Delaware

State Fiscal Briefs

November 2020

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Delaware’s budget basics

According to the National Association of State Budget Officers (NASBO), Delaware’s total expenditures in fiscal year (FY) 2020 were $11.9 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Delaware’s combined state and local direct general expenditures were $10.7 billion in FY 2017 (the most recent year census data were available), or $11,167 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

Delaware’s largest spending areas per capita were public welfare ($2,622) and elementary and secondary education ($2,144). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Delaware’s combined state and local general revenues were $10.2 billion in FY 2017, or $10,636 per capita. National per capita general revenues were $9,592. Delaware does not levy a general sales tax but it does have a gross receipts tax (Census counts this revenue as either general sales tax revenue or selective sales tax revenue). After federal transfers, Delaware’s largest sources of per capita revenue were charges ($1,574), such as state university tuition and highway tolls, and individual income taxes ($1,234).

Delaware also has an idiosyncratic source of tax revenue: Delaware is home to nearly 80 percent of all publicly traded companies and over two-thirds of Fortune 500 companies. The state credits its “flexibility in formation” and “customer service” for attracting so many companies, but many firms locate there in large part because of its relatively lax business laws and its exemption of intangible income from tax. However, Delaware collects a corporate income tax and license fees from its corporations. As a result, this small state has the fifth-highest per capita corporate income tax revenue ($257 compared with the national average of $162) and far and away the highest per capita revenue from corporate license fees (Delaware collected $1,363 in 2017 while the next-highest state was $130 and national average was $18.) Corporate license fees accounted for 12.8 percent of Delaware’s state and local general revenue in 2017; the national average was 0.2 percent.

Delaware’s politics

Governor John Carney Jr., a Democrat, was elected in 2016 with 58 percent of the vote. The next gubernatorial election is in 2020.

Democrats control both the House of Representatives (26 Democrats to 15 Republicans) and Senate (12 Democrats to 9 Republicans). Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in Delaware. All Delaware House seats are on the ballot in 2020 because representatives serve two-year terms. Senators serve a combination of two- and four-year terms during each decade’s legislative district apportionment cycle. This 2-4-4 term system ensures all Senate seats are up for election after new legislative district boundaries are drawn. Roughly half the senators are up for election in 2020, and all senators are up for election in 2022.

Delaware’s budget institutions, rules, and constraints

Delaware uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit into the following year. Delaware limits both spending and revenue growth with binding rules that require a legislative supermajority or a popular vote to override. A supermajority is also required for any legislation that increases taxes or revenues. Delaware also places limits on the total authorized debt and debt service the state can incur.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Delaware’s recent fiscal debates

  • Delaware was the first state to authorize legal sports betting following the May 2018 Supreme Court decision that overturned the federal restriction on state-authorized sports gambling (outside of Nevada, which was exempt from the federal law). Delaware was able to quickly authorize sports betting because the legislature had passed sports betting legislation in 2009. The Supreme Court prevented Delaware from acting on its law, but the legislation was still in the state’s statute when the federal ban was overturned. The state had also previously established three casinos, which made the transition even easier to execute. Despite some hype, however, taxes on sports betting raise relatively little revenue. In Delaware, sports betting tax revenue totaled a little over $6 million in the first calendar year after the federal restriction was lifted.
  • Delaware has made several relatively small but interesting tax changes in recent years. In 2017, the state increased its corporate franchise tax (HB 175), increased its cigarette tax from $1.60 to $2.10 per pack and began taxing vaping products (HB 242) and eliminated its estate tax (HB 16). However, despite several attempts over the past few years, the Delaware legislature has not been able to add more brackets and progressive rates to the state’s individual income tax.

Delaware’s current budget

Delaware Governor John Carney Jr.’s proposed FY 2020 budget included spending increases in education programs (specifically the state’s Opportunity Fund for low-income students), infrastructure, and pension payments. The budget did not include any major tax proposals, but in his 2019 state of the state address, the governor praised a recently enacted angel-investor tax credit and said the state would aggressively pursue Opportunity Zones as part of his economic development strategy.

The legislature passed its budget in June 2019, which mostly followed the governor’s proposals. According to state senator Harris McDowell III, the budget negotiations represented one of the “best years of cooperation” he had seen between the governor and legislature. In fact, one of the few notable differences between the governor’s proposal and the enacted budget was that the legislature allocated more money for the Opportunity Fund than the governor requested.

Governor Carney released his proposed FY 2021 budget and gave his 2020 state of the state address in January 2020.

For more on Delaware’s budget, see