DE’s Dependence on Federal Transfer Payments Growing

Posted on 12-26-2020

Center for Economic Policy and Analysis
A major component of Delaware’s personal income is transfer payments, and the importance of transfer payments in Delaware is growing.
According to the U.S. Bureau of Economic Analysis, transfer payments have gone from accounting for 18% up to 21% of Delaware’s personal income (17% today throughout the U.S.) over the last ten years. SEE CHART 1 below.
Between 2009-2019 Delaware had $481.3 billion in personal income, with $97.5 billion from transfer payments.
Transfer payments are composed primarily of Social Security benefits, Medicare, Medicaid, SNAP (Supplemental Nutrition Assistance Program), unemployment, education training, and assistance (e.g., Pell grants).
Transfer payments are rising faster in Delaware than in the nation. Between 2009-2019 total Delaware transfer payments rose 67% vs. 46% for the U.S. Growing the fastest was education and training assistance with an increase of 85% vs. 31% in the nation.
Growth leaders include Medicaid (an 83% increase) and Medicare (82%). Together Medicaid and Medicare poured almost $44 billion into Delaware’s healthcare industry over the last decade. Medical benefit transfers rose 81% in Delaware vs. 60% across the U.S-See CHART 2 below.
SNAP benefits rose 22% over the last ten years compared to no increase in the nation. Annual Delaware unemployment compensation benefits fell from $314 million in 2009 to $67 million in 2019 and declined throughout the nation.
With the net in-migration of retirees to southern Delaware, Social Security benefits rose 70% vs. 55% in the nation. They pumped $32 billion into Delaware’s economy over the ten years.
Transfer payments are obviously a significant part of Delaware’s economy. Any future restrictions on Medicaid or Medicare will be immediately felt across the state’s healthcare industry. The solvency of the Social Security Trust Fund is of importance to Delaware industries relying on spending by retirees (e.g., restaurants). Meanwhile, it is encouraging to see rapid growth in the use of education benefits.
Finally, since the annual increases in the majority of transfer benefits are by formula tied to the inflation rate, the growth rate of more than one-fifth of Delaware’s personal income will be constrained.
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