DOVER – In their final report before the state legislature approves the Fiscal Year 2022 budget, Delaware’s independent fiscal analysts added $71.5 million Friday to next year’s budget limit, now totaling more than $5.97 billion, and expect to end the year with a $975 million surplus.
Although 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, was concerned about the impact of the COVID-19 pandemic on state finances starting last spring, those worries were never borne out. DEFAC has continuously set rosier projections for state revenues over its more than half dozen meetings over the past 15 months.
The improved financial standing for the state largely comes from the successes of corporate America, which has continued to book solid revenues in major sectors, including health care, finance, and homebuilding, despite the pandemic.
With the legislature required to approve a budget by the end of June, the typically acrimonious annual deliberations have sailed through Legislative Hall this year with Delaware projected to finish this fiscal year with a surplus of more than $975 million – about a fifth of the state’s total operating budget. Gov. John Carney’s record-breaking $4.7 billion Fiscal Year 2022 operating budget and $894 million capital budget, proposed in January, will survive without serious, if any, cuts from the legislature this year.
The analysts now expect to end the current Fiscal Year 2021 budget on June 30 with a $975.2 million surplus but also see $27 million less in FY 2022 revenue than thought last month. The 98% appropriation limit, or the total the state can spend while setting aside 2% of annual revenues in a “Rainy Day” savings fund, has risen more than $1 billion from DEFAC’s October estimate due to the strengthening economy. The budget limit is also 29% larger than it was capable of spending in the FY 2021 budget that ends this month.
“This really has to do, I think, with the nature of the pandemic, the unexpected, extraordinary expectations for the year, and also just the timing of it,” said David Roose, the director of research and tax policy for the Delaware Department of Finance. “If the timing had been different than the June estimates and budget, last year may have looked very, very different than they did.”
Roose said Friday that the revenue penciled into the June report was largely straggling personal income and corporate taxes for the second quarter. He said that researchers don’t expect the increased gains to flow through to the next fiscal year at the same rate, with estimated personal income tax revenue falling 5% from the pandemic highs due to lower capital gains tax proceeds, among other reasons.
“Assets of all kinds gained value last year, particularly real estate, that would have generated probably significant capital gains. Cryptocurrency and a variety of other assets could have been generating strong growth too,” he said, noting the volatile stock market would have produced long-term and short-term gains for many as well.
