State budget forecast in the black

Budget forecasters painted a rosier outlook for the end of December with state revenues on the uptick after a dreary fall prognosis.

Revenues released Dec. 15 by the Delaware Economic and Financial Advisory Council show increases in the current Fiscal Year 2026 budget and those forecast for FY 2027 – a change from the deficits reported by DEFAC in October.

The revenue increases for both FY 26 and FY 27 are offset by the October deficits, resulting in 1.1% increases for both years, according to the summary of changes.

Overall, estimates show $74 million more for the current fiscal year, and about $77 million for FY 27. The total FY 27 budget is estimated at $6.948 billion.

Increases in limited partnerships and LLCs, business entity fees, and gross receipts tax combined for a $55 million increase, offsetting the flat returns posted in October. 

Corporation income tax also posted $80 million more compared to a nearly $170 million deficit in October.

Personal income tax, however, was estimated to drop about $14 million in FY 27’s October through December forecast with flat realty transfer taxes, and a 4.4% drop in dividends and interest.

Gov. Matt Meyer will use DEFAC’s estimates to put together his FY 27 budget recommendations expected to be released early 2027.

Based on the December DEFAC report, House Republicans said the 98% state revenue limit set by law for the FY 27 budget is $7.098 billion, and they issued a statement urging Meyer and his staff to take a cautious spending approach for the coming year, and leave be the $366 million Rainy Day Fund and the $469 million Budget Stabilization Fund. 

“State spending has recently been growing at an unsustainable rate. In FY 2022, we enacted an operating budget of $4.771 billion. Our current FY 2026 budget is $6.580 billion – an increase of more than $1.8 billion, or about 38%, over the four-year period,” the statement reads. “Our state, nation and world are facing uncertain economic conditions. While we’re still optimistic for the future, hope is not a successful fiscal strategy.

“We still have four more state revenue estimates this spring, with the last and deciding forecast not being issued until June. As we head into the New Year, let us resolve to adopt prudence as we allocate the taxpayers’ money.”

Meyer said he took the latest DEFAC as a good sign, but would like to see the revenues higher.

However, he said there is work to be done.

“There is a clear imbalance between our expenses and our revenues,” Meyer said.

The Carney Administration left office with a 7% expense growth compared 1% to 2% revenue growth, Meyer said, which is better than previous ratios.

“It’s a little bit better than four years ago,” he said. “What you're going to see in our budget is a further attempt to bring those two numbers together.”

Meyer said he plans to present his budget Jan. 29, 2026.