This story has been updated to reflect comments from the Meyer administration.
Gov. Matt Meyer releases his fiscal year 2026 budget proposal for the state of Delaware, suggesting various tax increases and new personal income tax brackets.
His "budget reset" follows former Gov. John Carney's state budget proposal, which was released in January of this year.
Meyer is proposing a $6.6 billion operating budget for FY26, which is just $29 million more than Gov. Carney's proposal.
He is maintaining several of Carney’s recommendations, including public educator and state employee salary increases, $85.5 million for Medicaid growth and $61.3 million for state retiree healthcare benefits.
Gov. Meyer is building upon efforts to improve literacy rates in the First State with an $8 million investment and an additional $3 million to leverage private contributions for direct support in the classroom.
“The state's going to distribute these funds based on demonstrated commitment to evidence-based literacy instruction and reading pilot programs, using the same successful funding model employed during the high dosage tutoring effort," Gov, Meyer said during his presentation.
Meyer is also recommending a $19 million investment in the Housing Development Fund to support more affordable housing — the Delaware State Housing Authority only requested $4 million for that program just last month.
He's suggesting $6 million for the State Rental Assistance Program (SRAP), $3 million for the Workforce Housing Program and other program investments that would bring affordable housing spend to $35.5 million.
His proposal would also increase the state's paramedic cost share from 30% to 35%, a move notably supported by Republican leadership.
In January, the House Veterans Affairs Committee cleared a bill that would create a new state-level Department of Veterans Affairs led by a cabinet-level secretary, but the legislation has since stalled in the House Appropriations Committee due to its fiscal note.
Although his recommended budget does not include the estimated $850,000 to create the department, a spokesperson for the administration says the governor's office believes it can potentially find a way to fund the department without utilizing more taxpayer dollars.
Gov. Meyer is also recommending $4.6 million more in support for nonprofits than Gov. Carney did, bringing the annual Grants-in-Aid bill total to $82.8 million.
His plan recommends less cash be allocated to the Bond Bill for capital improvements, bringing the total spend of the Bond and Capital Improvements Act to $937.9 million.
When all is said and done, under Gov. Meyer's proposal, the state is expected to spend just over $7 billion next fiscal year — Delaware is currently on track to spend $6.8 billion in the current fiscal year.
Gov. Meyer's operating budget reflects a 7.4% increase over the current fiscal year while the state's revenue is only expected to grow by 1.9%.
In an effort to combat this gap, the governor is recommending updating Delaware's tax code to include three new tax brackets, along with plans to modestly decrease existing rates.
The three new brackets would be for those who make $125,000, $250,000 and $500,000. Currently, the floor for Delaware’s highest bracket is $60,000, which is taxed at a rate of 6.6%
Under Gov. Meyer's proposal, the $125,000-$250,000 income group would be taxed at 6.75%, $250,000-$500,000 would be taxed at 6.85% and $500,000 and above would be taxed at 6.95%.
“We're gonna be adjusting some tax brackets to make sure the wealthiest Delawareans truly pay their fair share under this budget. No Delawarean who has taxable income under $134,667 annually will pay a penny more in income taxes," Meyer said.
But these adjustments are only a suggestion, and Meyer needs a member of the State House to introduce the changes, and then garner support from three-fifths of both chambers.
State Rep. Sean Lynn (D-Dover) introduced legislation with similar tax bracket changes in January, but the bill has not yet received a committee hearing.
If Gov. Meyer's proposed brackets were to be accepted by the General Assembly, personal income tax revenue for the state is expected to increase by $16.54 million in 2026 and $35.2 million in 2027.
The governor is also recommending a cigarette tax increase by 50 cents per pack and tax increases on other tobacco products.
Additionally, the Delaware Department of Transportation (DelDOT) is expected bring forward a package that would raise revenues by $107 million.
Although the state is expected to be able to foot the $7 billion bill for FY26, without significant budget cuts or revenue increases, the state could drain its budget reserves by FY28 and still be in a $480.5 million deficit.
Lawmakers on both sides of the aisle express hesitancy around proposed tax plan and future of the Budget Stabilization Fund
Delaware legislators from both parties appeared hesitant to support Gov. Meyer's new tax plan without looking at some spending cuts first.
“The fact is, what we saw a lot of was increased spending, increased programs, but ‘Oh my gosh, in the next couple of years, we're gonna be in deficits of $400 million.’ Where's the efficiency? Where's the cutting back on programs?” Minority Whip Jeff Spiegelman (R-Clayton) said.
"I think we all really need a case of DOGE [U.S. Department of Government Efficiency] here in Delaware. We really have to take a look at some things and make some cuts in some areas. There's a lot of great things that Gov. Meyer put forth — a lot of things I agreed with — but we've got to do something about spending," Minority Leader Tim Dukes (R-Laurel) said.
As far as where those cuts should be made, Republican leadership says Delaware should start with removing vacant state employee positions, noting there are currently over 2,200 jobs with allocated funding that are not filled.
Joint Finance Committee member and State Rep. Kevin Hensley (R-Townsend) says some state agencies have positions that have been vacant for over 16 years and argues if an agency is not successful in filling that vacancy, they should be mandated to return the allocated funding back to the general fund.
Joint Finance Committee Chair Kim Williams (D-Stanton) also expressed frustration with looking at tax increases before spending cuts.
She gave the example of Gov. Meyer's budget proposal re-upping a $3 million lease within the Brandywine Building for Delaware Department of Justice staff, despite the state having invested close to $20 million in a new space for the department on 704 N King St. in Wilmington.
"I am disappointed to see the Brandywine lease back into the budget... when we decided last year we weren't going to do it. We have the building that we bought that we've put a huge investment into — 704 [N] King St. — and we want to raise people's taxes but we're going to go lease a $3 million building? Yeah, I have a problem with that. A big problem," Rep. Williams said.
Joint Finance Committee Vice Chair Trey Paradee (D-Dover) raised particular concern around how the proposed new tax brackets could affect the middle class, especially when compounded with a gas tax increase.
"At that income level, that really hits a lot of middle class families, and when you take that and put increases in gas taxes, which apparently are coming with a DelDOT fee and tax increase, I'm just really concerned about how that's going to affect middle-class families," Sen. Paradee said.
A spokesperson for the Meyer administration confirmed a gas tax increase will not be a part of DelDOT's fee package proposal, which has not yet been filed in the legislature.
While Gov. Meyer's budget maintains the $469.2 million in budget reserves — a budget-smoothing approach championed by Gov. Carney known as the Budget Stabilization Fund — he has expressed disinterest in keeping that reserve account alive in the future.
“If we're asking residents to pay us tax every year, that tax should be an accurate number of what we're going to actually spend. I'm not a big fan of collecting excess revenue and socking it away," Meyer said at Spotlight Delaware's Legislative Summit in January, reiterating that stance at his budget presentation on Thursday.
This sentiment troubles Democratic and Republican lawmakers alike, especially as Gov. Meyer's administration is projected to completely drain that fund in the next three fiscal years.
"I am extremely troubled by the thought of the administration's openness to or willingness to eliminate that fund. I typically take it to the personal level. I don't think any of us in this room, or any of us in [Legislative Hall] would be keen on wiping out the savings account or wiping out the piggy bank. That's, in essence, what's being suggested here, and it's deeply concerning," Rep. Hensley said.
Rep. Williams also disagrees with Gov. Meyer's implication of eliminating the Budget Stabilization Fund, noting the state tapped into the account during the COVID-19 pandemic and that it was a contributing factor in keeping Delaware better positioned financially than surrounding states.
"Who would have ever guessed that we would have possible federal funding cuts, and we have that money now to help us get through maybe some of the darkest times," Rep. Williams said.
There were efforts to constitutionalize the Budget Stabilization Fund in 2018. Although that attempt failed, Gov. Carney was successful in passing legislation that requires these budget tactics to be considered by future governors — sponsored by Sen. Paradee.
But the bill’s language reads more as a recommendation, rather than a requirement. The legislation says any recommended budget must consider the Benchmark Appropriation and Budget Stabilization Fund requirements, "unless the Governor deems any changes necessary or desirable, in accordance with the Governor's own best judgement and conclusion."
"The Budget Stabilization Fund has already proven itself to be a savior to this state," Sen. Paradee said. "I think it's critical that we try to maintain that because there will be a recession some day. In fact, we already might be in one."
Gov. Meyer's recommended budget does include the creation of a federal contingency fund of $21.9 million to offset potential federal funding reductions.
"To me, it's not just about balancing the budget. Ultimately it's about people. And when there are federal funding cuts that truly harm Delawareans, it's why we put this reserve in there to say, 'Let's work together. Let's put our heads together. Let's look at the actual impact of cuts and changes in federal programs and make sure we're protecting Delawareans," Gov. Meyer said.
His recommended budget now heads to the Joint Finance Committee for review. That committee will produce a bill with the final appropriations that will head to the General Assembly for approval in June.
