The Delaware Economic Financial Advisory Council (DEFAC) issued its latest state revenue estimate earlier this week for the upcoming Fiscal Year 2027, which begins July 1.
This estimate is the fourth in a series of five and will play a major role in determining state spending.
By law, Delaware budget writers can appropriate no more than 98% of expected state revenue. Since the last forecast was issued in March, the amount of anticipated “spendable” cash lawmakers writing the new appropriations bills will have at their disposal has increased by $196 million to $7.328 billion.
According to an analysis by the Office of the Controller General, $104.2 million of the increase came from higher-than-expected collections in the current fiscal year, primarily attributable to the franchise tax, business entity fees, gross receipts tax, personal income tax, and insurance taxes and fees.
Where did the revenue come from?
The balance of the increase, $95.8 million, came from projected increases in the gross receipts tax, franchise tax, insurance taxes and fees, and dividends and interest for the upcoming FY 2027.
Welcome news for budget-writers
The new forecast provides a little breathing room for state budget writers. The total spending contained in the governor’s recommended appropriations bills he unveiled in January — the General Fund Operating Budget, Capital Budget (a.k.a., the Bond Bill), the Grants-in-Aid Bill, etc. — was $7.245 billion.
Contingency funds remain untouched
Two state contingency funds remain intact. The Budget Stabilization Fund continues to have a balance of $469.3 million to cover unexpected budgetary shortfalls. The Budgetary Reserve Account (a.k.a., the Rainy Day Fund), intended to address catastrophic circumstances, is capped at 5% of the state’s expected annual revenue. The account has a current balance of $366.5 million. It has not been tapped in the 46 years since its creation. The state’s 98% spending limit on expected revenue also leaves a 2% buffer of unencumbered cash.
What’s next?
Legislative budget writers will use the latest estimate to draft the state’s spending plans over the next several weeks, setting them, more or less, into their final forms.
The measures will be slightly tweaked after the last revenue forecast is issued on June 15 to reflect that data.
