Delaware Economic and Financial Advisory Council (DEFAC) cuts official state revenue forecast

Delaware Economic and Financial Advisory Council (DEFAC) cuts official state revenue forecast

by Mark DiMaio

Delaware’s projected state revenues have deceased by an additional $26 million over DEFAC’s September 2016 revenue forecast. DEFAC now projects that state revenues for the 2017-2018 fiscal year will be about $200 million dollars less than the current 2016-2017 fiscal year. The decreased revenue projection to $3.9 billion equals about 5% less than the $4.1 billion being spent during the State’s current fiscal year. In addition to the decrease in projected revenues, the cost of state government is projected to increase by $150 million dollars with Medicaid spending, state employee health care costs and increased school enrollment driving the escalation in state spending.

The DEFAC report points to flat revenue growth for upcoming fiscal years, which could lead to an annual cycle of seeking revenue enhancements. Even if Delaware can successfully restructure its future revenue portfolio, state spending could outpace new revenues. Delaware’s murky fiscal picture has been static for the past several years, with many elected officials focused solely on generating and increasing revenues to the state. If Delaware has finally reached a fiscal crossroads, maybe it’s time to take a serious look at state spending. The old playbook of raising corporate franchise taxes, raising gross receipts taxes and many other fees may not be sustainable. At some point, companies that incorporate here may seek out other states or nations for incorporation. The sky isn’t falling but sticking to the same formula of increasing revenues without serious consideration of reducing state spending will not be viable in the long term.