Amidst uncertainty, Delaware revenue projections drop

DOVER — The council that sets Delaware’s revenue forecasts is warning of a potential lasting economic downturn due to the coronavirus, projecting a drop of $94.1 million in revenue for the upcoming fiscal year.

The Delaware Economic and Financial Advisory Council on Monday officially approved a forecast that, for now, sees the coronavirus pandemic hitting the state mildly hard for the fiscal year that begins July 1. However, members cautioned there is much uncertainty around the projection, which will be updated in each of the next three months before lawmakers approved the budget in late June.

The panel, which conducted its March meeting with a mix of members participating in person and over the phone, noted the numbers could look quite different in just a few weeks, for better or for worse.

“We all hope this doesn’t last for long, it doesn’t have an impact, but it probably will,” Chairman Mike Houghton said.

As of Monday, Delaware had announced eight positive test results for COVID-19.

DEFAC’s forecast has revenues dropping by just $1.1 million from the level predicted in December for the current fiscal year, with a much bigger impact coming more than three months down the road. Although revenue projections rose in September and December compared to June, meaning the state is still expected to bring in more money than thought nine months ago when the current budget was passed, the impact from the virus could wipe out those gains in the next fiscal year.

Another model presented to DEFAC, this one expecting a stronger recession, has Delaware’s revenues coming in at $175 million less than expected in the upcoming fiscal year.

Personal and corporate income taxes would be the biggest risks in the event of a severe economic downturn, and the federal government pushing back the tax filing deadline due to the virus could see tens of millions of dollars shifted from the current fiscal year into the next for Delaware.

On the spending side, a recession would likely hit the budget hardest in employee salaries and Medicaid spending, Office of Management and Budget Director Mike Jackson said. Those two areas alone account for about $2.35 billion in the current fiscal year, slightly more than half the general operating budget.

DEFAC members also noted the state has $126.3 million in an unofficial reserve account after legislators, with some prompting from the administration, set aside tens of millions of dollars each of the past two years. The savings were created exactly for situations like this, should the coronavirus prove to seriously impact the economy and Delaware budget.

Helpful Coronavirus links

Delaware Division of Health Coronavirus Page
CDC: About the Coronavirus Disease 2019
CDC: What to do if You Are Sick
Johns Hopkins Coronavirus Resource Center
AP News Coronavirus Coverage
Reopening Delaware: Resources for Businesses
Delaware Phase 2 guidance

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