Gov. Matt Meyer unveiled his fiscal year 2027 state budget proposal, a plan that keeps spending growth below 5%, “for the first time in years.” The budget grew by more than 7% in the current fiscal year and 9% in FY 2025.
Meyer says to get there, his office focused on “efficiency and transparency” as it drafted fiscal year 2027’s budget for the state.
Meyer said his office does not believe in, “budgeting and cutting with a chainsaw, but making intelligent decisions and creating efficiencies with a scalpel.” And the goal was to reduce expenditures without “any meaningful reduction in service levels to Delawareans.”
Revenue For the State
Brian Maxwell, director of Delaware’s Office of Management and Budget, said the revenue piece of the puzzle is expected to raise approximately $170 million.
Nearly half of that– about $81 million– will come from modernizing business formation fees, such as costs for LLC formation and annual franchise tax for trusts, LLCs, and LLPs. Meyer noted this does not touch Delaware’s corporate tax structure.
Another $18.9 million will come from tobacco taxes - including cigarettes and vape products. The tax on cigarettes will increase from $2.10 to $3.60 per pack, echoing legislation introduced in the Delaware General Assembly last summer.
Plus, the state is proposing a film tax credit to incentivize film production in Delaware, expected to generate $10 million.
Closing the Gap
To avoid a deficit, Maxwell said his office also had to reduce the state’s spending. Most of the $525 million it takes to maintain the state's current government operations comes from covering state employee healthcare, public education operations, health and social service programs, and debt services.
His office pushed budget growth down by targeting strategic cuts to Delaware’s government operations – about $108 million. Maxwell said by working with the state agencies, it found “creative solutions” to lower the state’s spending on government healthcare, education, and other programming. Generally, Meyer’s office aimed to have a 1% reduction in expenses across departments, but he said that couldn’t happen everywhere.
“Some agencies are more heavily people driven,” Meyer said. “So unless you're laying off people, you can't get the 1%.”
Some departments came to his administration with “two or three” spending cuts that made sense to implement.
“So in some departments, you'll see closer to 1% reductions,” he said. “In others, you might see 0% reductions.”
A reallocation of state investments, cut $131 million.
But the biggest reduction to spending came from one-time expenses– totaling nearly $169 million.
Some notable deductions include a reduction in Delaware’s Bond Bill, which the Governor’s budget sets at $934 million. If the General Assembly accepts the plan as is, that would be approximately $43 million less allocated to capital improvement projects than in FY 2026
Meyer’s plan also calls for $85.5 million for grants-in aid funding for 2027 - about $12.5 million less than what the state allocated to nonprofits, local fire companies and senior centers for fiscal year 2026.
Meyer said his budget prioritizes a few areas important for Delawareans
The cuts made it possible for the Governor’s office to set aside $42.8 million for “strategic investments” in housing, education, and workforce development, Maxwell said.
Meyer’s budget proposed a 2% pay increase for state employees, costing the state approximately $22 million. Another $1.5 million is set aside in his proposal for apprenticeship and workforce training.
Meyer’s budget also puts forward nearly $69 million to cover educator pay, including annual STEP increases. Following the third year of recommendations from the Public Education Compensation Commission, it increases the starting salary for teachers to $56,243. The state’s Public Education Compensation Committee recommends Delaware increase its starting salary for teachers to match surrounding states, like Maryland.
It allocates $35 million for housing support; a majority going to the State’s Housing Development Fund.
Meyer said the housing fund goes to home ownership counseling, emergency home repairs, down payment and settlement assistance, and mortgage assistance.
The budget also allocates nearly $57.8 million for state programs supporting children and education.
It proposed an approximately $25 million increase in state support for early childhood and after-school education. It also suggests continuing the state’s $8 million emergency literacy fund, which was established last year. The state distributes this money to schools for reading pilot programs that follow the science of reading.
Delaware lawmakers are expected to pass a new school funding formula during this legislative session. Though the formula would not be implemented for the 2027-2028 school year, the governor has set aside a couple million dollars to start its implementation and public outreach in the coming budget cycle.
Big ticket items for the state in healthcare consistently include Medicaid support and contracts.
The federal government is decreasing its administrative support for SNAP. Delaware covered 25% of the expense previously. The cost will now be split fifty-fifty, costing Delaware $10 million.
This year, Delaware expects to expand rural health care access through a federal grant for $157 million. It will receive The Federal Rural Health Care Transformation grant for five years.
The federal grant will help pay for state projects, like two new centers in Kent and Sussex County that offer “healthcare, employment, and housing services under one roof.” The plan is to model them off of the Hope Center opened in New Castle County in 2020.
Some quick notes on the budget from Meyer:
Delaware has no broad-base tax increases for Delawareans in fiscal year 2027.
The budget doesn’t pull from the state’s budget stabilization, which currently holds about $463 million dollars. The last time that fund was used it was during COVID-19 pandemic.
