Delaware analysts added $84 million to the final Fiscal Year 2024 estimate, easing the path forward for the legislature’s proposed budget. | DBT PHOTO BY JACOB OWENS
BEAR – In the last meeting of the state’s independent financial analysts before legislators vote on the Fiscal Year 2024 budget, steady income from May and June added $84.3 million to the budget appropriation limit.
The final report from the Delaware Economic and Financial Advisory Council (DEFAC), a non-partisan group of business and community leaders, academics, and government professionals that sets the state’s official revenue estimates, increased the spending limit to more than $6.63 billion. That’s more than $360 million more than the initial forecast made last October for FY 2024 but only about $59 million more than what Gov. John Carney proposed in his budget.
With just days remaining ahead of the June 30 close of FY 2023, the analysts estimate that the state will end with a budget surplus of $730.2 million to roll into next year’s budget.
The FY 2024 budget proposed Carney included $5.48 billion in operating spending, $324.9 million in supplemental spending, $59.8 million in grants-in-aid assistance and $664.7 million in cash outlay to capital projects – totaling about $6.53 billion.
The legislature’s Joint Finance Committee (JFC), which reviews and revises the governor’s proposed budget, has already added more than $124.5 million to its proposal. With a proposed budget of about $5.6 billion, the latest estimates will allow lawmakers to move the proposal through without major revisions that may have been necessary if revenue projections dipped.
Among major additions, the JFC included $48.7 million more to address growing Medicaid expenditures as well as $13 million for nursing care facilities and home care workers to tap into federal grant matches. It also approved $4 million to stand up a new regulatory system for recreational marijuana, which Carney allowed to become law without his signature.
The increased revenue estimate from DEFAC came largely on the back of higher personal income taxes and corporate income taxes, adding $11.2 million and $20.5 million to the current fiscal year, respectively. Fewer than expected claims on the state’s unclaimed property cache will also result in an additional $10 million this fiscal year, while continued real estate sales added $6 million to estimates.
“The revenue changes are almost entirely just tracking changes as we are closing up fiscal year,” David Roose, the state finance department’s director of research & tax policy, told DEFAC at their Friday meeting.
DEFAC members spent much of their time Friday discussing the future economic forecasts as they try to predict how inflation, unfulfilled jobs and monetary tightening may affect FY 2024 and 2025 revenues. Right now, they are predicting a 3% decline in revenue next year compared to the current year and a FY 2025 that would also see declines from FY 2023.
Notably, House Speaker Peter Schwartzkopf told the Delaware State Chamber of Commerce earlier this month that he was already preparing his majority caucus with the reality that lawmakers may face a deficit upward of $300 million compared to this year’s revenue level. That means long-term spending and services may have to be curtailed in future years.
The state is sitting on considerable savings that help protect its AAA bond rating, including $316.4 million in its “Rainy Day” reserve fund and $402.6 million in the Budget Stabilization Fund, a discretionary fund that could be tapped to fix future deficits.
