Rep. Smyk Co-Sponsor’s HB 109 – A “Budget Stabilization Fund”

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Meineke

State Rep. Steve Smyk is co-sponsoring a new constitutional amendment – House Bill 109 – that would limit state spending and replace the “Rainy Day Fund” with a more robust mechanism to protect Delawareans from the consequences of an economic downturn.  The measure would limit the annual growth of state spending, linking it to factors including personal income growth, population increases, and a cost index of the goods and services purchased by state government. 

It also seeks to create a new Budget Stabilization Fund. The fund would absorb and replace the current Budget Reserve Account (also known as the Rainy Day Fund), while eventually doubling its size.  In good economic years, when the state had surplus revenue, half of it would be deposited into the Budget Stabilization Fund. The fund would be capped at 10% of the state operating budget. 

When the economy slowed, and the state had a budget deficit, the fund could be tapped to fill the gap — allowing services and benefits to be maintained, without raising taxes. A nearly identical proposal was made several years ago and, despite broad bipartisan support at the time, was blocked from consideration by a few lawmakers in key positions. 

However, Gov. Carney was an advocate of the plan and adopted its provisions under an executive order, recently crediting it for helping Delaware avoid problems experienced by other states during the economic disruption caused by COVID-19.  Executive orders are only effective for the term a governor is in office. Supporters say their proposed amendment would make this proven and prudent mechanism a permanent part of state government, protecting Delawareans in the future.


Hermann-Financial