Delaware’s budget forecasting brain trust reported Sept. 21 that state revenues are down more than $47 million from what it projected when the budget was passed in July.

    The Delaware Economic and Financial Advisory Council blamed the skidding revenue estimates on reduced receipts from personal and corporate income taxes, and disappointing returns from the state’s court-crippled sports betting enterprise.

    Personal income tax returns are now expected to bring in approximately $20 million less than was expected, even after the General Assembly passed legislation that raised rates for some taxpayers.

    In addition, DEFAC said the state can expect to pay an additional $3 million in tax refunds.

    Corporate income taxes are expected to fall $4.5 million short of what was budgeted.

    Acting Secretary of Finance Tom Cook said the projections are a symptom of high unemployment and falling wages, national trends from which Delaware has not been spared.

    “There were two major categories that were lowered,” Cook said. “One was withholding payments, that’s the money businesses submit to us for the people that are employed, plus what we call estimated payments, that’s people who add income because of capital gains or the stock market or something like that … those categories are tracking weak.”

    Income tax shortfalls represent the largest share of the projected deficit, but gambling revenues also are off by millions.

    When the General Assembly approved sports betting in the spring, the Department of Finance said the state stood to gain $17 million in new revenue — $3 million from sports betting alone and $14 million in so-called “crossover play” on slot machines and other video lottery games at the state’s three racinos.

    The latest estimates put the expected sports betting revenues, including crossover play, closer to $6.7 million.

    Cook said the new estimates reflect the fact that Delaware is only allowed to offer parlay bets on NFL football games pursuant to the ruling of a federal court.

    When the plan was originally conceived, the state expected to offer single game and parlay bets on a variety of professional and college sports, year round.

    In addition, DEFAC shaved another $600,000 off projected lottery revenues in anticipation of the introduction of slots at Ocean Downs, a race track located just west of Ocean City, Md. Cook said that facility is expected to cut into the market share of Delaware’s racinos.

    Other notable shortfalls on the DEFAC report include a $4 million deficit for real estate transfer taxes and a $1.5 estimated loss from public utility taxes.

    Only two categories are projected to exceed what was initially projected. Bank franchise taxes are expected to bring in $5.3 million in additional revenues and insurance taxes are expected to bring in $1 million more.

    Cook said the situation is disheartening, considering all the tax increases and budget cuts incorporated into the budget by the General Assembly.

    Even though the revenue projections are falling short, Delaware still is on sound financial footing, he said. Because the state only allocates 98% of its revenues and leaves a 2% cushion — approximately $63 million — Delaware can retain a favorable credit rating.

    “I think you have to give credit to the General Assembly and the Governor for sticking to the fiscal principles that have led Delaware to be one of only seven triple-A rated states,” he said. “There was pressure to appropriate 100% instead of 98%.”

    The next DEFAC meeting is scheduled for Dec. 21.

NOTABLE REVENUE CATEGORIES REVISED BY DEFAC:
Personal income taxes: down $20.9 million
Corporate income taxes: down $4.5 million
Lottery revenues: down $10.9 million
Real estate transfer tax: down $4 million
Public utility taxes: down $1.5 million
Bank franchise taxes: up $5.3 million
Insurance taxes: up $1 million

  Email staff writer Doug Denison at doug.denison@doverpost.com.