The Delaware Economic and Financial Advisory Council (DEFAC) is projecting that $4.2 billion will be available in the fiscal 2020-2021 state budget.
It was the second month in a row that the revenue estimate had declined, according to a posting from the Delaware House Republican Caucus.
The current projection is about $400 million less than John Carney’s proposed fiscal year budget.
Carney has been estimating that the budget gap could range between $500 million and $1 billion.
The state is expected to receive federal aid as part of the federal CARES program. However, as it now stands, the money has to go to direct coronavirus costs. The nation’s governors have been seeking more flexibility from the program in addressing budget deficits that have been driven by coronavirus.
There have been calls to use the state’s Rainy Day Fund. However, the fund would not be enough to plug the budget gap and tapping it could lower the state’s debt rating, thereby raising borrowing costs.
Delaware relies heavily on income taxes and corporate fees to finance schools and social services. Property taxes remain low and the state has no sales tax.
The lack of a balanced revenue stream could lead to bigger budget gaps in the coming years if unemployment remains on the high side.
Meanwhile, the General Assembly remains out of session. The state has to pass a budget with no deficit by July 1.
