Fixing Delaware’s Budget: Smart Solutions for Growth
By Charlie Copeland
Center for Economic & Fiscal Policy
March 5, 2025
Delaware faces a growing budget crisis—rising costs, demographic shifts and slow economic growth threaten the state’s long-term stability. Without immediate action, the state will struggle to sustain economic growth. To reverse this trend, lawmakers must act now by modernizing government, reducing inefficiencies and fostering a more business-friendly environment. The time for reform is now.
Projections from the Delaware Office of Management and Budget (OMB) and the Delaware House of Representatives highlight the urgency. While state spending is set to rise by 6.9 percent in fiscal 2026, revenue growth lags at just 2 percent. This widening gap signals a deeper structural problem in Delaware's government.
In May 2024, the Caesar Rodney Institute warned about the Carney administration’s eight-year spending spree. The only factors that saved the state were federal COVID-19 relief funds and a post-pandemic economic rebound—neither of which will continue.
Delaware’s Rainy Day Funds Won’t Prevent a Crisis
Former Gov. Carney created a Budget Stabilization Fund (BSF), which currently holds $469.2 million. While this safety net is commendable, it will not be enough given the projected spending trajectory. Gov. Meyer has also voiced opposition to “rainy day funds.”
According to Delaware’s OMB and Delaware’s House of Representative, by fiscal 2027, spending growth is expected to continue at 5 percent while revenue growth slows to 1.4 percent. At this rate, the BSF will be depleted within two budget cycles, leaving Delaware vulnerable to economic shocks. (Note: According to the St. Louis Fed, Delaware has had seven recessions since 2005 compared to only two nationally.)
Where Have All the Young Professionals Gone?
Delaware’s fiscal challenges are worsened by troubling demographic trends. The Delaware State Chamber of Commerce’s 2025 Competitiveness Blue Book, reports that Delaware has the third-lowest percentage of residents aged 25 to 44 in the nation—just 24.5 percent, compared with about 28.5 percent in states like California and Texas.
Delaware is also experiencing a brain drain. The Wall Street Journal analyzed IRS migration data and found that Delaware ranks among the top two states losing high-earning young professionals and high-income earners (those making $200,000 or more annually).
This exodus reduces the tax base and depletes the state of essential talent needed for innovation and economic growth. As the sixth-oldest state in the nation—and one of the fastest aging (U.S. News & World Report ranks Delaware third nationally in aging rate)—Delaware cannot afford to lose its young talent pool.
Three Key Reforms to Fix Delaware’s Future
The convergence of these fiscal and demographic challenges requires a fundamental rethinking of how Delaware's government functions. The solution lies in three key areas of reform:
1.) Modernize Government Operations: Delaware should invest in digital transformation. Automating services and modernizing state agencies will enhance efficiency and cut costs. These improvements will also make Delaware’s government more attractive to tech-savvy young professionals.
2.) Reduce Government Waste: Rather than across-the-board cuts, Delaware should conduct a strategic review of state functions, eliminating redundant positions and consolidating roles where technology can streamline processes. A leaner government would reduce pension and benefit obligations while maintaining service quality.
3.) Cut Red Tape for Businesses: Delaware’s regulatory environment creates unnecessary barriers to business growth. For instance, the “Ready in 6” permitting reform initiative took nearly a decade to implement. Many outdated regulations designed for heavy industry should be eliminated or modernized to foster a pro-business environment that drives job creation.
Governor Meyer’s Leadership is Crucial—Action is Needed Now
Gov. Matt Meyer’s plan to "reset" the budget process in March 2025 presents a critical opportunity for reform. We welcome a serious, results-driven overhaul of Delaware’s government, but lasting success requires more than executive action—it demands a commitment from the legislature.
Unfortunately, lawmakers have already introduced a tax increase bill, which does nothing to fix Delaware’s economic challenges. Higher taxes will only drive away young professionals and high-income earners, shrinking the tax base further.
The stakes could not be higher. Increasing taxes without addressing spending inefficiencies will lead to higher costs, weaker economic growth, and continued capital flight.
By embracing government modernization, workforce optimization, and regulatory reform, Delaware can reverse these trends and build a sustainable, prosperous future for all residents.
For Further Research
For previous Caesar Rodney Institute research articles on Delaware’s economy and demographic trends, please visit: https://www.caesarrodney.org/cri-focus-areas/Center-for-Economic-and-Fiscal-Policy.htm