Part 1 of the Delaware Civics 101 Series:
Understanding How Delaware Organizes, Spends, and Balances Its Money

To many Delawareans, the state’s budget process has always been a bit of a mystery. We read headlines about “bond bills” and “capital budgets,” and wonder why we should care. We hear legislators battle over spending priorities, but it’s not always clear where the money goes – or where it’s coming from. Are we living within our means – or beyond them? And what are the consequences in either direction?.

This series aims to resolve that murky picture – and show the many ways that Delaware’s budget has the power to affect our lives, our families and our future. 

When lawmakers pass the state budget each year, they’re doing more than playing politics –they’re shaping how the state educates children, builds roads, attracts business, keeps communities safe, and provides care for families and seniors. 

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To follow how those policy choices come to life, it helps to understand the basic structure of Delaware’s finances. The state budget is built around four main parts –  think of them as “buckets” of money – each with a specific role and funding source:

  • General Fund (aka “the Operating Budget”) – covers everyday operations like education, health services, police.
  • Special Funds – dedicated dollars for specific purposes, like roads, prevention programs.
  • The Bond Bill – building Delaware’s future with new roads, facilities. Also known as the “Capital Budget,” this gives the state authority to borrow money for multi-year projects that won’t fit inside a single year’s budget.
  • Federal Transfer Funds – Washington’s contribution for federally mandated programs and expenses, like highways.

The Big Picture: A $15 Billion Blueprint

Across all four of those buckets, Delaware’s total budget can add up to $15 billion (depending on the year), but when most people talk about the “state budget,” they’re talking about the general fund. In this current fiscal year (July 1, 2025-June 30, 2026), the general fund fell just shy of $6.6 billion. 

The process follows a predictable rhythm each year: 

As a starting point, the state turns to the Delaware Economic and Financial Advisory Council (DEFAC), an independent body of experts that since 1977 has issued quarterly forecasts of how much revenue the state is expected to take in. By state law, the governor and General Assembly must base the budget on DEFAC’s official, politics-free projections.

This is an area where Delaware’s lawmakers are restrained by the state constitution – the legislature is required to spend no more than 98% of the estimated available revenue. The remaining 2% must be used as a cushion to prevent deficits and safeguard against overspending.

With revenue numbers in hand, the state then begins to decide how the money will be divided among agencies. Each agency submits their budgetary “wish lists” every summer, and in November, the governor’s Office of Management and Budget (OMB) holds public hearings and produces a report.

Even though the legislature ultimately has the “power of the purse” in Delaware, state code gives the governor the first crack at the budget: “[The governor] may make such changes … as the Governor may deem necessary or desirable in accordance with the Governor’s own best judgment … and shall submit the budget report … to each House of the General Assembly, on or before February 1 of each year.”

That proposed budget then goes to the Joint Finance Committee (JFC), made up of House and Senate lawmakers. (The JFC is one of the most powerful and sought-after committee appointments in the legislature, and is often made up of the chamber’s most experienced lawmakers, from both parties.) The JFC holds public hearings on the governor’s proposal, reviews agency requests line-by-line, and ultimately writes the final budget bill that will be voted on by the entire assembly. 

Once the legislature approves the bill, it goes on to the governor, who gets one more chance to make their voice heard: Through a “line-item veto,” the governor has the power to strike out specific spending items in the budget bill without vetoing the entire budget. This executive power isn’t available for all legislation, and it can make final budget negotiations particularly intense. 

But it’s rarely used: The last governor to use this leverage was Jack Markell, in 2011.

By law, all this maneuvering has to be settled by June 30 each year, making the start of Delaware’s summer a notoriously hectic time for lawmakers.

Sidebar: Keep These Elements in Mind

In addition to the “Four Buckets” detailed below, there are a few budget-related mechanisms to keep in mind. These serve as tools to help keep the process running smoothly, and safeguard against the unexpected:

  • Supplemental Budget: Used to adjust the state’s finances after the main budget has been signed into law. Example: If the state suddenly gets an unexpected windfall from a court settlement, the Supplemental Budget lets them spend it.
  • Grants-In-Aid let the state support the missions of the many nonprofit allies working for a better Delaware, such as social service providers and volunteer fire companies. It’s seen as a way the government can fund services in a more efficient and cost-effective way, while also supporting strong communities.
  • “Rainy Day Fund”: Think of this as the state’s emergency savings account, to be used only when there is an unanticipated shortfall in revenue, and only when three-fifths of the legislature approves. It’s the state’s safeguard against broader economic downturns, preventing abrupt cuts in services.
  • Budget Stabilization Fund: This relatively new law aims to smooth out budget volatility by setting aside surplus funds and creating guardrails against overspending.

1. The General Fund – Delaware’s Everyday Wallet

Delaware’s main spending account, also referred to as the “operating budget.” It pays for salaries, services, and ongoing programs that keep the state running.

Where the Money Comes From

• Personal and corporate income taxes
• Franchise and business license fees
• Gross receipts tax (on business sales and services), and lottery revenue

Where the Money Goes

• Education (~35-40%) – Teacher pay, classroom operations, special education, and higher-ed funding.
• Health & Social Services (20–25%) – Medicaid, public health, child welfare, and mental-health services.
• Public Safety (10–15%) – State Police, prisons, courts, and emergency response.
• General Government (10%) – Administration, finance, technology, and facilities.
• Debt Service (5–10%) – Payments on prior borrowing and contingency funds.

Picture It

• Your child’s teacher in Milford? Paid from the General Fund.
• A state trooper patrolling Route 1? General Fund.
• The public health nurse giving free flu shots? General Fund.

2. Special Funds – Dollars With a Destination

So-called “Appropriated Special Funds” are earmarked revenues – money that can be spent only on its assigned purpose. These funds – approximately $1.2 billion in FY 2026 – come from fees, fines, or dedicated taxes rather than general income.

Examples

• Transportation Trust Fund (TTF): Motor-fuel taxes, tolls, and registration fees pay for roads, bridges, and DART transit.
• Lottery & Gaming Proceeds: Support education and addiction-prevention programs.
• Environmental Fees: Support clean water and state park improvements.
• Health Funds: Tobacco-settlement dollars for cancer prevention and public-health campaigns.

Picture It

• The pothole repairs on Route 13? Transportation Trust Fund.
• The playground upgrades in a state park? Environmental Special Funds.
• Problem-gambling hotlines and education grants? Lottery Special Funds.

3. The Bond Bill – Building Delaware’s Future

The Bond and Capital Improvements Act, or Bond Bill, funds construction and long-term investments, often by authorizing the state to borrow money through the bond market.  Think of it as Delaware’s infrastructure plan for schools, roads, and state facilities that will be needed in the near future.

By law, the state cannot simply borrow what it wants — it must follow a fixed formula designed to prevent the state from borrowing too much money. Mandated by statute, the Debt Affordability Limit is based on a formula related to personal income and revenue.

The Bond Bill is ultimately drafted by the separate Joint Committee on Capital Improvement (often called the Bond Committee), which is similar to the Joint Finance Committee’s role in the Operating Budget.

How It’s Funded

• General obligation bonds (state borrowing)
• General Fund transfers
• Special Funds such as the Transportation Trust Fund
• Federal matching grants

What It Pays For

• Education: New schools, renovations, HVAC, and safety systems.
• Transportation: Road and bridge projects, transit hubs, bike trails.
• Public Safety: Police barracks, courts, correctional facilities.
• Environment: Clean-water systems, flood control, park facilities.
• Technology: Modernized data centers and cybersecurity systems.

Picture It

• A new elementary school wing in Sussex County? Bond Bill.
• A bridge replacement on Route 9? Bond Bill.
• Beach nourishment in Lewes or state-park renovations? Bond Bill.

4. Federal Transfer Funds – Washington’s Partnership

Federal Transfer Funds are grants and reimbursements from the U.S. government that support specific programs. They make up roughly $2–3 billion of Delaware’s total budget.

Where They Go

• Health & Social Services: Medicaid, SNAP (food), TANF (Temporary Assistance for Needy Families), and public-health initiatives.
• Education: Title I (low-income schools) and Individuals with Disabilities Education Act (special education).
• Transportation: Federal highway and transit grants.
• Environment & Housing: Clean-water revolving funds, FEMA disaster relief, HUD housing programs.

Picture It

• A Medicaid patient’s hospital visit? Half paid by the federal government.
• Title I reading tutors in Wilmington? Funded federally.
• Highway upgrades on I-95? Largely federal grants.

Seeing the Whole Picture

Together, these four funds make up Delaware’s financial ecosystem:
• General Fund = everyday operations
• Special Funds = dedicated programs
• Bond Bill = infrastructure investments
• Federal Funds = federally supported programs.

As an example of how the four parts of the system work together, consider a schoolteacher who earns a salary (General Fund), drives to school on Delaware roads (Special Funds), arrives at her new school building (Bond Bill), and teaches with support of a reading grant for struggling students (Federal Funds).

Next in the Series

Part 2 – Where the Money Comes From: Delaware’s Revenue, Taxes, and Fees.
We’ll break down how the state raises its funds — from income and corporate taxes to tolls, fees, and federal matches — and how those sources shape our ability to invest in Delaware’s future.

About the Civics 101 Series: Civics 101 is a continuing explanatory series by Delaware LIVE and the Spotlight Delaware content marketing team designed to help readers understand how state government works and how budget decisions affect everyday life in Delaware. To read other stories in the series, visit the Civics 101 home page.