Governor Matt Meyer’s first State of the State and his fiscal 2027 recommended budget outline an agenda focused on fiscal stability alongside targeted investments in children, housing, healthcare, and the workforce. These priorities closely align with the missions of Delaware’s nonprofit and philanthropic communities, but they also raise important questions about sustainability, capacity, and who ultimately bears the cost of delivering essential services. 

Aligning Public Investment with Community Needs 

The fiscal 2027 governor’s recommended budget (GRB) directs new and expanded investments toward early childhood education, literacy supports, housing stability, homelessness response, Medicaid, and workforce compensation. These commitments reflect long-standing nonprofit priorities and acknowledge the role community-based organizations play in delivering services at scale. 

At the same time, the Meyer Administration emphasizes fiscal discipline. The budget reduces the projected structural deficit by more than 70 percent and limits operating budget growth through targeted reductions, reprogramming, and new revenue measures. Core public services are largely protected, but this restraint also limits the State’s ability to address rising service demand through public funding alone. 

Structural Gaps for Nonprofit Service Providers 

At DANA’s Annual Budget Update on February 2nd, Brian Maxwell, the Director of the Office of Management and Budget (OMB) highlighted a key planning reality: the State systematically accounts for inflationary pressures in major “door openers” such as Medicaid, personnel costs, student unit count, and employee and retiree healthcare. However, increases to nonprofit service contracts to reflect inflation are not built into the State’s budget planning process. 

As a result, nonprofits delivering state-funded services are expected to absorb rising costs, particularly workforce and operating expenses, without corresponding rate adjustments. This dynamic places increased strain on organizations already operating with thin margins. 

Director Maxwell also acknowledged that the State cannot fund nonprofit services at market rates and that, as needs grow, philanthropy is increasingly expected to help fill the gap between the true cost of services and what the State can pay. He further noted that the State is not positioned to bring these contracted services back in-house, leaving nonprofits as the primary — and most effective — providers of these essential services. 

Why This Matters for Philanthropy 

This expectation is deeply concerning. While philanthropy plays a vital role in innovation, capacity-building, and community responsiveness, it does not have unlimited resources, nor is it designed to subsidize core government-contracted services indefinitely. Reliance on charitable dollars to backfill structural underfunding risks destabilizing both nonprofits and the philanthropic ecosystem. 

As James Bush noted in his State of the State analysis, progress is promised, but questions remain about long-term sustainability if the true cost of service delivery is not addressed. 

Call to Action from DANA 

DANA urges nonprofit leaders and philanthropic partners alike to engage legislators during the FY27 budget process to help educate them about the realities of nonprofit financing and the limits of philanthropy. Fair, cost-based, inflation-aware contracting is a government responsibility, not one that can be shifted to charitable dollars. 

Legislators need to hear clearly that philanthropy cannot serve as a permanent safety net for underfunded state services. Sustainable solutions will require transparent data, realistic pricing, and a shared commitment to ensuring nonprofits can continue delivering essential services on behalf of the State.