BEAR — Despite big-picture questions about how the federal funding bill may impact Delaware, state officials welcomed news that the budget limit is once again set for $7.08 billion for the first budget under Gov. Matt Meyer’s watch.
That is, once again, a record-setting amount and a seventh consecutive increase for Delaware. The Delaware Economic and Financial Advisory Council (DEFAC) met on Monday afternoon to set the budget limit in the final meeting before state legislators start budget deliberations.
The council, which is composed of business and community leaders, academics, and government professionals, raised the budget estimate that was set in March by $97.6 million.
Meyer appointed new DEFAC members including new chair Alan Levin, the former Delaware Economic Development Office secretary. Together, they had to contend with a slightly worse economic outlook than in 2024. Days before Meyer revealed his budget reset, DEFAC had dropped the budget limit to $6.9 billion.
Financial analysts at the Delaware Department of Finances now report strong personal income tax revenue, strong corporate income tax revenue and strong franchise tax and fees to help tide the state over for now.
Meyer’s
“budget reset” proposes $7 billion in total spending authority for fiscal year 2026. That includes a $21.9 million federal contingency fund, on top of the stabilization fund, to help buffer any financial hits the state may take due to cuts from federally supported programs.
What's driving the forecast
Delaware Research and Tax Policy Director David Roose said that the broader uncertainties would impact fiscal year 2026 and 2027 but, for now, it was “extraordinarily unlikely” that anything would affect the state’s current finances outside the stock market.
Delaware added $39 million in its prediction in personal income taxes and financial analysts are predicting a 7% growth since March, which outshines the average 5% over the last few years. That may be attributed to wage growth triggered by inflation as well as a tight labor market, as well as strong capital gains.
Franchise tax revenue for companies that made Delaware its legal home rose by $18 million, with the deadline to pay the bulk of that fee in June. Collections of the franchise tax have picked up more than state officials expected at this time.
New incorporations via limited liability companies have increased in the past three months, according to Chief Deputy Secretary of State Kris Knight.
Collections for gross corporate income tax, the tax paid by business entities that do business in the state, continue to surge ahead with the first quarter payments up by almost 10%. This tax has grown massively in the span of five years, partially because of a state law adjustment but also because of a provision passed in the federal 2017 Tax Cuts and Jobs Act.
That law changed the deductibility of research and development expenditures by allowing those costs to be paid over the five years in 2022. By that point, Delaware had reported an average of $150 million in corporate income tax. Today, it’s estimated at $450 million.
“That was a significant increase in taxable income, probably driving much or maybe all of this growth,” Roose told the council. “I want to give it a little more thought before I say anything definitively, but I think as we get through the changes that were enacted, we may be expecting them to come back down to the $150 million for some period. But that’s subject to whatever comes out of Washington.”
What's happening in Washington
Many of the new DEFAC members had their minds on Capitol Hill as well as the proposed federal budget bill has been advancing through committees this week. In addition to extending the income tax cuts from President Donald Trump’s first term as well as no taxes on tips.
Beebe Healthcare President and CEO David Tam asked whether the
$1.11 million forecasted for Medicaid would have to be amended again pending the outcome of the federal budget; Medicaid is the state-based health insurance for eligible low-income families, elderly persons or people with disabilities. That process would have to be handled through the General Assembly as the federal fiscal year starts in October.
JPMorgan Chase & Co. Executive Director and Delaware site lead Don Mell raised the question of when DEFAC and the state as a whole deal with that possibility.
“I realize it’s premature, and this is only dealing with 2026, but looking at the numbers that came with [bill reconciliation’ last night, it’s a $250 million Medicaid impact to the state and $60 to $70 million when it comes to SNAP,” Mell said. “We kind of know what’s coming down the road one way or another.”
Pointing to the broader uncertainties with the Trump administration, Delaware Office of Budget Management Director Brian Maxwell said that much of it would be policy decisions made by Meyer—such as a penalty of $330 million to serve the undocumented immigrants.
“If you can look in a crystal ball, there’s going to be 150%
tariffs on China. So as to what’s going to happen at the federal level, your guess is as good as mine,” Maxwell said. “We would have to make policy changes or have enough revenue to support these expenditures as the program exists today.”
