After a Long Period of Growth, State Revenue Estimates Dip

Posted on 03-28-2023

Issue 559 – March 25, 2023

The state’s revenue forecast has dropped for the first time in recent years.

Issued on Monday, the most recent state revenue forecast from the non-partisan Delaware Economic and Financial Advisory Council (DEFAC) revealed a modest dip in the money expected to be in the state’s coffers during the new fiscal year that begins July 1.

The latest projection predicted a decrease of $36.2 million in useable revenue compared to the previous estimate published in December.

The forecasts, issued six times yearly, are at the heart of the state budgeting process. By law, the state can only spend up to 98% of projected revenues, so DEFAC’s predictions set an appropriations limit for budget writers.

The 12 state legislators (Joint Finance Committee) recrafting the governor’s proposed state operating budget now have $6.5387 billion with which to work. To put that figure into context, in the current fiscal year, $6.6263 billion was appropriated through the state’s three “money bills” — the operating budget, the capital budget (Bond Bill), and Grants-in-Aid — all of which were new record highs. The current Bond Bill (House Bill 475) is especially robust. At $1.458 billion, it is more than twice the size of the capital budget from just two years ago and includes more than $692 million in cash.

Tempering the new forecast were lower revenue estimates for the personal income tax and dividends & interest. Those disappointing figures were somewhat offset by better performance expected from the corporate income tax and franchise tax. 

A recent U.S. Supreme Court decision (Delaware v Pennsylvania et. al.) in a case involving revenue from abandoned prepaid checks, which Delaware lost, is not reflected in the latest DEFAC projections. While some estimates indicate the High Court ruling could cost Delaware up to $400 million in total assets owed to approximately 30 states, the exact figure and payment terms have yet to be determined.

State legislators, the Carney administration, and budget writers will be paying close attention to the ultimate financial impact of that case as well as the results of the next three state revenue forecasts that will be made before the state enacts its annual spending bills.

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