Delaware panel lowers official state revenue forecast

NEW CASTLE — A state panel has lowered Delaware’s official revenue forecast once again, just days before Gov. John Carney unveils his budget proposal for the upcoming fiscal year.

The Delaware Economic and Financial Advisory Council on Monday lowered its revenue estimate for the current fiscal year by about $30 million compared to its December forecast. The change was mostly due to lower projections for corporate income tax and abandoned property revenue.

Those same factors prompted the panel to lower its revenue estimate for fiscal 2018, which starts July 1, by about $6.5 million compared to its December forecast, when estimates for both years also declined.

“It’s not surprising given the trend over the last several months with regard to revenue projections,” state budget director Michael Jackson said of Monday’s revisions. “We were running through various scenarios in case there would be additional budget reductions.”

Citing the latest projections, Jackson on Monday sent a memo to Cabinet agency directors informing them of various cost-cutting measures.

Jackson ordered an immediate hiring freeze for all Cabinet agencies and directed officials to limit use of contractual services. Purchase orders over $10,000 will be reviewed, and those deemed nonessential will be rejected.

Meanwhile, fiscal and policy analysts will work with agency officials to review and reduce expenses for travel, contractual services, supplies and materials, and capital outlays, reverting appropriations to the general fund if possible.

The reviews will be completed in time for consideration of April’s meeting of the DEFAC panel.

Carney will unveil his proposed budget for fiscal 2018 on Thursday.

“These latest estimates only confirm what we already know — that Delaware faces a serious financial situation,” Carney said in a prepared statement. “As I have been saying for months, we have a structural budget problem that requires a balanced long-term solution, and shared sacrifice.”

With the latest changes, revenue estimates have declined by about $100 million since lawmakers approved the current year’s budget last June.

Officials previously said that just to match this year’s budget, with no growth, they would need to find more than $200 million in revenue.

Taking into account Monday’s economic forecast, along with cost drivers for next year’s budget, such as Medicaid obligations, debt service and school enrollment increases, the actual shortfall, compared to the current budget, is around $385 million.

In campaigning last year, Carney called for a complete “budget reset,” saying the state needs to take a hard look at both spending and the various revenue sources that feed general fund coffers. The volatility of some of those sources increases the uncertainty in trying to predict how much revenue state officials can expect as they go through the budget development process.

State finance secretary Rick Geisenberger noted that abandoned property and corporate income taxes are very volatile revenue sources, accounting for about 85 percent of declining revenue estimates since June.

“They’re not growing nationally. They’re not growing here in Delaware,” he said.

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