State coffers are not likely to fill quickly in the near future. The Delaware Economic and Financial Advisory Council (DEFAC) offered its December revenue forecast Monday, and there is little change in the outlook for the remainder of this fiscal year or next. But DEFAC members rejected a characterization that the numbers are stagnant.
“That’s a little too negative a word,” said DEFAC’s chairman of the revenue subcommittee, University of Delaware economics professor Kenneth Law. "It’s not all bad, and it does give us a little confidence."
“Flat is good,” suggested Robert Byrd, a DEFAC member and former council chairman.
DEFAC trimmed its revenue forecast for the current fiscal year by $3.3 million from its last projection, in September—a 0.1 percent drop.
DEFAC’s forecast for fiscal year 2012 revenues is up $16.9 million dollars, a 0.5 percent increase over September’s estimate.
The numbers would have been a bit rosier—a $2.7 million increase in FY11 revenue and a $33.4 million increase for FY12—but elements of the tax deal signed by President Barack Obama last week forced DEFAC to adjust downward its projections for corporate, personal, and estate tax revenues.
Still, Monday’s new revenue numbers show Delaware ahead $21.5 million year-to-date from the FY11 budget passed last June. DEFAC also projects the state will have an additional $42 million to appropriate in its FY12 budget.
“The extra money for the legislators, I’m sure is going to be appreciated by state workers,” Law observed.
DEFAC projects growth in revenue from corporate franchise taxes and the state lottery will offset weakness in other areas, including bank franchise revenue.
Both Law and Byrd pointed to the projected lottery revenue as particularly encouraging. DEFAC added $18 million to its September lottery revenue projection—growth that came exclusively from casino games (slots, table games, and sports betting).
“The fact that the lottery is holding up against this multi-state competition [is encouraging]. We’re getting it from both sides [Maryland and Pennsylvania], but we're holding up,” said Law.
DEFAC Revenue subcommittee chair and UD economics professor Kenneth Law on additional reasons for optimism in the latest DEFAC estimates (click here to listen).
Law adds that DEFAC also projects an upward trend in the growth rate for personal income tax withholding projected for FY12.
The revenue estimates are the last DEFAC will make before Governor Jack Markell unveils his 2012 budget proposal next month. Despite the relatively positive news, the Governor’s office reacted cautiously.
"The numbers reaffirm the need to keep fiscal responsibility as a guiding principal while creating the budget and to look for ways to create cost savings,” said Brian Selander, Markell’s spokesperson.
DEFAC did warn of a growing concern on the expenditure side. Medicaid costs continue to skyrocket and could reach $600 million in FY12. The state spent just under $429 million on Medicaid in fiscal year 2010.
Still, DEFAC members left their December meeting with a better feeling than at some meetings in the recent past.
“Overall, this is good news for Delaware,” said Byrd.