Delaware panel boosts official government revenue forecast
DOVER, Del. (AP) — The panel that sets Delaware’s official government revenue forecast increased its estimate for the current year by more than $172 million at its final meeting of the year Monday.
The Delaware Economic and Financial Advisory Council also boosted its revenue estimate for the fiscal year starting July 1 by $140 million compared to its October forecast.
Gov. John Carney’s budget office will use the latest estimates to put the finishing touches on a fiscal 2024 spending proposal that he will unveil in January after the General Assembly reconvenes.
Officials said the increases are due largely to higher estimates for personal income taxes, corporate income taxes and corporate franchise taxes, which are paid by companies incorporated in Delaware even if they don’t do business in the state.
The panel boosted its corporate income tax estimates by $50.4 million for this year and $30.8 million for next year compared to its October projections.
David Roose, director of research and tax policy for the state Department of Finance, told council members that Delaware has seen “extraordinary activity” and “phenomenal growth” in the corporate income tax. While net corporate income tax revenue fell from $147.8 million in 2019 to $116.5 million in 2020, it ballooned last year to a record $314 million.
“We’re not seeing the details of exactly what’s driving it, but what I can say is that corporate profits, especially for very large companies, have been extraordinary the last two years,” Secretary of Finance Rick Geisenberger said after the meeting. “A lot of that is COVID-related.”
Geisenberger also cited a low interest rate environment that had kept the cost of capital for businesses down for several years.
Despite the increased estimates, corporate income tax revenue this year is expected to be about 10% lower than last year’s record haul, and to continue to decline in fiscal 2024.
Meanwhile, estimates for personal income tax revenue, the state’s largest revenue source, increased by $43.1 million for this year and $45.2 million for fiscal 2024.
Estimated revenue from the corporate franchise tax and fees on other business entities such as limited partnerships and LLCs increased by $48 million for the current fiscal year and $18 million for next year. The state also continues to collect significant revenue from abandoned property, with estimates for this year increasing by $39 million compared to October, and by $20 million for next year.
Overall, the estimated spending authority for the fiscal year starting July 1 increased by $306.2 million compared to October’s projections, even though total general fund revenue is expected to decline by 3.1% compared to this year.
The state is currently expected to end the current fiscal year on June 30 with a surplus of $662.3 million. That’s in addition to a never-tapped “rainy day fund” of $316 million, and a separate “budget stabilization” reserve fund created by Carney that totals about $403 million.