State legislators are staring down a $44.8 million gap for next year due to significant declines in corporate-related taxes and unexpected refunds.
The Delaware Economic and Financial Advisory Council, or DEFAC, released its projection Monday, marking the third straight negative report this year.
Unexpected costs for the state’s share of Medicaid for the upcoming fiscal year totaled another $28 million, bringing the total budget hole to $72.8 million from what Gov. Jack Markell (D) proposed in January.
That number doesn’t factor in a significant amount of legislative wish lists, which have totaled as much as another $160 million, according to JFC co-chair Sen. Harris McDowell (D-Wilmington North).
Finance Sec. Tom Cook mentioned eliminating a handful of tax breaks for senior citizens as one easy, but politically catastrophic solution, though he says it’s not something on the governor’s agenda.
“The administration is not urging, at this point, to do that. The administration is pointing out the fact that $150 million of resources are going to that and not being income tested before the credit is given out. At some day, the piper will have to be paid,” Cook said.
The General Assembly has also balked at other long-term solutions like recalibrating tax rates to be more responsive to the economy and reining in high-cost health benefits for public workers.
Overall, the personal income tax was down $18.3 million. Deputy Finance Sec. David Gregor said there was "fairly widespread strength" as a whole, with a handful of larger taxpayers owing less than expected.
Delaware continues to heavily rely on its personal income tax, business related taxes and abandoned property program, the latter of which has been a concern to top officials because of its volatility.
"It's tough to make up ground when two or three big sources aren't really performing for you," Gregor said.
The Joint Finance Committee will kick off its budget markup process Wednesday morning.
DEFAC will release one more projection next month, potentially bringing relief or further pain as the General Assembly finalizes next year’s budget.
