Delaware budget forecasters are predicting small dips in revenue for the current fiscal year and the next, citing the effects of national economic trends. The Delaware Economic Financial and Advisory Council (DEFAC) estimates a $30 million decrease in spending authority for fiscal year 2026 compared to its December meeting. Department of Finance Director David Roose explains that uncertainty around the federal economy, including the expected layoffs of over a quarter of a million federal employees, is contributing to the economic slowdown. This is further exacerbated by weak consumer spending and an expanding trade deficit.
The state is facing challenges in personal income tax revenue growth due to weakening forecasts for wage and salary incomes. Additionally, Delaware is expected to pay $60 million more in personal income tax refunds over the next two years. The state is also awaiting clarification on the president’s tax policy, which could have significant implications for Delaware’s general fund.
As a result, DEFAC is projecting a 3.1% increase in state spending for fiscal year 2026, with particular attention to potential Medicaid cuts by the Trump administration. State leaders are considering budget cuts and the possibility of dipping into the state’s Budget Stabilization Fund in the coming fiscal years. Gov. Matt Meyer is expected to propose his recommended budget in the coming weeks as Delaware prepares to navigate these economic challenges.
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