Why Should Delaware Care?
In presenting his recommended budget for the 2027 fiscal year, Gov. Matt Meyer outlined a nearly $7 billion dollar package that prioritizes cost of living investments and closes the gap between the state’s expenses and its revenues. It remains to be seen just how much of Meyer’s proposal will be kept intact after it is scrutinized and rewritten by the General Assembly’s Joint Finance Committee next month.
Gov. Matt Meyer kicked off months of budget negotiations Thursday with a proposed $6.9 billion state operating budget that he said will “invest in our children, our housing, our health care and our workforce.”
When combined with cash to be contributed to capital projects and the state’s annual support of nonprofits in the Grant-in-Aid bill, spending is proposed to exceed $7.2 billion in Fiscal Year 2027, which starts July 1.
Meyer’s proposed investments come even as regular inflationary growth in government operations from last year put Delaware at a roughly $500 million deficit, according to the latest projections from state budget officials. That deficit is driven almost entirely by the rising cost of health care and projected salary increases for state workers rather than falling revenues.
Meyer said he will overcome that gap through a series of cuts that will also provide an additional $42 million to put toward his budget priorities, which include allocations for teacher and state employee raises, more money for affordable housing incentives, and nearly $140 million in Medicaid funding.
While Meyer described the plan as one that makes targeted and efficient investments, it is likely to face some resistance from lawmakers, particularly given that the governor has maintained at times tense relationships with legislative leadership in both parties.
Just one day before his budget speech, state senators within Meyer’s own Democratic Party voted to override two vetoes that he issued on bills last year. The House later sealed the override on the labor bill, but has not yet voted on the override of marijuana zoning regulations.
Still, on Thursday, Democratic leaders in the legislature said they were pleased by Meyer’s proposed budget. State Sen. Trey Paradee (D-Dover), who co-chairs the Joint Finance Committee (JFC) that considers and amends the recommended budget, said the governor’s stated priorities align with some of the biggest issues currently facing Delawareans.
Beginning next week, the JFC – made up of members of the State Senate and House of Representatives – will scrutinize and rewrite Meyer’s budget to prepare a proposal for the entire General Assembly to consider later this spring.
“I’ve got to say I’m really pleasantly surprised,” Paradee said. “I think this is a good starting point for the work that we’ll be doing in February.”
House Speaker Melissa Minor-Brown (D-Delaware City) said she liked Meyer’s presentation but needed to see a more specific breakdown of his proposal.
“I have not seen the details, especially around what’s being cut,” she said. “When we talk about cuts and we’re talking about health care, what are we cutting?”
Members of Republican leadership expressed cautious optimism about Meyer’s proposed budget, commending his efforts to close the gap between the state’s revenues and its expenses.
“I think the governor’s recommended budget is probably the least gap of any we’ve seen in years,” Senate Minority Leader Gerald Hocker (R-Ocean View) said. “And I was so happy to see that.”
Closing Delaware’s ‘structural’ spending gap
The budget process began with Delaware facing a more than $500 million deficit, largely due to inflation and rising costs.
Meyer called the deficit part of a “structural imbalance” between the state’s expenses and revenues, with spending growth outpacing revenue growth for the past three years.
Reducing that gap, Meyer said, was a “primary goal.” His proposed budget reduces the spending deficit by more than 70% from last year’s proposal. The governor’s recommended budget keeps expense growth just below 5%, and projects a revenue growth of just more than 3.5%.
To achieve this goal, Brian Maxwell, director of the Office of Management and Budget, said he worked closely with state agencies to drive down what he called “door opener” costs, or expenses that are essentially required in the operation of government.
He pointed to the areas of Medicaid, education unit growth, purchase of care and corrections department health care, saying he was able to find “creative solutions” to cut nearly $108 million in spending.
Maxwell also said his office was able to cut $131 million in reductions, reallocations and switch funds, along with saving nearly $169 million through reductions in one-time spending and cash allocated to the bond bill.
Those spending cuts are coupled with a projected $147 million revenue package driven largely by “modernizing” the state’s business formation fees. Meyer projects bringing in $81 million from these fee changes. It would also increase sales taxes on tobacco and vaping products, including raising the per pack tax on cigarettes to $3.60, to raise about $19 million.
What’s in Meyer’s budget?
During a presentation at the Delaware Public Archives, Meyer outlined key areas where he would like to direct funding over the next fiscal year, largely focused around education, housing, health care and workforce development.
Meyer touted what he called “historic” investments into early childcare, saying he increased funding for Delaware’s purchase of care program — which provides subsidies for child care to eligible low-income families — and maintained funding levels for his literacy emergency initiatives from last year.
The governor also reaffirmed his support for public education funding reforms, proposing a nearly $3 million allocation to implement changes to the state’s education funding model.
“We are implementing Delaware’s new education funding system,” Meyer said. “Now, the details of that funding system have not yet been finalized. We hope it will be before the legislature this year, but we’re supporting the Public Education Funding Commission as they look to overhaul Delaware’s public education funding model.”
Meyer’s proposal includes a slew of funding for Delaware State Housing Authority programs, including $19 million for the Delaware Housing Development Fund, which provides low-interest loans and grants to build affordable housing.
When discussing health care investments, Meyer once again homed in on expanding access in Delaware’s rural communities through the funding the state received through the Rural Health Transformation Program. The program will also fund the creation of Delaware’s first medical school.
Meyer also highlighted “targeted Medicaid investments,” totaling nearly $140 million, that will include rate increases — or boosts in the payment amount Medicaid programs pay to health care providers — for direct service, skilled nursing and mental health workers.
To continue developing Delaware’s workforce, Meyer’s budget proposal includes pay increases for both teachers and all state employees. His proposal allocates nearly $69 million for educator pay, and almost $22 million to account for a 2% pay increase for state employees.
Now that Meyer has presented his proposed budget, members of the Joint Finance Committee will begin holding a series of hearings over the next six weeks to scrutinize and rewrite Meyer’s budget, ultimately preparing their own budget proposal for the entire General Assembly to consider later this spring.