Delaware’s latest financial forecast shows a bump in revenue available in fiscal year 2024.
Delaware Economic and Financial Advisory Council’s December estimate adds about $300 million to the state’s bottom line from its forecast in October.
The projections include a continued increase in net corporate income tax revenues that Director of Research and Tax Policy David Roose called inexplicable.
“This is the area of the forecast where there is the greatest risk – possibly for the good, possibly for the bad – but very difficult to explain," he told the Council on Monday. "It truly is extraordinary activity in corporate income tax collections.”
But Finance Secretary Rick Geisenberger noted that the phenomenon is "unlikely" to continue unabated, so the revenue forecasts assume that corporate income tax revenues will begin to decline in the coming years.
Risks include the possibility that several of the state’s largest corporate taxpayers request refunds for overpayment that they haven’t requested in previous years. "We've seen this on a rather large level for four or five years," Roose said. "It doesn't hurt until all of them come in the same fiscal year and ask for tens of millions of dollars back. We have built a cushion for that into the forecast."
The council also notes the possibility that a potential drop in the number of employees receiving end-of-year bonuses could impact personal income tax revenues.
Meanwhile, predictions of a recession in fiscal year 2022 have now been pushed back to fiscal year 2023; Delaware’s GDP growth in the past quarter has outstripped the rest of the country. "While the US experienced successive contractions, Delaware rebounded," said Department of Finance Analyst Arsene Aka.
Notable increasing expenditures include capital costs for building new school buildings – generally long-term projects that span multiple fiscal years – and rising pension costs amid retirement rates among state employees. Delaware’s Medicaid expenses are also expected to rise by over 11 percent in the coming year.
The December forecast is the final estimate before Gov. John Carney unveils his 2024 budget proposal. DEFAC’s next state revenue estimate comes in March.
