Delaware's economic projections are faring better than the state's financial leaders predicted in March, but uncertainty at the federal level remains a concern.
The Delaware Economic Financial and Advisory Council (DEFAC) — the body in charge of projecting the state’s revenues and expenditures — is predicting the state will have $98 million more dollars to work with for the upcoming fiscal year than it did at its last meeting in March.
Gov. Matt Meyer is proposing a $6.581 billion operating budget for fiscal year 2026 — with appropriations for capital projects, nonprofit support and one-time supplemental expenditures, his total spend is expected to cap out at $7.015 billion.
According to DEFAC's updated May numbers, the new limit the state is allowed to spend for the next fiscal year is $7.083 billion.
The state's total spend for the current fiscal year — which ends on June 30 — is now estimated to be around $6.983 billion, which is down just slightly from the council's March prediction, but a 12.1% growth from fiscal year 2024.
The council is also projecting the state will have $71.9 million more dollars to work with this current fiscal year than it previously predicted at its last meeting, thanks to more-than-anticipated revenue from personal income tax, dividends and interest and corporate franchise taxes.
All of this is good news for the First State as it braces for a budget deficit in the next three years, even after potentially draining its reserves, but federal uncertainty remains a strong force in the state’s economic outlook.
Much will remain unknown until Congress passes a budget by the end of September, but Delaware Department of Finance Director of Research and Tax Policy David Roose says talks of a nationwide recession are lessening.
“I think the talk of recession, or the odds of recession, have eased up a bit over the last three weeks or so, as I think — critically — as the tariff situation has become maybe not more clear, but become less onerous for international trade," he said during the meeting.
While GDP decline, low consumer sentiment, tariff uncertainty and program cuts all remain top of mind for First State financial analysts, so does a federal push for no tax on tips or overtime.
“Just as one example of the uncertainties, of course, it has to make its way through the legislative process, but that could be a — I hesitate to put numbers on them at the moment without looking at them — but that's going to be a revenue loss of tens of millions of dollars if it is enacted," Roose explained.
DEFAC members say they will continue to crunch the numbers as more information is disseminated from the federal government.
The budget-writing Joint Finance Committee begins its final budget markup next week.
