Delaware’s Budget Woes: A Crisis Made in Dover, Not Washington
By Charlie Copeland
Center for Economic & Fiscal Policy
Caesar Rodney Institute
November 11, 2025
Delaware Gov. Matt Meyer has pointed to federal tax changes as the cause of Delaware's projected budget shortfall. In an Oct. 31 press release, Meyer said, "We're staring down a $400 million shortfall because Washington keeps handing out tax breaks to the wealthy while working people get left behind."
But this isn't a new problem caused by Washington. As the Caesar Rodney Institute (CRI) has documented for years, Delaware's fiscal challenges stem from persistent, state-driven spending growth. The structural issues that were evident a decade ago are the same ones driving the shortfall today, and they are the result of long-standing budget decisions made by Delaware's state government in Dover.
CRI has raised this issue before. As one of my earlier commentaries warned, "Static revenues, a General Assembly addicted to spending, and campaign promises of large spending increases suggest tax increases are coming."
Delaware's state government has dramatically increased spending in recent years, often using mechanisms that mask the budget's actual size. According to a 2024 analysis by CRI, lawmakers approved supplemental "off-budget" spending bills for six consecutive years, adding more than $915 million outside the normal budget process. These extra appropriations expanded the state's expenditures beyond the reported budget.
A clear example is the Fiscal Year 2024 budget. The General Assembly passed a $5.6 billion general fund budget plus an additional $195 million one-time supplemental bill. That same CRI analysis found that when combined, these measures pushed the state spending up 13.2% that year - more than twice the rate of inflation. Despite public claims of fiscal "restraint," Delaware's government spending surged.
Federal Relief Hid the Problem
State officials have cited a string of recent budget surpluses as evidence of sound fiscal management. In reality, this "success" was primarily the result of massive, one-time federal aid during the COVID-19 pandemic.
Earlier analysis by CRI found that since 2008, Delaware's finances have followed a predictable boom-and-bust cycle. Each new governor inherits a deficit, fills it with tax hikes plus higher spending. Eventually the money runs out and the cycle begins again. Former Gov. John Carney entered office in 2017 with a nearly $400 million shortfall and raised taxes to balance the budget.
That pattern was interrupted only because the Trump and Biden administrations sent billions of dollars in federal one-time COVID relief to Delaware, creating a temporary surge in revenue in 2021-2022. According to the same CRI analysis, this federal windfall broke the usual deficit cycle and masked underlying problems.
Those problems resurfaced as soon as the emergency federal funds disappeared. State budget projections now show an unsustainable trend: Delaware's spending is on track to rise about 6.9% annually in the near term, while revenues are projected to grow only around 2%. By fiscal 2027, the gap widens even more - expenditures would be growing roughly 5% per year against only 1.4% revenue growth, a recipe for deep deficits.
Weak Growth, Lost Workers and an Aging State
Delaware's economic underperformance both predates and contributes to its budget woes, underscoring the state's internal problems. By many measures, the First State's economy has been among the slowest-growing in the nation for decades. Data from the Federal Reserve Bank of St. Louis shows that Delaware's long-term economic growth has significantly lagged behind the U.S. average. In other words, the economic growth needed to sustain rising government spending simply has not been happening in Delaware.
Meanwhile, the state's population trends are moving in the wrong direction. Delaware is losing younger workers and high earners at an alarming rate. A study by the Delaware State Chamber of Commerce found that only 24.5% of Delaware residents are between the ages of 25 and 44 - the third-lowest share of young adults among all states. At the same time, IRS migration data reported by The Wall Street Journal rank Delaware among the two worst states nationwide for net loss of both high-earning young professionals and wealthy taxpayers. Simply said, the very people who drive economic growth and sustain the state's tax base have left.
Compounding the challenge, Delaware's population is rapidly aging. It is now the nation's sixth-oldest state, and the share of residents age 65 and older is growing at one of the fastest rates in the country. An older population means higher healthcare and social service costs for the state, even as the workforce contracts.
Conclusion
Far from being caused by Washington, Delaware's looming budget crisis was merely delayed by it. To kindle local economic growth, the Caesar Rodney Institute recommends that the Governor:
- Issue an executive order mandating an evaluation of all Delaware regulations to eliminate one-third of them while modernizing the rest, and
- Order the Delaware Department of Transportation and the Department of Natural Resources and Environmental Control cabinet secretary to fast-track all projects that have met safety and health regulations.
Taken together, these steps would begin to slow the state's structural spending growth and move Delaware away from its recurring boom-and-bust budget cycle.