Gov. Jack Markell (D-Delaware) and lawmakers are getting a huge windfall to help offset what had been a growing budget deficit projected for the fiscal year 2017.
The Delaware Economic and Financial Advisory Council or DEFAC added nearly $79 million more in revenue to its estimate for next year in its December report.
That, combined with extra cash carrying over from the current fiscal year wipes clean much of the projected deficit coming into the meeting – including new costs according to Finance Secretary Tom Cook.
“I think this certainly takes care of most of those, but there’s still some rising costs in healthcare that will put pressures on the budget," Cook said.
State budget officials say they’re still calculating whether they’re cash positive in the next fiscal year based on the new numbers.
The revenue growth is buoyed by gains in the corporate franchise tax and more moderate revisions in corporate income tax collections over past projections.
"We could've gone up higher, but I think we're doing the right thing by cautiously raising these up," Cook said.
DEFAC revised down personal income tax collections by $7 million due to impending layoffs at DuPont when it completes a merger with chemical manufacturing giant Dow.
Members questioned how the planned merger will affect other sources of revenue including corporate and gross receipts taxes.
Cook says DuPont's current corporate structure is expected to stay intact for the next 18 months and won't affect the upcoming budget year.
Legislative reaction was swift. Senate Minority Leader Gary Simpson (R-Milford) issued a statement calling it "wonderful news."
But he cautioned that more work needs to be done to shore up long-term structural problems that make Delaware's revenue streams less responsive to the state's economy -- especially considering the uncertainty surrounding DuPont. "We should celebrate today’s news, but tread lightly until the situation is more concrete,” Simpson said.
The Democratic House Majority leadership also put out a statement noting the General Assembly still needs to move carefully while drawing up the state's spending plan. "As we move forward into 2016, we must continue to take a responsible approach to budgeting."
December’s state revenue forecast is the final report before Markell crafts his budget for next year.
He’ll present that to the General Assembly in January.
