Delaware’s expected surplus will allow state lawmakers some leeway while planning the 2024 fiscal year budget. Photo by Andre Taissin/Unsplash
Delaware heads toward the final moves in creating its 2024 budget, which starts July 1, with a projected $963.5 surplus.
It will be the third straight year in a row of extraordinary revenues that hit right at $1 billion, and a turbulent economy it’s expected to be the last for a while to reach that stratospheric height.
Revenue estimates rose $12 million between the March and May meetings of the Delaware Economic and Financial Advisory Council, which is charged with tracking revenue and expenditures to help the General Assembly create the state budget.
But what really caught the attention of Senate Minority Whip Brian Pettyjohn, R-Georgetown, a member of DEFAC, was a long discussion about the rising costs of Medicaid.
They are coming as the federal pullback of COVID-19 money and rules means that some people will be kicked off the rolls, but Delaware has to foot bills once paid by the Feds as the program ratchets down.
Costs also are rising because of increased healthcare costs and salaries, said Molly Magarik, secretary of the Department of Health and Human Services.
Nationally, about one-third of the country is on Medicaid, and that includes those who live in poverty, kids, people with significant health or disability issues, and older people who need help with their healthcare.
Delaware’s roles include 300,000 people in a state of nearly 1 million.
“Our Medicaid numbers are skyrocketing,” Pettyjohn said after the DEFAC revenue and expenditure committees met Monday. “We will have to add at least $48 million in markup.”
Markup is how the legislature refers to the work that the Joint Finance Committee does when it sets actual amounts to budget line items. They work off Gov. John Carney’s proposed $5.5 billion budget, up 7.4% from fiscal 2023’s.
The committee’s markup meetings start May 23 and are public. Go here to listen.
This year’s 2023 budget was higher than state rules generally require because of the recent surpluses. Delaware has a built-in budget break, which says the legislature can only appropriate 98% of the budget.
But because of a budget stabilization fund, state rainy day fund and more, politicians have been able to put more one-time money into projects like water cleanup, schools, healthcare for retirees and more.
At the same time, the state bean counters have been able to put more money back into the budget stabilization fund, which it raided in 2020 as revenues suffered during the early days of the COVID-19 pandemic.
This year, DEFAC heard, Delaware will be able to put $511.3 million out of fiscal year’s 645.3 unencumbered funds into the Budget Stabilization Fund, which sits at $402.6 million.
That will give the state a total of $918.9 million and a huge hedge in the turbulent economic times when predictions of recessions wane and wax like the moon each month.
Among budget details
Among the interesting bits of Monday’s DEFAC subcommittee and full committee meetings:
The outlook didn’t change much overall, with a few exceptions.
Real estate transfer taxes have been down about 30% from December through now, partly because there’s low stock available. Owners don’t want to sell and be locked into a higher-rate mortgage for a more expensive house.
Medicaid expenditures are a little over $1 billion, nearly one-fifth of the state’s budget, with a $94.2 increase over the previous year.
There’s been a steep drop in capital gains tax, but the tracking of those lags about two years, so the 2022 data won’t be available until 2024.
Last year saw the greatest number of initial public offerings that registered in Delaware in the last 25 years. That’s slowed way down.
DELDOT reduced salary expectations $4.6 million this year because it couldn’t fill all its jobs.
Because of the no-show-snow this year, the Department of Transportation was able to slash its $10 million budget for that by $6.5 million.
Becaue of that same no-show snow, DELDOT increased salary expenses by $4.7 million because it’s been able to make so much progress on road projects.
State salaries will trend down in 2024 because there won’t be a 27th pay period like there was last year. That happens every 11 years to people who are paid every two weeks and costs the state a few saddlebags of cash.
Pension costs will fall slightly because there will be no one-time contributions as there were last year.
Contract services will rise as many of the capital projects that have been on the books finally enter the construction state and the money begins to be spent.
The tax filing season brought much stronger returns than expected.
Personal income tax refunds have been delayed, many until summer, because of problems using a new federal tax program.
Lottery drawing revenue is up $1 million this year, largely because of the string of massive jackpots.
Corporate taxes dropped 30% over a couple of years during the dot.com bust in the early 200os, but it only dropped 2% in 2008 and 2009. If there is a recession, it hard to predict what will happen based on past performance.
The IPO market could be affected by a tightening of credit that was already in place among recession-mongering fears, but has gotten worse with the collapse of four big regional banks.
Treasury bond yields are down slightly as investors look for safer, more lucrative places to stash their cash.
S&P Global Ratings expects gross domestic product growth to hit a trough this summer, and talk of recession has popped back up after S&P recently said the country would experience an “economic pause” as opposed to a full recession.
