The Delaware Economic and Financial Advisory Committee (DEFAC) is projecting an almost identical economic forecast for Delaware as it did at its last meeting, but concerns for the future remain.
At its May meeting, DEFAC added $98 million to the state's authorized spending for the next fiscal year — beginning on July 1 — bringing the total authorized spend for fiscal year 26 to $7.083 billion.
At Monday's meeting — DEFAC's last meeting of the current fiscal year — the body added just $1.3 million to that projection, putting the state’s total authorized spend at $7.085 billion for FY26.
Despite this small increase, state revenue is still only projected to grow by 1.2% next fiscal year while the state budget, currently pending approval by the legislature and Gov. Matt Meyer, would grow spending by 7.4%.
Delaware is expected to see a sharp decline in revenue from its corporate income tax (CIT) and dividends and interest (D&I) for FY26. CIT revenue is projected to decrease by 12.5% next fiscal year and D&I is projected to decrease by 32%.
While the majority of other revenue categories — like personal income tax and the franchise tax — are expected to grow over the current fiscal year, they are not projected to grow at nearly the same rate they did this fiscal year.
"We do expect continued below-potential growth, with the slow down — not a recession, but the slow down — peaking some point next year before things hopefully look a little bit brighter," Delaware Department of Finance Director of Research and Tax Policy David Roose said during the meeting.
Delaware's virtually stagnant revenue growth has been top of mind for the governor and lawmakers.
While there were initial plans from state leaders to add three new personal income tax brackets to generate more funds, that plan has since been scrapped for the current fiscal year.
The legislature is however pursuing various tobacco tax increases. If signed into law, the changes would take effect in September.
With large federal funding cuts possible and general national economic uncertainty, DEFAC Chair Alan Levin urges Gov. Matt Meyer and the General Assembly to “get a handle” on the state’s economic situation.
"Today is one thing, but depending on what happens in Washington [D.C.] and funding that comes into Delaware going forward, this could create a dramatic effect on where we go and how we're going to deal with this in the outlier years," he told DEFAC members. “Clearly, we can't put our head in the sand on this one. So we're going to have to confront it one way or the other, and I do think the numbers we're getting are as clear as they can be. Regrettably, they're not going in the right direction.”
The budget before the General Assembly would not require the state to dip into its financial reserves, but if spending growth continues to outpace revenue growth, the state is expected to hit a deficit by fiscal year 28.
A $6.58 billion operating budget for FY26 is before the General Assembly — lawmakers are expected to approve a final budget by June 30.
