Dismissal of DEFAC Chairman Draws Sharp, Diverse Response
In an era when disagreements involving elected officials often quickly spiral into political tribalism, it’s rare to find a situation in which people across the political spectrum share a common perspective. Yet that is exactly what has happened in reaction to Gov. Matt Meyer’s recent removal of a top official from a committee whose work impacts every Delawarean.
Gov. Meyer recently removed Mike Houghton from the Delaware Economic and Financial Advisory Council (DEFAC). While many state residents may never have heard of the group, its work is key to determining how much the state spends each year.
The group of business officials, financial analysts, state legislators, and state agency staffers meets five or six times annually, issuing periodic forecasts of how much revenue the state can expect to receive. Its prognostications are essential. Unlike the federal government, Delaware’s government is required to appropriate no more than 98% of what it expects to receive in any given fiscal year.
At the most recent DEFAC meeting last month near New Castle, Mr. Houghton, a nine-year group member and past chairman, sought clarity on Delaware’s expected proceeds from corporate franchise taxes and fees. It is the state’s second-largest revenue stream.
Over the last two years, Delaware’s standing as the nation’s preeminent corporate home has taken some hits. Over 2.2 million corporations are registered here, and that has reaped huge benefits for the state, providing more than a third of all state revenue through the collection of taxes, fees, and escheat (abandoned) property.
But headline-grabbing corporate disputes, the perceived unpredictability of Delaware’s Chancery Court decisions, and tax measures passed by the General Assembly have led some major corporations, including Tesla, Meta, Simon Property Group, and Dropbox, to flee the state and incorporate elsewhere in what has been called “DExit.” That is notable because a disproportionately large amount of Delaware’s corporate revenue comes from a comparatively few corporate whales.
The Meyer administration has publicly and repeatedly dismissed DExit concerns, citing an overall increase in the number of total incorporations filed in Delaware.
At the March DEFAC meeting, Mr. Houghton, noting the absence of new corporate revenue data in the state’s calculations, asked for an update. The difference between the corporate revenue projection for March and the one preceding it in December often does not differ much. But that expectation is not inevitable. For instance, in March 2022, the estimate for this category jumped by $155 million.
Not only did state officials not provide the requested data, but the governor dismissed Mr. Houghton from the group soon afterward.
Criticism of the action was swift and diverse.
John D. Flaherty, Director of the Delaware Coalition for Open Government, organized a letter of protest to the governor, signed by dozens of community leaders, including two mayors and members of New Castle County Council and Wilmington City Council.
“The recent removal of Mike Houghton from the Delaware Economic and Financial
Advisory Council (DEFAC) is a deeply troubling signal to the citizens of this state,” the letter stated. “DEFAC is not a rubber-stamp committee for the executive branch; it is a vital safeguard designed to provide the General Assembly and the public with an unvarnished look at our fiscal health. When Mr. Houghton questioned why ‘unprecedented’ corporate formations weren’t translating into tangible revenue projections, he was doing exactly what a responsible council member must do: he was asking the difficult questions.”
The letter urged the governor to reinstate Mike Houghton and release the full March corporate franchise revenue data before the next DEFAC meeting.
A prepared statement released by Senate President Pro Tempore Dave Sokola, D-Newark, Pike Creek, also expressed displeasure with the governor’s action. “As a former member of DEFAC, I believe it’s not only a member’s right to ask questions, but our responsibility to do so…Governor Meyer promised Delawareans that he would be a collaborative leader whose administration prioritizes transparency, but this maneuver stands in contrast to those values. I am hopeful cooler heads can prevail, reconciliation can occur, [and] Mike Houghton is reinstated.”
State Rep. Charles Postles, R-Milford North, Frederica, a member of DEFAC and the budget-writing Joint Finance Committee, echoed a similar note in a letter to the editor:
“Much like the Federal Reserve at the national level, DEFAC is designed to function as an independent, data-driven body whose work must remain insulated from political pressure,” he wrote. “Its credibility depends entirely on the willingness of its members to ask hard questions, challenge assumptions, and ensure that the numbers guiding our budget are as accurate and transparent as possible. If members of DEFAC cannot raise such questions without fear of consequence, then the reliability of our revenue estimates is placed at risk. And if those estimates are compromised, so too is the foundation of Delaware’s entire budget process.”
DEFAC will meet two more times before the start of the new fiscal year. Its next gathering is set for May 18. Lawmakers will largely fashion the state’s spending plans based on the numbers released then, adjusting them slightly in June to align with the final revenue projections of FY 2026.
