Delaware Gov. Meyer’s fiscal year 2027 budget proposes spending cuts, tax raises

Recommended budget aims to close ‘structural gap’

Meyer said there was a structural gap between expenses and revenue of more than $500 million. He’s proposing reductions to several areas of the budget to help close the divide.

“We don’t believe in going around and cutting government with chainsaws,” he said. “We believe in doing it with scalpels, going line by line, looking intelligently at the services Delawareans are receiving and making sure that we can make more efficient those that aren’t working or don’t make sense.”

Brian Maxwell, director of the Office of Management and Budget, said spending on cost drivers, which totals $524 million, has grown 8% from the current fiscal year. The administration wants to reduce cost drivers by nearly $108 million. Maxwell said Medicaid, inmate medical services, personnel cost and student population growth make up 66% of total for cost drivers.

Other reductions include a $131 million reduction in state investments and a $168 million cut in one-time spending.

The governor’s recommended capital projects legislation, known as the Bond Bill, is $43 million less than the $934 million total in fiscal 26. The recommended budget also slashes $12.5 million from last year’s grants-in-aid bill, giving about $85.5 million in state funding to nonprofits, local fire companies and senior centers.

Meyer also wants to use $10 million to create a film tax credit.

Adding revenue from fees and taxes

The administration wants to balance the budget by raising approximately $160 million in new revenue.

Meyer did not include a proposal to revamp the state’s regressive personal income tax system so wealthier residents would pay more taxes, one of his signature priorities he outlined last year.

About $81 million of that would come from revamping business formation fees, such as when companies form limited liability companies, or LLCs, and the annual franchise tax. Another $18.9 million would come from hiking tobacco taxes, including taxes on cigarettes and vaping products. The tax on cigarettes would go from $2.10 to $3.60 per pack.

House Speaker Melissa “Mimi” Minor-Brown introduced legislation to raise tobacco taxes last year, but it stalled in committee.

Meyer said the proposed tobacco tax increase reflects changes in how people consume nicotine and how outdated the current tax structure has become.

“The tobacco tax also has to do with the changing nature of that industry and tobacco products,” Meyer said. “When you look at the tax system we have in place now for tobacco, I don’t think it makes sense for the current industry — and I wouldn’t say that about alcohol.”

Senate budget chief Trey Paradee, D-Dover, said he’s unsure there’s the political will to rework the tax brackets.

“Coming out of this property reassessment debacle, for lack of a better word, I don’t think that there is much of an appetite to touch people’s personal income taxes at this time,” he said.