On Thursday, the leaders of all four General Assembly political caucuses jointly introduced a bill to ensure the continued existence and operations of a group essential to the state’s multi-billion-dollar budgetary process.
House Bill 370 would codify the Delaware Economic and Financial Advisory Council (DEFAC) in state law. Consisting of more than 30 business officials, financial analysts, state legislators, and state agency staffers, the group meets five times annually, issuing periodic forecasts of how much revenue the state can expect to receive.
This task has been integral to the state’s budgetary process for nearly five decades because, unlike the federal government, Delaware can appropriate no more than 98% of what it expects to receive in any given fiscal year.
Governor Pete du Pont established DEFAC in 1977 through an executive order, as part of his administration’s reforms to address years of state financial crises. At the time, Delaware had the lowest bond rating of any state in the nation.
While executive orders carry the weight of law and persist even after the governor that issued them has left office, they are vulnerable to being rescinded or amended by the governors that follow.
While DEFAC has continued its uninterrupted work for almost 50 years, actions by Gov. Matt Meyer have raised questions about its future.
Mike Houghton, a nine-year DEFAC veteran and former chairman, was recently removed from the group by the governor. The abrupt dismissal came after Mr. Houghton sought clarity on Delaware’s expected proceeds from corporate franchise taxes and fees—the state’s second-largest revenue stream—during last month’s public DEFAC meeting.
Corporate disputes, erratic decisions by Delaware’s Chancery Court, and new tax measures have led multiple corporations to flee the state and incorporate elsewhere in what has been called “DExit.”
The Meyer administration has repeatedly dismissed DExit concerns.
Mr. Houghton’s dismissal was perceived by many as an act intentionally calibrated to intimidate DEFAC members and limit inquiry.
Senate President Pro Tempore Dave Sokola (D-Newark, Pike Creek), a former DEFAC member, said council members have an obligation to ask uncomfortable questions. He said the dismissal contradicted the governor’s earlier promises to work collaboratively and transparently.
State Rep. Charles Postles (R-Milford North, Frederica), a member of DEFAC and the budget-writing Joint Finance Committee, said DEFAC’s credibility depends on its members’ ability to work independently and challenge assumptions without consequence. He said the governor’s action severely undermined the group.
John D. Flaherty, the Director of the Delaware Coalition for Open Government, called Mr. Houghton’s removal a “deeply troubling signal to the citizens of this state,” and called for his reinstatement.
Not only did the governor not restore Mr. Houghton to the council, but he also quickly filled the vacancy with Tuesday’s appointment of new DEFAC member Brenda Wise.
The structure, membership, and mandated functions of DEFAC remain largely unchanged under House Bill 370. While mostly retaining the current status quo, including the governor’s broad latitude to add and remove members, the legislation would give DEFAC a permanence it has never truly had by enshrining its existence in the Delaware Code.
“This has the potential to be an important moment of unity and foresight for our state,” Sen. Sokola said. “Codifying DEFAC sends a clear message that the safeguards that have fostered a half-century of economic vibrancy and responsible budgeting are here to stay.”
State House Republican Leader Tim Dukes (R-Laurel) echoed those thoughts, saying: “For decades, DEFAC has served a vital function in Delaware, ensuring our budget-writers colored inside the lines and that the state spent less money than it expected to receive. But until now, DEFAC has lived an ephemeral existence—operating under an executive order any governor could change or revoke. This bill gives it the security it deserves by writing its form and functions into the Delaware Code.”
Rep. Postles said that while he has no issue with the bill, he thinks it should have included reforms to protect DEFAC members. “The dismissal of Mr. Houghton illustrated an inherent flaw in the current structure. Just as is the case now, the governor has the unchecked authority to dismiss, without cause, any council member who doesn’t fall in line. This legislation does nothing to address this glaring weakness.”
HB 370 is named the DuPont-Cook Financial Responsibility Act, honoring the legacy of DEFAC creator, Gov. Pete du Pont, and the late Senator Nancy Cook, who was instrumental in establishing the state’s balanced budget guidelines and Rainy Day Fund.
