BEAR – When Gov. John Carney proposes his Fiscal Year 2024 budget next month, he will have a record $6.5 billion from which to draw, according to revenue estimates approved Monday.
While the governor has an enormous amount of projected revenue to pay for projects and people, the typically cautious Carney is unlikely to propose spending such a large sum, especially as fears about a future recession continue to persist.
His current FY 2023 budget was proposed at about $1 billion less than the available spending authority. For the upcoming FY 2024 budget that begins July 1, the benchmark appropriation rate – a calculation that would stabilize state budget growth from year-to-year to ensure they are sustainable – is an increase of 6.1%. That serves as a guideline that Carney’s budget will likely fall closer to $5.58 billion, depending on one-time expenditures, which would leave a revenue surplus of nearly $1 billion.
Despite the uncertainty over a recession next year, Delaware’s independent fiscal analysts are continuing to see higher than normal tax collections, leading them to raise the current and next fiscal years’ revenue projections, adding $306.2 million to the state government’s available spending limit.
Delaware is now estimated to end the current fiscal year on June 30 with a surplus of $662.3 million, according to the Delaware Economic and Financial Advisory Council (DEFAC), a non-partisan group of business and community leaders, academics, and government professionals that sets the state’s official revenue estimates. It will push the potential budget limit for next year’s Fiscal Year 2024 budget to $6.57 billion.
Through the COVID pandemic, ensuing supply chain issues and even historic inflation, DEFAC has continuously reported strong revenue flows for the state, especially in personal income taxes – the state’s largest single revenue source – as well as corporate income taxes and franchise and LLC/LP formation taxes.
On Monday, DEFAC added $50.4 million in corporate income taxes to this fiscal year and $30.8 million to the next, a sum that officials said was a bit “inexplicable.” Secretary of Finance Rick Geisenberger told the Associated Press after the meeting that booming corporate profits over the last year and a previously low-interest rate environment that kept debt expenditures low probably helped boost the state’s revenue source. The panel expects corporate income taxes to decline in future years though.
Meanwhile, DEFAC raised personal income taxes estimates for this fiscal year by $43.1 million and next year by $45.2 million, driven in part by workers suddenly empowered to demand higher wages amid a labor shortage.
Finally, the unclaimed property revenue estimate was adjusted upward by $39 million this year and $20 million next year. The revenue source has benefitted from smaller reimbursement claims, including from other states, and includes a wide assortment of escheatment, including abandoned bank accounts, payroll checks, stocks, depots, money orders, gift cards, and much more. Delaware benefits from an outsized claim on such property as it is the state of incorporation for so many companies worldwide.
Unclaimed property could take a further hit in the future as the U.S. Supreme Court weighs a case regarding Moneygram products that could take hundreds of millions of dollars out of Delaware coffers.
