The Delaware Economic and Financial Advisory Council (DEFAC) offers some better news on the state’s financial health for the 2027 budget cycle.
DEFAC says Delaware’s efforts to blunt the impact that tax changes in the One Big Beautiful Bill Act would have on state revenues should work.
In October, the group warned that the state faced a loss of about $400 million in revenue because of those changes. It now expects HB 255 – which decoupled the state from several of the new federal tax provisions – to recapture about $328 million between now and FY2028.
The federal changes allowed immediate tax breaks for research and development expenditures and the instantaneous expensing of business and qualified production property.
Under HB 255, those breaks are still allowed, but the timing will be spread out over a few years instead of all at once, which is how it previously worked.
New federal rules also allow businesses to use new tax breaks to claw back tax dollars they've already paid, going as far back as 2022. HB255 disallows that, but will allow those breaks to be filed moving forward.
It also It also decouples federal retroactivity for full bonus appreciation expensing for tax year 2025 and future years, instead allowing businesses to immediately deduct up to $2.5 million in purchases of assets with a lifespan of less than 20 years.
Updates based on decoupling were the primary reason DEFAC is bumping up its FY 2026 revenue estimate by nearly $173 million compared to its last meeting in October. Its 2027 revenue forecast is up about $124.5 million.
The changes leave the state spending limit for FY 2027 at just under $7.1 billion. That’s up $365 million from the October number and is about $517 million more that the current year’s budget.
This month’s forecast is a significant one. These DEFAC numbers are the ones Gov. Matt Meyer will use to craft his 2027 budget proposal that he’ll unveil in January.
