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Why is the state so out of touch from what its own residents are going through?

There is little public attendance or media coverage of public budget hearings that deal with billions of taxpayer dollars. Public involvement is severely missed in this process. Delawareans are simply presented the Governor’s proposed budget in January, after many hearings and proposals are done and considered.

The Governor holds a significant amount of power in the process, which results in a near-complete state budget before the Joint Finance Committee hearings even begin in February. Due to the lack of attendance at the initial budget request hearings, February would essentially be the public’s first say in the process (through their elected officials on the JFC). However, the JFC does not have as much say as you might imagine, with pre-allocated funds for schools, government agencies and more.

In a bid to enhance the transparency of this process and to hold not only the Governor, but the agencies presenting budgets accountable, A Better Delaware has summarized what was delivered in the recent budget request “public hearings,” below.

Strikingly, there was clear disregard and complete lack of sensitivity to what many Delaware businesses, households, and residents have been through during COVID-19. While businesses were forced to reduce their operations or even close down—costing revenues, jobs, and even life’s work—Delaware agencies are presenting budget requests with 4%+, 9%+, and 18%+ increases over FY 2021 budgets.

Why is the state so out of touch from what its own residents are going through?

The Department of Agriculture submitted a budget request that was the same as FY 2021, stating:

 “This request is fiscally responsible while allowing our Department to fulfill its mission of serving our agricultural community and providing a wide array of consumer protection services for Delawareans.”

Unfortunately, other agencies operated as if the coronavirus was a hallucination, and moved forward with ever-increasing budget requests, despite a state revenue forecast that could change any day.

The Department of Justice requested a 3.49% increase to hire dozens of new attorneys and staff. How much funding and how many attorneys are going towards the numerous out-of-state affirmative litigation cases that Delaware has joined in on recently? Meanwhile, workers in Delaware across various industries have lost their jobs due to COVID.

Delaware State University requested a 9.76% increase, much of which can be attributed to “campus improvements.” With DSU’s president now working for Biden and bringing in multimillion dollar donations, the request should be updated to show some fiscal responsibility and remove the burden of this massive budget increase from the state’s taxpayers.

Perhaps the most alarming is the unabashed 18.75% increase requested by DELDOT. Despite continuing with full funding during the pandemic, the agency has presented the largest budget increase in the state, totaling an additional $62.1M in taxpayer dollars. DELDOT was able to keep their full budget, receive federal CARES Act funding, and is now asking for a budget increase on top of that. Meanwhile, our restaurants, hotels, retailers, and more are losing capacity, revenues, staff, and even shutting down—with limited assistance offered to prevent this.

Delaware taxpayers turning a blind eye to the budget formation process has unwittingly enabled state leaders to abandon the concept of fiscal responsibility when it comes their money.

Minnesota and New Mexico have been examining better government spending through a partnership with the Pew-MacArthur Results First Initiative, where policymakers look at the effectiveness and return on investment of programs to determine where to allocate taxpayers dollars. For example, Minnesota agencies were asked to provide evidence of desired outcomes along with their budget request for each program. This was not present in many Delaware agency presentations.

It’s time for Delaware lawmakers and our Governor to actually address the ever-growing budget by instituting a policy of data-based spending. Agencies can use existing funds more efficiently, invest in programs that improve life for the state’s residents, provide more economic opportunity, and show that they can operate by normal budgeting standards that businesses and individuals already do. There have been efforts to fix this here before, but they have failed.

The Government Accountability Act, a bipartisan bill that never made it to a vote, would have made the annual budget process part of a “performance management system of strategic planning, performance metrics and performance budgeting,” that would make State government more efficient, reduce costs, and eliminate waste in the process and operations executed by the state.

Another bill that never made it to a committee hearing would have implemented a mandatory window to wait before voting on any budget bill, in order to allow for adequate evaluation and discussion before being pushed through. While not bipartisan, this bill would have forced lawmakers to actually read the budget before voting to pass it.

The time to do better and be better is now.

Delaware can’t brew expansion

Delaware has almost one dozen craft breweries and brewpubs, some with multiple locations statewide, but the industry could be growing more than is currently allowed. In what sems to be another arbitrary thing on our books, Delaware law prevents these establishments from expanding beyond three locations in the state.

In September 2019, the popular Iron Hill Brewery grew their business 20 miles over state lines in Exton, PA due to this restriction. Iron Hill wanted to expand in Delaware, but simply couldn’t, pushing them to take their business—and the jobs it created—across state lines.

“It puts an unnecessary burden on these companies that are trying to expand and create jobs here in Delaware,” said State Representative Bryan Shupe, “We’re hindering their ability to compete.”

Representative Shupe sponsored a bill in 2019 that would have eliminated this limit on brewpubs, though it never made it out of committee. A new version of the bill is expected in 2021, and the hard lesson from Iron Hill should push lawmakers to reconsider the measure in a bipartisan manner.

Not only does the current limitation hurt small businesses, but stalls the growth in jobs that they could provide. After the major hit to our labor market from COVID-19, anything that hurts job creation should be heavily considered, and at minimum given a chance to be heard, unlike in 2019.

Our local businesses are struggling to stay afloat. Many brewpubs are a part of the restaurant industry, which has been hit particularly hard by the pandemic. Nationally, the restaurant sector had already lost $120 billion in sales by May, only 2 months after the initial restrictions were enacted. In Delaware, Governor Carney’s new COVID-19 restrictions limiting restaurant capacity to 30% went into effect on November 23.

These businesses cannot survive on takeout alone, which may soon be the case. The 100% costs of staying open aren’t covered by the 30% of sales they are able to bring in. According to the Delaware Restaurant Association, up to 30 percent of Delaware restaurants could close if they do not receive assistance.

This is stacked on top of the struggle of being locked in place by the current Delaware Code.

“You have to pick three locations that have the best opportunity to grow your business and make money. These smaller communities without brewpubs, I don’t think they are going to see them,” Harry Metcalfe, co-owner of Revelation Craft Brewing Company said.

The brewpub restriction is only one example of the burdensome regulatory code that exists in Delaware. These regulations hurt all types of businesses statewide and are rarely reviewed or changed.

As of last year, Delaware’s regulations included 104,562 restrictions, 6.7 million words, and would take 9 weeks to read through—and all of this is in addition to federal regulations. For a small state, that’s quite a regulatory burden.

Delaware ranked 42nd for its regulatory environment and 37th for economic environment pre-COVID. Our lawmakers should be working to serve those they were elected to represent by addressing the job killing regulations. The brewpub bill is a good place to start, but is hopefully one of many steps in a process to truly better our state.

The Restaurant Industry: The Other COVID Fatality

You’re hearing it everywhere: this pandemic has really hurt small and local businesses. Perhaps one of the most impacted by COVID-19 restrictions has been the restaurant industry. Restaurants typically have extremely small profit margins, meaning any hit to their operations could spell disaster.

Nationally, the restaurant sector had already lost $120 billion in sales by May, only 2 months after the initial restrictions were enacted. The reach of this loss must be understood; a blow to this industry kills a large percentage of jobs, and hurts other businesses from florists, to food packagers, to liquor salesmen, and more.

The situation for restauranteurs is dire: Yelp reported that by May, 53% of the restaurants on their platform were now permanently closed, while OpenTable said one in four were at risk of foreclosure. These numbers were when other options, like outdoor dining, were available. As we move into the winter months, it is difficult to grasp the impact this may have.

Governor Carney’s new COVID-19 restrictions limiting restaurant capacity to 30% went into effect on November 23. This new Executive Order will further cripple an entire industry that has been struggling—and failing—due to similar orders for eight months.

These businesses cannot survive on takeout alone, which may soon be the case. The 100% costs of staying open aren’t covered by the 30% of sales they are able to bring in. For many, this year was the one in which their business, livelihood, and dreams shut down forever. According to the Delaware Restaurant Association, up to 30 percent of restaurants could close if they do not receive assistance.

If only 1.44% of Delaware’s positive COVID cases in November visited a bar, and 4.63% a restaurant, why are we targeting this industry?

The Delaware Restaurant Association reports close to 2,000 eating and drinking locations in the state, which provide around 50,000 jobs and $2 billion in sales. This sector is the largest small business employer in Delaware. Carrie Leishman, President of the Delaware Restaurant Association, estimates thousands of workers losing their jobs around the holidays due to the new limit.

Meanwhile, retail and other industries have operated without issue, despite being a major catalyst for public crowds. Black Friday produced a packed crowd at the Christiana Mall, even in the food court. The absolutely arbitrary parameters of what has made a business “essential” is precisely what is killing this massive industry nationwide.

Delaware’s economy cannot shoulder this burden. Pre-pandemic, we were ranked 34th for employment and one of the worst states for small business. Now we face hundreds or thousands more jobs on the chopping block with less unemployment assistance from the state than before. The Delaware restaurant industry has received about $25 million in state assistance so far, and anticipates $25 million more. Unfortunately, it may not be enough to counter the restrictions.

Add in the newly drafted minimum wage bill and other costly proposed employer mandates that are likely to be brought forth for a vote in the 2021 Legislative Session, and our restaurants—and the jobs that they offer—may never recover. It is far past time to take action and save livelihoods, not just lives.

Restaurateurs raise heat over increased restrictions

From Delaware Business Times

WILMINGTON — As Gov. John Carney rolled back indoor dining back to Phase 1 requirements of 30% of indoor capacity to slow the spread of COVID-19, Delaware’s restaurant industry faces difficult decisions this winter amid an estimated $900 million loss through the pandemic.

“Look, it means that full-service restaurants that rely on that in-person dining experience will be hit hard,” Xavier Teixido, owner of Harry’s Hospitality Group, told the Delaware Business Times. “You cannot make money at 30% capacity. The No. 1 decision restaurants are going to face is the value in staying open with staff there to serve 30% of the guests that were allowed versus the hit in closing restaurants.”

Gianmarco Martuscelli, owner of Klondike Kate’s in Newark and La Casa Pasta in Glasgow, said the industry was “disappointed” by the renewed restrictions. Martuscelli, who serves as treasurer for the Delaware Restaurant Association board, said that owners had hoped for a curfew, like Maryland has instituted, rather than reduced capacity because it would allow them to retain more of their dinner business. Now, however, some owners are deciding whether to scrap indoor dining altogether and return to curbside takeout only, he said.

Since June, Delaware has been operating in Phase 2, allowing 60% capacity of fire code capacity in restaurants although bar seating was restricted in many Sussex County beach communities in the height of summer. Carney eased those restrictions on beach bars in September — allowing patrons in if they reserved a seat and ordered food — and lifted them entirely this month ahead of winter.

Lisa DiFebo-Osias, owner of DiFebo’s Restaurants in Bethany and Rehoboth beaches, said her anger comes when she walks into a store and sees employees without masks on because they did not want to wear them. In comparison, the DiFebo’s staff works eight-hour shifts while wearing N95 masks without taking them off once.

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State’s jobless rate rises again

From Delaware State News

DOVER — Delaware’s unemployment rate rose again in October, the fourth straight month it has increased.

Data released Friday by the Delaware Department of Labor estimates 3.7 percent of the state’s workforce was not employed last month, up .2 percent from September, Delaware’s unemployment level has surpassed the U.S. rate for the first time since December 2017.

The First State’s unemployment rate hit 3.2 percent in April, remaining there for three months before it began climbing again. The national rate has fluctuated since then but now sits at 3.6 percent, an increase of .1 percent from the month before.

“Unpublished unemployment data from the Delaware Current Population Survey using 12-month averages show that the share of job losers has increased to 75 percent of the unemployed from just under 40 percent one year ago,” Tom Dougherty, the acting chief for the Office of Occupational and Labor Market Information in the Department of Labor, wrote in a commentary released with the numbers Friday.

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Chancery judge: Counties ‘manufacturing excuses’ over property tax fix

From Delaware Online

The judge overseeing a landmark property tax lawsuit said on Friday that he felt officials from the state’s three counties were “manufacturing excuses” in delaying a resolution to the litigation.

The parties all agree that resolution will be the reassessment of property values used to calculate property taxes statewide, values that Chancery Court Vice Chancellor J. Travis Laster ruled were unconstitutional earlier this year.

But the education activist plaintiffs that brought the suit and Laster disagree with the counties in the form and timing of how that reassessment occurs, according to testimony Friday during a status hearing regarding debate on how to fix the system.

The plaintiffs want the counties to end the litigation by agreeing to a four-year plan for reassessing property values, plans that each of the counties commissioned from experts and submitted to the court recently.

But attorneys for the counties on Friday asked the judge not to bind them to those plans and instead to put court proceedings on hold while they explore different ways to do a reassessment. That could include asking the General Assembly to approve laws to govern statewide reassessments in the future.

In response, Laster accused the counties of holding up a plan to fix the problem.

“My perception is that there’s been backsliding going on on the county side,” Laster said.

The disagreement means he will order another trial proceeding over how the court will require the counties fix the tax system, and a final plan for the reassessment may not be sorted out before March or April.

“I am disappointed in where we stand,” Laster said. “I don’t feel like things are going swimmingly.”

In May, he ruled that the lack of a reassessment coupled with the counties’ current methods of assessing property values creates a system unfair to the point it violates provisions in the state’s Constitution that require property owners to be taxed equally. He then put the litigation on hold for several months as the COVID-19 pandemic grew.

In October, each of the counties told Laster they were optimistic about reaching a settlement to finalize a plan for reassessment based on proposals created by reassessment experts that would ultimately yield changes to property tax bills in 2024.

It is unclear from the hearing testimony on Friday why the three counties’ position has changed since October.

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COVID won’t be the only job killer with this bill

Delaware lawmakers wasted no time preparing for the 2021 Legislative session after the election. One may think the priority would be to help Delaware businesses and workers recover from the impact of COVID—19. Unfortunately, you’d be mistaken, since one of the first bills being circulated is legislation that would actually do the exact opposite.

A draft of a bill to raise the minimum wage to $15 an hour by 2026—which would amount to a 61.6% increase—has been drafted and circulated for co-sponsorship. If you thought COVID took jobs and hurt our small businesses, just wait until this upcoming session.

The unintended consequences of raising the minimum wage have already been seen in New York, San Francisco, and Illinois. In San Francisco and New York, the restaurant industry has been hit especially hard by the measure, with many businesses raising prices (and losing customers), cutting hours, reducing staff, and some even filing for bankruptcy. When New York City’s minimum wage was raised to $15 per hour, there was an overall decline in restaurant workers, despite total employment increasing by more than 163,000 workers.

Owners tried raising menu prices and adding an extra surcharge to customers’ bills, but restaurants were no longer profitable. Many industries will face the same problem and their businesses will reduce worker hours or the number of workers, scale-back production, turn to automation, or shut down. Businesses want to pay their workers more, but government-mandated increases in wages hurt employment and the overall economy.

The Delaware restaurant industry has had a particularly tough time during the pandemic, and would be crushed by a mandate like a minimum wage increase for at least a few years. It took the First State six years to recover from the 2008 recession. Despite the numbers being far worse than twelve years ago, the new minimum wage would start in just one year.

Our small businesses and low-skill and low-income workers would have no chance, though one is desperately needed. When asked about this, Central Delaware Chamber of Commerce President Judy Diogo told Delaware Live, “It’s going to take [Delaware businesses] a couple of years to recuperate from [COVID—19]. They are not going to get over that in a year. So we need to give them some time to get past that, but we also do not believe the state’s government should be mandating wages.”

Business groups aren’t the only ones who understand this. Make no mistake, the very people pushing for $15 understand the consequences this mandate presents. When signing California’s $15 minimum wage into law, California Governor Jerry Brown said that “Economically, minimum wages may not make sense. But morally, socially, and politically they make every sense.”

Feel good policy doesn’t always do good. In this case, it hurts the very people it claims to help: low-wage and low-skill workers, disabled workers, former inmates, and more. Prices will go up and goods will become too expensive for most and the new “livable wage” will no longer be livable. You cannot mandate a market shift.

Florida and Maine recently joined the list of places with a $15 minimum wage. Delaware shouldn’t join just to feel good. Our lawmakers in Dover must look at the real implications of their decisions and do what is truly best for Delawareans and Delaware businesses. Increasing the minimum wage in the midst of a pandemic that crippled the workforce and businesses alike is not in the best interest of anyone but themselves.

UD and DOJ present budget requests in unusual year

From Delaware State News

DOVER — While most of the country is caught up in the outcome of the presidential election, state government continues to function.
The Office of Management and Budget has begun its preliminary budget hearings for various state agencies and related entities, part of the annual process of crafting a budget proposal.
Working with his financial team, Gov. John Carney will unveil recommendations for a spending plan in January. That outline will look quite different from the one proposed at the beginning of this year, with COVID-19 causing revenues to dip, while creating new expenses.
Over the next week-and-a-half, various departments and related entities that rely on state funding, such as higher education institutions, will make their formal presentations to financial officials. These are being held remotely, a reminder of the ongoing pandemic.
The University of Delaware, which presented its request to budget officials Tuesday, projects a deficit of $228 million to $288 million for the fiscal year ending June 30. The institution has reduced discretionary spending, offered retirement packages to staff, cut salaries for some employees, reduced positions and pulled about $100 million from its approximately $1.64 billion endowment.
“The hard reality is that the financial difficulties facing UD — and all higher education institutions — are not a one-year event, and the road to recovery will extend over the next several years,” President Dr. Dennis Assanis said in prepared remarks. “We are already looking toward the challenges for (fiscal year 2022), including a reduced ability to recruit new students, a continuing need to increase student financial aid and the uncertainties of the economy and its effects on our students and their families.
“As you can see, to reduce our deficit we’ve tightened our belts, leaned on our endowment and even eliminated some of our core workforce. The university has very few cost-cutting options left to help us deal with the unprecedented challenges thrust upon us this year.”

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Documents show settlement is near for plan to finally reassess Delaware properties after decades

From Delaware Online

Officials from Delaware’s three counties are negotiating a lawsuit settlement that would see a multiyear process for reassessing the values used to tax individual properties up and down the state – a process that is likely to render widespread changes to residents’ and businesses’ tax bills in coming years.

Attorneys have told a judge they are working to settle, by the end of the year, a lawsuit that found the property valuations currently used by Delaware’s three counties to calculate tax bills to be unconstitutional, according to recent court transcripts and correspondence.

Newly revealed court documents shed light on the time frame and goals being contemplated by county leaders and the education activists who sued them over the local tax systems.

Each county has submitted reassessment planning proposals that outline a four-year process beginning in January for reassessing properties, according to court documents.

“Our goal is to have this done and have the reassessment baked into the bills by 2024,” New Castle County attorney Nicholas Brannick told a Chancery Court judge in a recent hearing.

Under each of the counties’ planning proposals – which are not final and subject to change – new tax bills would not be mailed before 2024. Residents, however, would be notified of new property values in 2023 and be allowed to appeal.

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University of Delaware confirms 122 employee workforce reduction

From Delaware Business Now

The University of Delaware has laid off 122 employees as it deals with a potential quarter of a billion-dollar shortfall.

University spokesperson Andrea Boyle Tippett confirmed that the university went through a reduction in force this week.

Tippett said job reductions were concentrated in areas“where operations have slowed because of the pandemic, including facilities maintenance, construction project management, and conference services.”

Tippett noted that President Dennis Assanis had announced that the reductions would be coming along with small salary cuts for top administrators and other actions aimed at dealing with the shortfall.

UD also tapped into its estimated $1.5 billion endowment to deal with the budget gap.

The layoffs are believed to have come from the ranks of nonunion employees.

Negotiations are underway with professors and others with union representation regarding early retirements and other options.

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