Delaware state officials are coming to terms with an uncertain outlook on the state budget as the prospect of a sweeping federal funding freeze emphasizes how critical that assistance is to many agencies and operations across the state.
This week, when President Donald Trump and his budget office ordered a 13-day pause on all federal grants and loans and programs like Medicaid, Head Start, various housing and food assistance programs were left in limbo for the next couple of days. For most of Tuesday, the Medicaid and Head Start portal was down, causing confusion for a quarter of a million Delawareans who use those services.
In the 36 hours between the memorandum issued by the U.S. Office of Management and Budget and when it was eventually rescinded, Delawareans called their federal delegation in droves. Gov. Matt Meyer’s office raced to assess the immediate impact in the state.
The Delaware Office of Budget and Management tentatively estimated Tuesday afternoon that $4.3 billion of federal funding supports Delaware programs, according to the governor’s office.
However, representatives from Meyer’s office later told the Delaware Business Times that number could be even larger.
Analysts at the the non-governmental organization that studies fiscal matters, told DBT that federal funds and grants were $4 billion of Delaware’s Fiscal Year 2022 budget. That is 32% of revenues for that fiscal year, according to their analysis.
While the memo was rescinded, Trump’s executive order to review all federal allocations in accordance with the law and the president’s priorities were still in effect. That could mean another review and possible cuts may still be on the table.
“While I’m glad the federal funding freeze directive has been rescinded, it should’ve never happened in the first place,” Meyer said in a prepared statement on social media. “Here in Delaware, we will continue to be vigilant to protect the livelihoods of all residents.”
Delaware’s federal funds
Federal grants and funding are a major part of state budgets across the United States, and they cover several programs intended for low-income families, among other groups. That ranges from Medicaid and the Supplemental Nutrition Assistance Program to Section 8 housing vouchers and other health services. It also includes many signature programs used in economic development in municipalities across the country, like the Community Development Block Grant, public housing operating and capital funds and Disaster Assistance Loans.
The First State received more than $3.8 billion in federal grants in 2024, Pew reported.
About 60% of those grants were through Medicaid, the nation's public health insurance program for people with low incomes. It provides health insurance for
one in six Delawareans.
The
Delaware Association for the Education of Young Children reported that $23 million of federal funds was allocated to the state through Head Start which provides free childhood education for close to 2,000 low-income families.
The
Delaware Alliance for Nonprofit Advancement heard immediate concerns from members who were unable to reach the federal partner agency that issued grants - and some nonprofits were already considering making hard decisions. DANA represents the 1,500 nonprofits that handle many services provided to Delawareans, some of which are contracted through state agencies.
“Some organizations were starting to look at who they would have to lay off. This impacts a significant number of jobs because a lot of nonprofits receive federal funding that supports their work,” DANA President and CEO Sheila Bravo told DBT. “It was almost like COVID where nonprofits were worrying about their staff but also about how they would provide the services thousands need.”
More than 80,000 people in Delaware are employed through the 1,500 nonprofits in the state, though not all are funded by federal and state governments.
Delaware has long provided nonprofits funding as they handled more services over the years. Former Gov. John Carney had opted to use a one-time supplemental bill to handle projects and services not included in the budget or the bond bill and DANA representatives have maintained that the funding level had not risen to match the market.
“Years ago, the state made the decision that they could deliver services more efficiently by partnering with nonprofits, so that relationship is intertwined in much of the social impact as well,” Bravo told DBT Wednesday morning. “If one piece of the government stops, it has a big domino effect throughout our communities.”
The state of state finances
In this rapidly changing political climate, Meyer is now in charge of setting policy to determine the future for Delaware. He campaigned heavily on the platform of improving Delaware’s education systems with bold, decisive action. But as the Trump administration continues its unpredictable policies, the new governor is now tasked with shaping Delaware’s response.
It may be a difficult path to tread as he has vowed to invest heavily in Delaware’s schools and the Joint Finance Committee (JFC) will start hearings on former Gov. John Carney’s final proposed budget next week.
The current proposed budget that Meyer and the General Assembly will have the chance to mark up in May is $7 billion in all, complete with bond-funded capital projects and grants-in-aid. It is almost flat from what Carney proposed the previous year.
Over the years, state lawmakers have passed record-setting spending plans as tax collections and other revenues held strong over the course of the COVID-19 pandemic. The spending plan was also boosted by unprecedented federal funds like the American Rescue Plan Act funds.
Rebecca Thiess, a manager of the Pew Charitable Trusts managing fiscal risks project, said that during the pandemic, many states overall collected more taxes than anticipated, and just now many states are coming off that peak.
“If you look at it from a state policy maker’s point of view, there’s been money coming in from the federal government and a lot more coming in through taxes than you thought. That’s helped be able to support certain policies, programs and priorities they may not have been able to do otherwise,” Thiess said. “Now they’re facing a time where it may not be as easy to do with this kind of directive on top of weakening tax revenues.”
Some Delaware policy makers are already watching the state’s revenues and expenses closely. Under the previous governor, Delaware had seen seven consecutive budget surpluses and
fiscal analysts reported in December that the state was looking at a slight surplus. The budget reserve fund holds $350 million and the budget stabilization fund has $470 million.
At the December meeting of the Delaware Economic and Financial Advisory Council (DEFAC), analysts projected that personal income tax withholding would be strong and estimated that the state would be at $2.6
billion for FY 2025.
JFC Chair Rep. Kim Williams (D-Marshallton/Pike Creek) told DBT in an emailed comment that the uncertainty around the future of federal funding was what all in the General Assembly were thinking of, especially as how fast things were changing.
“At this point, I think everyone understands our budget is going to be tighter this year compared to years past. That’s just the reality we’re facing,” Williams told DBT. “We’re closely monitoring updates from the federal government and will continue to factor those developments into our planning process, alongside the revenue forecasts provided by DEFAC.”
Meyer and Lt. Governor Kyle Evans Gay held a call with 200 business, nonprofit, health care and education representatives on Tuesday afternoon on the potential federal funding freeze. Those familiar with the call told DBT that Meyer’s office instructed the organizations to start tracking data on how a federal funding freeze may impact their operations.
His office is also asking Delawareans to do the same at
governor.delaware.gov/federal-funding-freeze
Associate Editor Jennifer Antonik contributed to this report.