DOVER — The Delaware legislature approved the state’s Fiscal Year 2026 operating budget at $6.58 billion with a $37 million one-time supplemental funding bill after weeks of apprehension as to how the federal ombudsman bill would impact state finances.
The legislature also ultimately approved $977 million in various capital projects through the bond bill after a standoff between legislators from both sides of the aisle over a controversial offshore wind bill.
Gov. Matt Meyer’s first budget in office is roughly on par with the amount he proposed for his “budget reset” back in March. The final spending package includes $451 million more- a 7% increase than the current budget.
The FY 26 budget includes several key provisions he sought in education, health care and affordable housing, as well as some developer and transportation fee hikes. It does not, however, include a personal tax increase which he previously advocated for in hopes of adding additional financial padding to the state.
The FY 26 budget also does not draw down from the Budget Stabilization Fund or the Rainy Day Fund which sit at $469 million and $365.4 million respectively. Another Meyer proposal was also declined for the incoming budget – a federal contingency fund to work as a back-up savings account ahead of potential deep cuts to federally-funded initiatives and programs.
“This budget is a promise to the people of Delaware: we are investing in your future. We’ve paired bold investments with responsible governance. From raising teacher pay and expanding early literacy programs to strengthening our safety net and honoring our commitments to public workers, we are building a state where every child, every family, and every community has a chance to thrive,” Meyer said in a statement thanking legislators for their hard work.
As a part of Delaware’s checks and balances, legislators on the Joint Finance Committee spend time reviewing and revising the governor’s proposed budget each year. In this budget, they approved $33 million for education initiatives including a raise to teacher pay and $8 million to create an Early Literacy Emergency Fund to direct funding to schools with the lowest level of reading proficiency rates.
It also includes $3 million for teacher-driven projects, $61.2 million to Other Post-Employment Benefits Investments for state retirees and $28 million for state employee health insurance premiums.
The Bond Bill
The $977 million bond bill was held until the final hours of the final day of session as House Republicans refused to vote on it if Senate Bill 159 was passed, a bill that sought to override Sussex County’s denial for US Wind to build a substation in Dagsboro for its offshore future wind farm.
Senate Bill 199 was proposed to override SB 159, seeking to delay the substation approval to January 2026, and was signed by Meyer just moments after it was passed allowing legislators from both sides of the aisle a chance to work on a compromise regarding the bond bill.
The bond bill also includes $5 million for the Strategic Fund which provides grants to businesses that create or retain jobs or make significant investments in projects in the state. Meyer previously said that he hopes to use $3 million of that fund for the Encouraging, Development, Growth and Expansion (EDGE) program which specifically supports early-stage startups.
The Delaware Division of Small Business is reportedly preparing new reforms for the program, dubbed “EDGE 2.0,” to be launched in July.
Another $5 million is earmarked for both the Graduated Lab Space Fund and the Transportation Investment Improvement Fund which was more than what the governor originally proposed for both line items. There is also $10 million included for the Site Readiness Fund, roughly on par with Meyer’s recommendation.
The Sports Tourism Fund, which was created two years ago while the state enjoyed a surplus of funds, was included in the budget again. Despite its exclusion from the budget recommendations of both Meyer and former Governor John Carney, who made his final budget recommendation in January, legislators found importance in the continuation of the fund and included $10 million for it again this year.
The Sports Tourism Fund has offered $22 million across nine sports facilities from around the state in 2024 alone.
When asked by the Delaware Business Times, a spokeswoman for the Senate Democrats said that the Bond Committee had wanted it and that it had been noted to support draws like “regional and national events to Delaware, positively impacting the state and local economy.”
Fee Increases and failed tax hike
Meyer started his first legislative session with four fee and tax increase proposals. He ended it with only two of those proposals passed and signed into law.
He advocated for a personal income increase that would create three new tax brackets and raise the top rate to 6.95% for households that earn more than $500,000. A bill proposed by Rep. Sean Lynn (D-East Dover) would also slightly cut the tax rate for filers under $60,000 and generate a tax cut of roughly $85 per year for many Delawareans. The bill died in the House Revenue and Finance Committee in mid-June.
Meyer also voiced support for raising the tobacco tax by 50 cents, though the final bill filed by House Speaker Melissa Minor-Brown (D-New Castle) included a $1.50 increase per pack. That bill, introduced in early June, was never heard in committee.
After weeks of discussion and advocacy with developers in the state, the legislature did pass a package of environmental permit and fee increases, which had not been raised since the 1990s. The package covered air permits, hazardous waste facilities fees and permits in the water division, generating $5.3 million per year.
Fee hikes at the Delaware Department of Transportation were the largest increase seen this year, with legislators hoping to generate an additional $107 million as revenues from the gas tax continue to decline. This includes higher costs on learner permits, name changes, commercial licenses and car registrations, as well as a tax on electric vehicle purchases.
A toll increase for all three toll roads was also a topic of discussion this session, as well as a possible rollout of tiered toll fees for U.S. Route 1 with lower fees for Delaware drivers.
DelDOT is also rolling out a tiered toll increase on South Route 1, a departure from the $1 on weekdays and $3 on weekends. Delaware E-ZPass holders are seeing it rise to $1.50 on weekdays to $4 on weekends. Those who use cash and out-of-state E-Zpass holders would pay $2.50 on weekdays and $6 on weekends.
