary Buxbaum: if we are having a three to four percent real growth

00:14:30.440 - 00:14:42.260

Secretary Buxbaum: and there is assumed a 3% inflation. Secretary Buxbaum: You're talking about six, seven Secretary Buxbaum: percent increase in revenues. Secretary Buxbaum: And let me comment one other point that

00:14:42.260 - 00:14:53.000

Secretary Buxbaum: is I don't want it to be contentious, Secretary Buxbaum: it needn't be contentious, Secretary Buxbaum: but the fact is I don't really personally Secretary Buxbaum: accept the forty million dollar figure

00:14:53.000 - 00:15:06.650

Secretary Buxbaum: for the first full year. Secretary Buxbaum: We have a certain methodology that has been Secretary Buxbaum: used here on legislation for some years that, Secretary Buxbaum: that people have questioned.

00:15:06.650 - 00:15:14.780

Secretary Buxbaum: It's just a mathematical way of saying, well, Secretary Buxbaum: if you reduce rates by 10 percent, Secretary Buxbaum: you're gonna get that much less taxes. Secretary Buxbaum: We know that there are other things

00:15:14.780 - 00:15:20.540

Secretary Buxbaum: at work out there that, Secretary Buxbaum: that tend to offset that. Secretary Buxbaum: For example, even in Secretary Buxbaum: the DEFAC meeting yesterday,

00:15:20.540 - 00:15:33.500

Secretary Buxbaum: it was agreed to appoint Secretary Buxbaum: a subcommittee to work during the summer Secretary Buxbaum: to refine for DEFAC's benefit, at least, Secretary Buxbaum: a way to more appropriately measure

00:15:33.500 - 00:15:42.560

Secretary Buxbaum: the impact of tax cuts, Secretary Buxbaum: which would attempt to give effect to Secretary Buxbaum: the multiplier effect that is Secretary Buxbaum: in the tax cut itself.

00:15:42.560 - 00:15:47.750

Secretary Buxbaum: In other words, that money Secretary Buxbaum: stays in people's pocket, Secretary Buxbaum: it doesn't come to the state Secretary Buxbaum: and it gets spent and

00:15:47.750 - 00:15:55.190

Secretary Buxbaum: spent several times over. Secretary Buxbaum: Now, I don't really choose to Secretary Buxbaum: introduce a new methodology Secretary Buxbaum: at this late stage,

00:15:55.190 - 00:16:04.440

Secretary Buxbaum: but I have to tell you qualitatively. Secretary Buxbaum: I believe that, believe that strongly Secretary Buxbaum: and the experience would support it. Secretary Buxbaum: And I would hope that

00:16:04.440 - 00:16:09.590

Secretary Buxbaum: indeed during the summer Secretary Buxbaum: this DEFAC committee Secretary Buxbaum: can come up with something Secretary Buxbaum: so that by the time they get

00:16:09.590 - 00:16:16.820

Secretary Buxbaum: to their September meeting, Secretary Buxbaum: then they will have to because they will have Secretary Buxbaum: presumably some tax cuts Secretary Buxbaum: with some magnitude.

00:16:16.820 - 00:16:25.740

Secretary Buxbaum: And they will have to quantify them. Secretary Buxbaum: And I would hope that that methodology could Secretary Buxbaum: then perhaps be transferred Secretary Buxbaum: back to Dover here

00:16:25.740 - 00:16:33.170

Secretary Buxbaum: to use in our fiscal note purposes. Secretary Buxbaum: But I am simply saying Secretary Buxbaum: that if you take Secretary Buxbaum: the worst out of everything,

00:16:33.170 - 00:16:43.910

Secretary Buxbaum: I agree with you, the numbers don't add up. Secretary Buxbaum: On the other hand, our experience has been that Secretary Buxbaum: even what the tax cuts we Secretary Buxbaum: have had excessive revenues,

00:16:43.910 - 00:16:53.600

Secretary Buxbaum: revenue buildups over Secretary Buxbaum: the past four, five years now. Secretary Buxbaum: That as far as I'm concerned, Secretary Buxbaum: I'll just I'm going into so

00:16:53.600 - 00:17:01.310

Secretary Buxbaum: my personal philosophy here, Secretary Buxbaum: but I'm sure I Secretary Buxbaum: know that I share it with some others. Secretary Buxbaum: That it is much more dangerous really

00:17:01.310 - 00:17:14.930

Secretary Buxbaum: to perpetuate those excess revenues Secretary Buxbaum: that find themselves one way or Secretary Buxbaum: the other end of the spending base. Secretary Buxbaum: And would I'm afraid result in our

00:17:14.930 - 00:17:25.400

Secretary Buxbaum: getting on a path of Secretary Buxbaum: spending an ever greater part of the, Secretary Buxbaum: of the economic wealth of this state, Secretary Buxbaum: which would really be

00:17:25.400 - 00:17:32.570

Secretary Buxbaum: a very bad road for us to get back on. Secretary Buxbaum: So I think Secretary Buxbaum: frankly in this area you have to take Secretary Buxbaum: some degree of chance.

00:17:32.570 - 00:17:42.140

Secretary Buxbaum: If you're absolutely sure that you Secretary Buxbaum: can cover every tax cut and can prove Secretary Buxbaum: it with numbers and still have an excess, Secretary Buxbaum: you're probably not cutting it

00:17:42.140 - 00:17:52.460

Secretary Buxbaum: thin enough in order to maintain Secretary Buxbaum: the, really the self-discipline that's necessary Secretary Buxbaum: to keep spending growth in check. Secretary Buxbaum: So all of these things have entered

00:17:52.460 - 00:18:02.700

Secretary Buxbaum: into mine and Secretary Buxbaum: the administration's consideration of this, Representative Bennett: So the assumption, Mr. Buxbaum, Representative Bennett: is a 3% budget growth in fiscal year 88?

00:18:02.800 - 00:18:11.030

Secretary Buxbaum: I would say that you'll Secretary Buxbaum: have more than that. I would say that Secretary Buxbaum: you'd have four or five, most likely. Representative Bennett: Historically, the last few years we've

00:18:11.030 - 00:18:20.110

Representative Bennett: been in the range of six to seven. Representative Bennett: And this this year Representative Bennett: we're about...well Representative Bennett: including the add-ins were about 6.7.

00:18:20.110 - 00:18:28.970

Representative Bennett: And I guess that's where we sort of separate. Representative Bennett: I don't want to argue the impact Representative Bennett: because I think your department says Representative Bennett: 39 million and we're saying 40.

00:18:28.970 - 00:18:37.970

Secretary Buxbaum: We say 38 really. But I won't quibble with that. Representative Bennett: So I think we're pretty Representative Bennett: close together at that point, but I... Secretary Buxbaum: At... on a full cost basis, Mr. Bennett,

00:18:37.970 - 00:18:47.270

Secretary Buxbaum: the 38 is the full calculated cost. Secretary Buxbaum: I'm saying that as a practical matter, Secretary Buxbaum: it will be less than that. Secretary Buxbaum: Then there's this other thing out there

00:18:47.270 - 00:18:54.990

Secretary Buxbaum: that I think we should not consider, Secretary Buxbaum: but we should be aware of. Secretary Buxbaum: And that is the federal government Secretary Buxbaum: is going to do something.

00:18:54.990 - 00:19:01.960

Secretary Buxbaum: We don't, we don't know what Secretary Buxbaum: the final package is. Secretary Buxbaum: We know, I think we know Secretary Buxbaum: with a high degree of certainty that

00:19:01.960 - 00:19:09.500

Secretary Buxbaum: something is going to come out Secretary Buxbaum: of Washington that is going to Secretary Buxbaum: significantly reduce the amount Secretary Buxbaum: of deductions that are

00:19:09.500 - 00:19:15.950

Secretary Buxbaum: allowed for federal income tax purposes. Secretary Buxbaum: Our methodology in Secretary Buxbaum: the state, the piggyback method, Secretary Buxbaum: which I think we should stick with,

00:19:15.950 - 00:19:21.730

Secretary Buxbaum: but we should compensate for it Secretary Buxbaum: in other ways is to pick up Secretary Buxbaum: adjusted gross income Secretary Buxbaum: from the federal return.

00:19:21.730 - 00:19:28.730

Secretary Buxbaum: Unless we do something in the way it Secretary Buxbaum: was significant tax cut Secretary Buxbaum: before this session ends, Secretary Buxbaum: we're going to have

00:19:28.730 - 00:19:39.410

Secretary Buxbaum: Delaware taxpayers in 1987 Secretary Buxbaum: having a perhaps significant increase Secretary Buxbaum: in their state income taxes. Secretary Buxbaum: And I don't any of us wants that.

00:19:39.410 - 00:19:45.590

Secretary Buxbaum: So well, Secretary Buxbaum: qualitatively, I think you Secretary Buxbaum: need to keep that in mind too. Representative Bennett: I think that what you're saying

00:19:45.590 - 00:19:54.230

Representative Bennett: from Washington would be nice. Representative Bennett: But I think all of us in this chamber Representative Bennett: cannot depend on Washington to Representative Bennett: even be consistent. That's part of the problem

00:19:54.230 - 00:20:02.780

Representative Bennett: they are having today. Secretary Buxbaum: I agree with that. Representative Bennett: And I would like to set that aside if we could, Representative Bennett: because DEFAC has not Representative Bennett: examine that and we're just not sure.

00:20:02.780 - 00:20:12.980

Representative Bennett: The, I guess Representative Bennett: the basic difference that Representative Bennett: that I keep seeing is Representative Bennett: in what we call the budget gross side.

00:20:12.980 - 00:20:25.910

Representative Bennett: And comparing to either your numbers Representative Bennett: or the numbers that I've been working with, Representative Bennett: there appears to be a potential Representative Bennett: of a negative downside,

00:20:25.910 - 00:20:41.660

Representative Bennett: in 88 of 15 to 13 million dollars, in that range. Representative Bennett: And this will drive us into a rainy day fund. Representative Bennett: Rather than say increase Representative Bennett: taxes or shift or do whatever.

00:20:41.660 - 00:20:51.740

Representative Bennett: And a lot at this, Representative Bennett: it appears that the choices we're confronted Representative Bennett: with are those that Representative Bennett: really we are approaching

00:20:51.740 - 00:21:00.410

Representative Bennett: with very little knowledge. Representative Bennett: You can't get the economists on DEFAC to go Representative Bennett: past the first-quarter of 87 Representative Bennett: to even talk about it.

00:21:00.410 - 00:21:09.200

Representative Bennett: Perhaps, to the point of Representative Bennett: being paranoid about the downturn Representative Bennett: in revenue in Delaware. Representative Bennett: Because I was involved in that one time

00:21:09.200 - 00:21:16.160

Representative Bennett: and it takes a lot out of Representative Bennett: one to try to find money. Representative Bennett: But at the same time, Representative Bennett: I think the issue should be

00:21:16.160 - 00:21:26.540

Representative Bennett: raised in front of this chamber. Representative Bennett: That there are things that could Representative Bennett: occur and we're not Representative Bennett: exactly on online with our figures,

00:21:26.540 - 00:21:34.610

Representative Bennett: as you indicated sir, to the chamber, Representative Bennett: there's a potential depending. Representative Bennett: So we're more or Representative Bennett: less in a balancing act.

00:21:34.610 - 00:21:44.740

Representative Bennett: And what I see as a percentage. Representative Bennett: And Lord knows this is Representative Bennett: a difficult position to be in. To be Representative Bennett: discussing or debating a tax cut.

00:21:44.740 - 00:21:53.420

Representative Bennett: When we all, in our times, Representative Bennett: particularly in our state, Representative Bennett: have enjoyed good times. Representative Bennett: But my figures

00:21:53.420 - 00:22:05.810

Representative Bennett: show that we should be looking Representative Bennett: at a range of about 6% as a maximum. Secretary Buxbaum: Well, really the point is not arguable, Secretary Buxbaum: If I think, I'm quite sure, that I

00:22:05.810 - 00:22:13.910

Secretary Buxbaum: am quite sure that administration, Secretary Buxbaum: I am quite sure the majority of people here, Secretary Buxbaum: if they really believed Secretary Buxbaum: that we'd have a shortfall of any magnitude,

00:22:13.910 - 00:22:20.630

Secretary Buxbaum: 13 million, 15 million Secretary Buxbaum: or less than that, half of that, Secretary Buxbaum: we could certainly not Secretary Buxbaum: be in position to supporting this.

00:22:20.630 - 00:22:34.390

Secretary Buxbaum: I believe that as dangerous as Secretary Buxbaum: it is to project the future. Secretary Buxbaum: We know we can't do it. Secretary Buxbaum: But using the past as a guide to some extent,

00:22:34.390 - 00:22:46.360

Secretary Buxbaum: using reasonable sets of numbers, Secretary Buxbaum: I would think that we could to do Secretary Buxbaum: this and have budgetary growth in FY 88, Secretary Buxbaum: something like four to five percent.

00:22:46.360 - 00:22:54.150

Secretary Buxbaum: And if that isn't enough, Secretary Buxbaum: then I mean, that's a judgment Secretary Buxbaum: that you folks have to make. Secretary Buxbaum: But it would seem to me in an environment of

00:22:54.150 - 00:23:01.130

Secretary Buxbaum: probably a three percent inflation that Secretary Buxbaum: most people are projecting Secretary Buxbaum: pertain then Secretary Buxbaum: that we ought not to be

00:23:01.130 - 00:23:09.010

Secretary Buxbaum: expecting budgetary growth Secretary Buxbaum: of magnitude greater than that. Representative Bennett: Well, actually the numbers I am using show Representative Bennett: a net, a net gross...

00:23:09.010 - 00:23:18.170

Representative Bennett: grossed net adjustment of seven. Representative Bennett: So I guess where even Representative Bennett: apart in that area, but... Secretary Buxbaum: I'm sorry. Secretary Buxbaum: A net adjustment? Representative Bennett: My figures show a net

00:23:18.170 - 00:23:28.490

Representative Bennett: adjustment of seven percent in revenue. Representative Bennett: We're talking, you were sir talking Representative Bennett: three to four to five, in that range. Representative Bennett:So there's a little difference there.

00:23:28.490 - 00:23:34.730

Representative Bennett: I don't want to belabor the point, Representative Bennett: Mr. Buxbaum. Representative Bennett: We can stand talk numbers Representative Bennett: all day and as we

00:23:34.730 - 00:23:46.090

Representative Bennett: know the old story about numbers, Secretary Buxbaum: That's right. Representative Bennett: but I do want to... Representative Bennett: I do want to express a concern Representative Bennett: that it appears that

00:23:46.090 - 00:23:53.630

Representative Bennett: if we pass this 10 percent Representative Bennett: across and that alone, Representative Bennett: exclusive of any other Representative Bennett: adjusting taxes that may occur or

00:23:53.630 - 00:24:04.140

Representative Bennett: come from a compromise between chambers. Representative Bennett: I think we should be taking Representative Bennett: a good hard look at Representative Bennett: whatever is compromised.

00:24:04.150 - 00:24:12.980

Representative Bennett: None of us want to be here Representative Bennett: in the period when we raise taxes, Representative Bennett: It's nice to stand here and cut them. Representative Bennett: But yet, at the same time,

00:24:12.980 - 00:24:21.500

Representative Bennett: the members should be aware Representative Bennett: that there may be something occurring. Representative Bennett: We have to go into the rainy day fund. Representative Bennett: Impacts across the Wall Street

00:24:21.500 - 00:24:28.220

Representative Bennett: or what have you may be difficult Representative Bennett: to handle even in our bond rating. Representative Bennett:Thank you sir, I appreciate it. Secretary Buxbaum: I can only say Secretary Buxbaum: that if I didn't really believe we could do it.

00:24:28.220 - 00:24:39.070

Secretary Buxbaum: I wouldn't be here either. Secretary Buxbaum: But it's a matter, as you say, Secretary Buxbaum: You can argue the figures. Male voice 4: What other questions for Mr. Buxbaum? Representative Petrilli: Yes if I may.

00:24:39.070 - 00:24:48.860

Male voice 4: Mr. Petrilli. Representative Petrilli: Mr. Buxbaum, Representative Petrilli: Mr. Bennett kept referring Representative Petrilli: to going into the rainy day fund. Representative Petrilli: I think that's an issue

00:24:48.860 - 00:25:01.440

Representative Petrilli: that we won't be addressing. Representative Petrilli: But we have been operating Representative Petrilli: basically with a negative cash balance Representative Petrilli: the last couple of years, is that correct?

00:25:02.140 - 00:25:10.580

Secretary Buxbaum: You mean on an operating basis? Representative Petrilli: Operating cash. Secretary Buxbaum: The revenues Secretary Buxbaum: versus the expenditures? Representative Petrilli: Yes. Secretary Buxbaum: Well it depends on how you count that too.

00:25:10.580 - 00:25:21.210

Secretary Buxbaum: If you take the current fiscal year after Secretary Buxbaum: the total appropriations in Secretary Buxbaum: FY 86 exceed the revenues Secretary Buxbaum: by some 39 million dollars.

00:25:21.210 - 00:25:29.270

Representative Petrilli: And... Secretary Buxbaum: However, in Secretary Buxbaum: those appropriations were forty million dollars set Secretary Buxbaum: aside for the First Aide Improvement Fund, Secretary Buxbaum: which is for capital improvements

00:25:29.270 - 00:25:36.920

Secretary Buxbaum: that otherwise would have been Secretary Buxbaum: funded with borrowings plus Secretary Buxbaum: 10 million dollars that was used Secretary Buxbaum: directly for debt retirement.

00:25:36.920 - 00:25:44.780

Secretary Buxbaum: So I think it's Secretary Buxbaum: legitimate to deduct those two numbers Secretary Buxbaum: and then you come out with a surplus Secretary Buxbaum: on that basis of some

00:25:44.780 - 00:25:59.270

Secretary Buxbaum: 10 billion dollars for the current fiscal year. Representative Petrilli: What do you expect the Representative Petrilli: operating balance to be in 88? Secretary Buxbaum: We... Representative Petrilli: Fiscal 87

00:25:59.270 - 00:26:10.250

Representative Petrilli: we have a negative Representative Petrilli: of about six million dollars. As Representative Petrilli: I understand it from DEFAC yesterday. Representative Petrilli: Essentially, what we are... Secretary Buxbaum: You said 88,

00:26:10.250 - 00:26:18.860

Secretary Buxbaum: did you mean 88 or 87? Representative Petrilli: No, 87 we have. 88 is a guess Secretary Buxbaum: Yeah, well I am... Representative Petrilli: on continuing unencumbered and reversions Representative Petrilli: and all that is tied in.

00:26:18.860 - 00:26:24.710

Representative Petrilli: But we do have a unencumbered cash balance Representative Petrilli: that we've been spending down Representative Petrilli: over the last few years. Representative Petrilli: Isn't this essentially

00:26:24.710 - 00:26:36.820

Representative Petrilli: where we're spending Representative Petrilli: down to get to such a point where Representative Petrilli: we can deal with a 10 percent tax cut? Secretary Buxbaum: To answer you're, trying to answer

00:26:36.820 - 00:26:43.500

Secretary Buxbaum: your question in the order. Secretary Buxbaum: As far as the projections Secretary Buxbaum: for the surplus of FY 88 Secretary Buxbaum: I have

00:26:43.500 - 00:26:51.340

Secretary Buxbaum: any number of them depending on what one Secretary Buxbaum: assumes is regards revenue growth Secretary Buxbaum: and what one assumes is regards to Secretary Buxbaum: tax cuts.

00:26:51.340 - 00:26:58.570

Representative Petrilli: Revenue growth as history is Representative Petrilli: let's say about 7%. Secretary Buxbaum: Okay. Representative Petrilli: Budget growth, let's say is assume is Representative Petrilli: about 6%. Secretary Buxbaum: If we take...

00:26:58.570 - 00:27:07.240

Representative Petrilli: Which is a little while in my judgment, Representative Petrilli: but that's the numbers that Representative Petrilli: Mr. Bennett was dealing with. Secretary Buxbaum: If we take that set of Secretary Buxbaum: numbers and apply my best estimates of what's

00:27:07.240 - 00:27:19.040

Secretary Buxbaum: the impact of the tax cut Secretary Buxbaum: would be then applying Secretary Buxbaum: taking the revenue Secretary Buxbaum: plus the unencumbered cash,

00:27:19.040 - 00:27:26.210

Secretary Buxbaum: applying the 98% rule to it, Secretary Buxbaum: you can have about four Secretary Buxbaum: to five percent budgetary increase Secretary Buxbaum: in FY 88

00:27:26.210 - 00:27:38.450

Secretary Buxbaum: with the 10 percent tax cut. Representative Petrilli: And still stay within a 100%? Secretary Buxbaum: Oh yeah, 98%. Representative Petrilli: That's not what I asked you, sir. Secretary Buxbaum: I'm sorry? Representative Petrilli: With a four or five percent budget growth,

00:27:38.450 - 00:27:44.810

Representative Petrilli: you can still stay within Representative Petrilli: a 100 percent of the appropriation? Secretary Buxbaum: Oh yes. Representative Petrilli: Thank you very much. Male voice 4: Further questions for

00:27:44.810 - 00:27:53.360

Male voice 4: the Secretary? Male voice 4: Mr. George? Representative Orlando J. George, Jr.: Thank Mr. Speaker. Mr. Buxbaum. Representative George: I thank Mr. Bennett has raised

00:27:53.360 - 00:28:02.840

Representative George: some legitimate questions. Representative George: And at least as far as I'm concerned, Representative George: I always find my tenure Representative George: with DEFAC very interesting

00:28:02.840 - 00:28:08.810

Representative George: because whenever you get Representative George: the economists to give Representative George: their prediction of the economy, Representative George: you feel like one's

00:28:08.810 - 00:28:16.070

Representative George: talking about what's going to happen Representative George: on Mars and another one Representative George: on Jupiter and whatever. Representative George: In fact, it got to a point one meeting,

00:28:16.070 - 00:28:21.320

Representative George: I recall where one economist Representative George: gave his prediction and Representative George: turn to the next one. Representative George: It said, Don't you agree?

00:28:21.320 - 00:28:31.100

Representative George: And he said I couldn't disagree more. Representative George: And the problem with that is Representative George: when one disagrees by one or Representative George: or two percent with the amount of

00:28:31.100 - 00:28:37.550

Representative George: the budget and revenue that we're Representative George: talking about in our state. Representative George: You're talking about 9 Representative George: million dollars for 1%,

00:28:37.550 - 00:28:45.650

Representative George: 18 million dollars for 2%. Representative George: And I don't care how good you are. Representative George: If you can get within one or 2%, Representative George: you're doing very well.

00:28:45.650 - 00:28:53.900

Representative George: Mr. Secretary, I want to ask you Representative George: this question and this is the proverbial Representative George: how much did the tax cut really cost? Representative George: This kind of question.

00:28:53.900 - 00:29:00.470

Representative George: I'll keep raising it. Representative George: I know you keep addressing it, Representative George: but maybe you could Representative George: share it with the members of the body.

00:29:00.470 - 00:29:09.740

Representative George: The last tax cut, do you have a feel, Representative George: first of all, what was Representative George: estimated that it would cost us? Representative George: And secondly, what you

00:29:09.740 - 00:29:21.530

Representative George: believe it ended up costing us? Secretary Buxbaum: I'm not sure I can reconjure Secretary Buxbaum: up when our number estimate Secretary Buxbaum: was for the tax cut

00:29:21.530 - 00:29:29.390

Secretary Buxbaum: that went into effect in FY 80. Secretary Buxbaum: We had one in FY 85. Secretary Buxbaum: I mean that January 85. Representative George: Mmhm. Secretary Buxbaum: We had one January 86.

00:29:29.390 - 00:29:37.850

Secretary Buxbaum: But looking at the numbers, I've Secretary Buxbaum: looked at the same thing, Secretary Buxbaum: Mr. George and tried to Secretary Buxbaum: to use that in a way

00:29:37.850 - 00:29:51.170

Secretary Buxbaum: to interpret how I would expect Secretary Buxbaum: this prospective or Secretary Buxbaum: this proposed tax cut to impact us. Secretary Buxbaum: My own examination of it

00:29:51.170 - 00:30:00.320

Secretary Buxbaum: would lead me to think it's probably Secretary Buxbaum: cost about half of what we calculated it would cost. Representative George: In other words, even though you're Representative George: publicly stating that 38 million

00:30:00.320 - 00:30:11.270

Representative George: is the official estimation. Secretary Buxbaum: That's the calculated number. Representative George: You feel Representative George: that it would be closer to 20? Secretary Buxbaum: Probably. Representative George: Well, that's certainly that's

00:30:11.270 - 00:30:18.890

Representative George: a difference of 18 million dollars. Representative George: That's 2%. Secretary Buxbaum: I cannot prove that. Representative George: I understand, but I think it's there. Representative George: I don't know whether it's

00:30:18.890 - 00:30:27.830

Representative George: 20 million or whatever, Representative George: but I have never seen Representative George: the full estimate of what Representative George: a tax cut was estimated to cost us,

00:30:27.830 - 00:30:34.430

Representative George: end up showing in the DEFAC numbers. Secretary Buxbaum: If you'd go back a couple of years. Secretary Buxbaum: Well, let me say, Secretary Buxbaum: I think if you go and we had

00:30:34.430 - 00:30:46.080

Secretary Buxbaum: one in 85, we had one in 86... [Audio skips] Secretary Buxbaum: ... such as deductions for personal interests. Representative George: Right. Secretary Buxbaum: The IRA deduction. Secretary Buxbaum: No capital gains deduction.

00:30:46.120 - 00:30:53.720

Secretary Buxbaum: Those are the big ones. Secretary Buxbaum: There are several others that are less Secretary Buxbaum: magnitude. If all of those things or Secretary Buxbaum: any significant portion of them

00:30:53.720 - 00:31:04.000

Secretary Buxbaum: should survive in to the final bill, Secretary Buxbaum: and if we did nothing else in the state, Secretary Buxbaum: we would have a very significant windfall Secretary Buxbaum: and additional taxes because

00:31:04.000 - 00:31:12.770

Secretary Buxbaum: all of those things have the effect of Secretary Buxbaum: raising adjusted gross income Secretary Buxbaum: on the federal return, Secretary Buxbaum: which they then offset by

00:31:12.770 - 00:31:24.020

Secretary Buxbaum: reducing the tax rates applicable to them. Secretary Buxbaum: We start off with... Male voice 5: Would it wash this? Secretary Buxbaum: I am sorry? Male voice 5. Would it wash this piece of legislation? Secretary Buxbaum: We cannot calculate it because we have

00:31:24.020 - 00:31:32.210

Secretary Buxbaum: not been able to evaluate each one of them. Secretary Buxbaum: We've made some rough calculations, Secretary Buxbaum: I would say, Secretary Buxbaum: as a generality, if the whole thing

00:31:32.210 - 00:31:40.700

Secretary Buxbaum: would survive as it looks today, Secretary Buxbaum: and I would not bet one penny Secretary Buxbaum: one way or the other even if I bet, Secretary Buxbaum: but if it should, then I would say would

00:31:40.700 - 00:31:50.370

Secretary Buxbaum: probably fully offset Secretary Buxbaum: a 10 percent tax rate Secretary Buxbaum: reduction in the state of Delaware. Male voice 5: Thank you. Secretary Buxbaum: But we don't have it... [Audio cuts off]