DOVER – With a nearly $1 billion estimated revenue surplus, Gov. John Carney proposed on Thursday a record $5.48 billion Fiscal Year 2024 operating budget, representing a year-over-year increase of […]
[caption id="attachment_230239" align="aligncenter" width="1200"] Delaware’s independent fiscal analysts raised their revenue outlook for the next fiscal year just before legislators begin their deliberations on the upcoming state budget. | DBT PHOTO BY JACOB OWENS[/caption]
BEAR – Delaware’s independent panel of fiscal advisors added $11.2 million to their estimated Fiscal Year 2024 budget limit in one of the year’s most important meetings as legislators begin their final deliberations on the state budget.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, increased the spending limit to more than $6.54 billion. It offsets a bit of the calculated reduction in DEFAC’s March report – the first time since the COVID pandemic that the advisors had trimmed revenue outlook – and provides a little more buffer for lawmakers who will meet in coming weeks. The state is now anticipated to end the current fiscal year on June 30 with a $645.3 million surplus.The FY 2024 budget proposed by Gov. John Carney, currently under review by the legislature’s Joint Finance Committee, includes $5.48 billion in operating spending, $324.9 million in supplemental spending, $59.8 million in grants-in-aid assistance and $664.7 million in cash outlay to capital projects – totaling about $6.53 billion.The state is sitting on considerable savings that help protect its AAA bond rating, including $316.4 million in its “Rainy Day” reserve fund and $402.6 million in the Budget Stabilization Fund, a discretionary fund that could be tapped to fix unexpected issues.The higher estimated revenue for the current fiscal year comes on the back of a stronger than previously expected personal income tax filings and corporate income tax filings, which were revised up by $48.2 million and $47.9 million, respectively.“Strength in the corporate income tax is coming from just about every corner of the economy,” David Roose, the state finance department’s director of research & tax policy, told DEFAC at its May 15 meeting.He noted that DEFAC is wary of the extraordinarily high levels of corporate income tax seen in recent years though and is hedging that growth by about 25% in the next fiscal year.The falling number of initial public offerings (IPOs) and tighter economic climate that will slow growth has also led DEFAC to revise down its corporate franchise tax revenue for the current fiscal year by $15.7 million.All other revenue streams saw small revisions of under $10 million or no revisions at all as the final calculations are completed. Notably, analysts said that real estate transfer taxes have fallen about 30% from December to May when compared over the prior year. Residential sales have slowed a bit as mortgage rates have risen in the past year and commercial property sales have also slowed as project financing has become more difficult.Although DEFAC proposed a benchmark index rate of 6.1% for the FY 2024 budget growth, Carney has proposed a budget that uses a rate of 7.5%, the highest in at least four years. Delaware Finance Secretary Rick Geisenberger said that rate of growth is appropriate because the reserve fund and Budget Stabilization Fund would hold more than 10% of the budget total.In discussing state expenditures over the past year, the analysts noted that the state’s contractual services costs have risen $113 million compared to last fiscal year while salaries have risen $146.5 million and pension and other post-retirement benefit costs have risen $243 million. The tight job market and inflationary pressures are biting into the state’s budget, and it could lead to more difficult decisions down the line, said Cerron Cade, director of the state Office of Management and Budget.“It is rather ominous. We have some fixed costs that we have to cover. Capital [projects] may be one area where we can pull back and delay projects but we can’t delay wages and can’t delay health care costs,” he said. “We have positioned ourselves incredibly well to be able to absorb some of the shock that growth; however, it is going to have an impact.