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Delaware's Legislative Hall | DBT PHOTO BY JACOB OWENS[/caption]
DOVER – In their first report of the new fiscal year, Delaware’s independent fiscal analysts expressed some concerns about the state’s near-term outlook even while projecting to conclude the fiscal year in June with a more than $400 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, have anxiously watched the impact of the COVID-19 pandemic, its effect on supply chains and rising inflation, the state’s finances have continued to prove strong through the public health crisis.
DEFAC has continuously set rosier projections for state revenues over its more than half dozen meetings over the past 19 months. The October meeting, which sets the year’s baseline, was no different.
On Monday, the panel approved new estimates that would conclude the current Fiscal Year 2022 with a $444 million surplus in June and start the next fiscal year with a potential $5.68 billion state budget. That would be about $65 million less than the record-breaking current fiscal year’s spending, but that was aided by a huge infusion of federal stimulus funds due to the pandemic.
Those hopeful estimates are buoyed by strong revenues over the past four months from a variety of sources, which led DEFAC to add $282.2 million to its overall FY 2022 estimated revenue.
Personal income tax estimates were increased nearly $70 million over initial estimates while estimated real estate transfer taxes were raised $71.5 million, due in no small part to some recent huge purchases, including Barclays Bank’s $83 million acquisition of its Riverfront headquarters that gave the state more than $2 million in transfer tax.
Gross receipts taxes were pushed up $20 million over June estimates, while lottery revenue and business entity fees were also both raised about $6 million each.
The only original estimates that were lowered by DEFAC this week were state business franchise taxes and insurance taxes, combining for a less than a $2 million reduction.
Despite that strong start to the fiscal year, the analysts are wary about the outlook for the state economy in the near term, primarily due to the continued workforce shortages that have impacted productivity, rising inflation that has begun to squeeze companies and the supply chain backlog that has led to manufacturing pauses and delays in shipping. Those challenges will result in lower than previously expected economic growth for the U.S. and Delaware in Fiscal Year 2022, noted David Roose, the director of research and tax policy for the Delaware Department of Finance.
“Some of the causes for the slower than expected growth this year, however, especially supply chain issues, largely represent a deferral of economic activity, and so the outlook for Fiscal Year 2023 is somewhat higher than previously expected,” Roose told Delaware Business Times.
