In a significant blow to Delaware, the US Supreme Court recently ruled against the state in a case revolving around its practice of collecting unclaimed property as a source of revenue. Delaware, known as the corporate capital of the country, has long benefited from its ability to claim unclaimed intangible property based on a 1965 Supreme Court decision. However, the recent ruling challenges this advantage, highlighting potential financial implications for the state. This article will delve into the details of the case, explore Delaware’s heavy reliance on unclaimed property revenue, analyze the consequences of the ruling, and assess the state’s preparedness to withstand the potential financial impact.
Delaware’s Reliance on Unclaimed Property Revenue:
As the leading corporate hub in the United States, Delaware has established a unique advantage in claiming unclaimed intangible property. The state’s revenue collection from unclaimed property, ranging from unused gift cards to abandoned bank accounts, surpasses that of any other state. This peculiarity can be traced back to a 1965 Supreme Court case that ruled in favor of the state where the owner is incorporated, giving Delaware a considerable edge over its counterparts.
Over the years, Delaware’s dependency on unclaimed property revenue has grown significantly, with the funds accounting for a substantial portion of its budget. At its peak, unclaimed property revenue constituted a staggering 13 percent of Delaware’s overall revenue. However, this figure had dropped to six percent by the last fiscal year. Despite this decline, the recent ruling threatens to further erode the state’s revenue streams and necessitates a reevaluation of Delaware’s fiscal strategy.
The MoneyGram Case and its Implications:
The Supreme Court ruling that has brought Delaware’s unclaimed property practices into question centers on the state’s collection of unclaimed checks issued by MoneyGram, a cash-transfer company. Delaware had claimed jurisdiction over these checks based on MoneyGram’s incorporation within the state. However, the court sided with thirty other states, including Pennsylvania and Wisconsin, stating that the checks fall under a federal law dating back several decades. This law stipulates that unclaimed money orders should be returned to the states where they were purchased.
While the ruling did not specify the exact extent of Delaware’s liability, estimates suggest that the state could potentially owe around $400 million to other states. However, Delaware’s Finance Secretary, Rick Geisenberger, remains optimistic, stating that the state’s cash reserves are at record levels and should be sufficient to withstand the financial impact. Geisenberger emphasizes that Delaware’s proactive measures to reduce reliance on unclaimed property and build reserves over the past decade have positioned the state to weather such challenges without major budgetary consequences.
Preparedness and Future Challenges:
Governor John Carney’s proposed 2023 budget underscores Delaware’s proactive approach to mitigate the impact of the Supreme Court ruling. The budget allocates over $700 million to the state’s rainy day and budget stabilization funds. This forward-thinking strategy, combined with the state’s substantial reserves, provides Delaware with a degree of financial insulation.
However, while Delaware may weather this particular ruling, the Supreme Court’s decision opens the door for other states to challenge additional streams of unclaimed property claimed by Delaware. This outcome necessitates a reevaluation of the state’s fiscal practices and calls for greater diversification of revenue sources to reduce dependence on unclaimed property. The ruling serves as a critical reminder for Delaware to continue its prudent financial planning to avert potential future crises.
Delaware’s reliance on unclaimed property as a significant revenue source faces a notable setback with the recent US Supreme Court ruling. The decision challenges the state’s advantageous position in claiming unclaimed intangible property, potentially leading to financial implications. However, Delaware’s proactive measures, including reducing reliance on unclaimed property and building reserves, have positioned the state to withstand the impact. Nevertheless, the ruling highlights the importance of diversifying revenue sources and calls for a reevaluation of Delaware’s fiscal practices to ensure long-term financial stability. As the state navigates the challenges brought forth by the ruling, it remains to be seen how Delaware will adapt and redefine its financial strategies to address future uncertainties.