DuPont news creates questions for state budget

 

DOVER — An announcement earlier this month that Delaware icon DuPont would merge with fellow chemical company Dow created a great deal of uncertainty in the First State. That uncertainty reached a new level Tuesday, as DuPont announced it would cut about 1,700 Delaware positions early next year.

While most of the questions swirling around the merger and the eliminations have centered on the impact on employees, there is another consideration — money flowing to the state.

The move not only could increase unemployment but also affect budget officials’ planning for the fiscal year starting July 1. With Gov. Jack Markell set to unveil his proposed budget in one month, potential changes to the state’s coffers are of tremendous importance for Delaware administrators.

At the Delaware Economic and Financial Advisory Council’s Dec. 21 meeting, officials revealed projected revenues for this year and next are $167 million above the September predictions, bringing them closer to matching spending levels.

Those projections come with a bit of a caveat, a result of the DuPont merger and potential layoffs — a possibility that now has become reality. The council lowered revenue expectations for fiscal year 2017 by $7 million based on an estimate of 700 Delaware employees losing their jobs.

“Today’s announcement is obviously a little bit higher than that,” Secretary of Finance and council member Tom Cook said.

While it is far too early to tell the exact impact, he said, the layoffs could boost revenue this fiscal year through the form of severance packages, something officials did not weigh in their previous budget considerations.

“It causes a little bit of a bump because people are getting paid and they’re getting a slight increase, a payment at one time,” he said.

Fiscal year 2017 would then likely see a downturn from previous levels.

Mr. Cook cited the closure of Delaware’s Chrysler and General Motors facilities in 2008 and 2009, respectively, as past examples of revenue temporarily seeing a minor boost due to severance pay.

In this case, he stressed more information is needed to make a specific prediction and said the predicted decrease of $7 million for 700 workers simply cannot be extrapolated out to $17 million for 1,700 employees.

The exact change in DuPont’s corporate taxes also will have to be determined, possibly impacting money available for the state.

Come the next council meeting, in March, officials should have a better estimate regarding the exact impact on the state, Mr. Cook said.

Reach staff writer Matt Bittle at mbittle@newszap.com

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