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May 13, 2006


Escalating energy prices and health-care costs not withstanding, the panel charged with monitoring the Delaware economy to guide state government spending remains bullish on the outlook for the coming fiscal year.

The Delaware Economic & Financial Advisory Council will forecast nearly 4% growth in state revenue in the year which beginning July 1. That is less than half the 8.7% growth rate expected in the current year. But adjusting for legislative and accounting changes the narrows the gap to 6.3%, compared to 10% in fiscal 2006 over fiscal 2005.

State revenue is considered the best available measure of the local economy.

At its meeting on May 15, the council will increase its projection for current-year revenue by $31.9 million over what it said a month earlier was likely. The fiscal 2007 forecast -- on which the state budget is required by law to be based -- will be upped by $81 million from what it was in April.

State government income will breeze by the $3 billion mark this year, netting an estimated $3,127.8 million compared to $2,877.6 million in actual receipts a year ago. That is now expected to grow to $3,200.6 million in fiscal 2007.

In setting its forecast for next year at a meeting on May 12, the council's revenue-estimating committee added $21.8 million to what the Department of Finance recommended. The additions were spread over several revenue categories.

"The economy is predicted to slow down, but not like this," Kenneth Lewis, chairman of the committee, said with reference to the department's recommendation. "There are a lot of bright spots in the economy."

Committee member Lindsey Davis said she sees nothing on the horizon that "could make the growth we've seen turn around and go down." She added that she is looking for "three, four or even five more good years."

Although there has been a slackening of activity in the real estate market, committee member Andy Lubin said that "prices are holding." He said he anticipates "a dynamic effect" from the providing of sanitary sewer service to part of southern New Castle County in 2008.

David Gregor, the finance department's liaison with the committee, said the impact of the acquisition of M.B.N.A. Bank by Bank of America apparently will be significantly less severe than previously anticipated.

Personal income tax continues to be the principal driver in the growth of state revenue. Tax receipts, net of refunds, this fiscal year will exceed $1 billion for the first time, increasing 15.7% over fiscal 2005. Gregor said deadline-day receipts this year were 20% higher than a year ago.

2006. All rights reserved.

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