Revenue improves as legislators face next year budget

Enhanced federal Medicaid funds help ease deficit
May 29, 2020

The latest revenue estimate for the end of the fiscal year is better than expected, with no deficit in the forecast as the budget enters its last month.

“We're still in a very difficult situation; it's just a less-difficult situation when it comes to our finances,” said Mike Jackson, director of the Office of Management and Budget, during a press conference.

In the latest financial report, released May 20 by the Delaware Economic and Financial Advisory Council, revenues came in at $92 million – boosted in part by maximizing federal stimulus funds for Medicaid.

An enhanced federal match rate for Delaware's Medicaid program has provided more money, and the state has also reduced expenses for the last budget quarter, moving from a $150 million deficit to a $39 million cash surplus, Jackson said.

“We've been able to transition from a shortfall to a positive balance all at the same time while being able to maintain … the budget stabilization account, which I like to refer to as our savings account,” he said.

The balance of $126 million in the budget stabilization account remains intact and is available for the 2021 budget, Jackson said. The rainy day fund has not been touched, he said. Delaware also has a $250 million rainy day fund created for extreme financial circumstances, but in order to use it, a three-fifths majority vote by the General Assembly is required.

Still, the government shutdown more than two months ago to prevent the spread of COVID-19 has resulted in a $620 million drop in revenue estimates for 2020 and 2021. In January, Carney presented his 2021 budget based on 4 percent growth with $250 million in surplus.

“The financial plan submitted to the General Assembly will have to be reduced by approximately $450 million, a significant change in terms of what was proposed,” Jackson.

As a result, he said, there will be little to no growth in the 2021 budget as a result of the state's deflated economy.

The next revenue forecast is expected June 17, and those numbers will be used as members of the Joint Finance Committee and bond bill committee meet for budget markups. The JFC will begin meeting Tuesday, June 2.

“At this point we have a cautiously optimistic outlook for the current fiscal year … and keep in mind we may have further changes in revenue as we move through this calendar year and into next year,” Jackson said.

Carney said his fiscally conservative budgets with built-in reserves have paid off by providing some padding as state revenues have dropped.

“We've quite a bit of cushion to go through in order to get to the bone there,” he said. “We'll keep our eye on the June DEFAC, where we get additional information on collections, and of course, they are very uncertain this year.”


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