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Judge rules Delaware property tax system unconstitutional; major changes to residents’ bills could follow

From The News Journal

A judge has ruled that Delaware’s property tax system is unconstitutional, potentially triggering significant changes in annual tax bills for the first time in decades.

Vice Chancellor J. Travis Laster wrote on Friday that all three counties calculate tax bills with property values that are so outdated some taxpayers get an unfair discount while others pay taxes on a larger share of their property’s actual worth.

Those inequities violate the state constitutional requirement that property owners be taxed equally, Laster said in a 149-page ruling in Delaware’s Court of Chancery.

“By continuing to use the decades-old valuations when preparing their assessment rolls, the counties treat owners of similar properties differently,” Laster wrote.

The ruling could eventually affect every property that is taxed in Delaware, and begins a debate on how to make the state’s property tax system fair in the eyes of the courts.

Laster’s opinion asks attorneys for both sides to submit a schedule in 45 days to govern that discussion, which is likely to be litigated in court before any residents see changes to their tax bills

The plaintiffs, a group of education funding activists and Wilmington officials, want property values to be reassessed — a potentially costly, months-long process in which assessors visit each property and update its value in current housing market conditions.

It could lead to property tax increases for those who are currently underpaying relative to the market value of the property, decreases for those who are overpaying and some tax bills changing very little.

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Open letter to Gov. Carney from business leaders

From Delaware Business Times

Dear Governor Carney: 

Since the beginning of the COVID-19 pandemic and the necessary restrictions on economic activity enacted by the State, The Delaware Business Roundtable and the Delaware State Chamber of Commerce have been working together to provide our assistance to safely and responsibly enable a phased reopening of Delaware’s economy. At the outset, we want to be clear that we believe any action to reopen the economy must follow public health guidance to be certain Delaware does not experience a resurgence and put additional pressure on the state’s healthcare system. 

We are writing today to offer two specific pieces of work: 

COVID-19 Best Practices: This is a guidance document for Delaware’s business community, developed after surveying and discussing these issues with businesses statewide. We believe this document will provide a basic guide to businesses outlining essential activities they must consider as they execute a phased reopening. We are working to disseminate this document widely to our members and beyond; 

Putting Delaware Back to Work: Economic Recovery in the First State: This is a series of strategic, long-term policy recommendations with consideration that the economic recovery from the pandemic will take far longer than any of us may have initially imagined. Thus, now is the time to make meaningful public policy changes and investments so that we can jumpstart efforts to create a higher skilled workforce, a streamlined regulatory approval process, easy access to broadband, and more. 

Many agree that the pandemic has brought to light some of the challenges Delaware faces in competing with other states for jobs, talent and investment. The goal is clear: we should act with urgency now! Why? So that in two or three years we can look back and assert unequivocally that in the midst of a national crisis Delaware leaders – representing both state and business interests – acted responsibly in the short term and also took the long view to put Delaware on a forward-looking, carefully considered path that resulted in economic prosperity for all Delawareans. We believe that, working closely with you and the General Assembly, many of the proposals articulated in the attached document should be enacted within the next 30 days as a means of generating jobs. As has been said before, we should never let a serious crisis go to waste; it’s an opportunity to do things we think we could not do before. 

Read the full letter here

Taxes and Spending: The Real Economic Impact

DEFAC estimates show Delaware’s revenues for FY 2020 down by $416M and FY 2021 revenues down by $273.3M, creating a deficit of about $748.7M. Governor Carney expects as much as $500M to $1B in lost revenues.

In 2017, Delaware increased spending and raised taxes to answer a $400M deficit.

Increasing spending with such a high deficit is irresponsible. As for taxes, asking businesses and workers to fork over money when businesses have been forced to exact layoffs, limit operations, or even close seems incomprehensible, but Delaware leaders are considering doing just that.

On Monday, Delaware Department of Labor Secretary Cerron Cade said higher unemployment taxes (paid by businesses) could be implemented to refresh funding for unemployment benefits. According to Secretary Cade, the total for these benefits could be $850M over the next three months alone.

Looming tax hikes aren’t our only concern as we push forward. If we look at how the current leadership has handled deficits in the past, Delawareans can expect to see spending for projects that could have been delayed until the state was stable again. Some argue this is how we jumpstart economic growth.

According to an article in Forbes:

“More government spending has been widely-touted as a cure for unemployment, but support for that view seems to be eroding…there isn’t any net gain from government spending since it’s offset by the taxes needed to pay for it, taxes that reduce private sector spending.”

For example, massive spending hikes in the 1930s, 1960s, and 1970s all failed to spawn economic growth, but in the 1980s and 1990s—when federal government spending shrank—the U.S. economy enjoyed one of its greatest expansions.

Some government spending is beneficial, but only if government spending does not crowd out similar private spending, and only is spent wisely, such as education, job training, physical infrastructure, and research and development. In general, government expenditures can weaken the private sector by unproductively allocating resources and thus slowing income growth.

Government spending is entwined with taxes, and high tax rates reduce incentives to work, save, and invest. This leads to a less motivated workforce and less business investment in new capital and technology. Few government expenditures boost productivity enough to offset that lost due to taxes.

So why do our leaders insist on additional spending?

It boils down to politics. New spending programs seem to benefit those who implement them more than those who pay for them.

In a ploy to avoid cutting spending, the state has requested federal funds. Delaware leaders jointly sent a letter to Delaware’s congressional delegation asking for flexibility with how the state can spend more than $1B in stimulus funds.

The National Governor’s Association (NGA) also submitted a formal request to Congress for federal aid to offset state deficits. This request has been denied for now, with leaders arguing that if states face budget woes, it is due to decades of fiscal mismanagement.

Instead of returning time and time again with more taxes coupled with new spending, the state government can be responsible and allocate surpluses to reserves or implement reviews to assess the need and efficiency of certain programs.

If this had been the response in 2017, we may have been more prepared to weather this storm.

Delaware has been shut down for 38 days with no real end in sight, and the President has recommended an incremental reopening strategy. Seventeen percent of small businesses said that they would have to close down or sell if they experienced two-month loss in revenue, according to the latest Small Business Credit Survey.

They need help, not taxes or spending programs.

Unfortunately, we cannot turn back time. All we can do is move forward in a way that is financially sound in the short- and long-term, and in a manner that does not add undue burden to taxpayers and businesses.

Legislators Call On Governor To End State of Emergency Citing Alarming Problems

From First State Update

A group of Delaware legislators is calling on Governor Carney to reopen the state.

In a letter dated April 30, 2020, the group said they can no longer remain silent and are urging him to end the State of Emergency.

Read the letter below:

Governor John Carney
Tatnall Building
150 Martin Luther King Jr. Blvd.
Dover, DE 19901
Dear Governor Carney,On March 12, you used your authority under the Delaware Code (Title 20, Chapter 31) to declare a State of Emergency in reaction to the perceived threat posed by the
COVID-19 pandemic. 

Since that time, you have renewed the State of Emergency and issued 13 modifications of the declaration.

We were supportive of the initial actions you took. Given the dire projections and the opinions of health experts at the time, we too believed these actions were prudent and necessary. Even when we have had differing opinions regarding the state’s response, our members have worked with your administration behind the scenes to present a united front during one of our state’s most difficult periods.

Today is the 49th day Delawareans are living under the restrictions imposed by your State of Emergency declaration. With the lives and livelihoods of our citizens under threat, we can no longer remain silent.

While COVID-19 poses a significant public health concern, the efforts to curtail its spread have created their own problems that are just as alarming…

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Delaware poultry worker files federal charges against local union, claiming violations

From The News Journal

An employee at a southern Delaware chicken plant has filed federal charges against the workers’ union representative, claiming “union officials are violating his and his coworkers’ rights by seizing union fees.”

Oscar Cruz Sosa, an employee at Mountaire Farms’ poultry processing plant in Selbyville, has filed federal charges with the National Labor Relations Board against the United Food and Commercial Workers (UFCW) Local 27 union for threats and other violations of federal law, according to a press release issued Tuesday by the National Right to Work Foundation.

Sosa said the union seized union fees “under an unlawful forced dues provision in the union contract,” according to the release.

Sosa’s charges also allege that a union official visited Sosa at his home in March and threatened him for submitting a petition seeking a vote to remove the union from his workplace.

The charges come after a debate over decertification of the union, which union officials previously said represents about 800 employees at Allen Harim’s processing plant in Harbeson and 1,000 at Mountaire Farms’ processing plant in Selbyville. The local union also represents workers in other industries throughout the state.

Union spokesman Jonathan Williams said Mountaire Farms and the anti-union National Right to Work Foundation are behind that effort, but that the union’s current focus is on the safety of its members inside the facility.

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Delaware’s Labor Secretary warns unemployment taxes after COVID-19 could hinder recovery

From WDEL

Delaware Department of Labor Secretary Cerron Cade said Delaware could be providing over $50 million a week in benefits soon, and the bill that will be due afterwards could hurt economic recovery.

Speaking during a Facebook Live Listening Session on Monday, Cade said Delaware has handed out around $30 million in unemployment benefits in each of the past two weeks, and that number could rise as more groups become eligible to file for unemployment during the pandemic.

Cade said they’ve applied for a loan from the federal government to help and also are getting relief from the federal CARES Act.

“The [total] number could be $850 million over the next three months alone. But more realistically, the state’s share of that will probably be a little bit less, in terms of what we’re going to have to figure out and handle, but it’s going to be a big number.”

Whatever the final cost to the state ends up being, Sec. Cade said one issue is going to be refreshing that fund, which could come in the form of higher unemployment taxes as businesses will be trying to land on their feet after some have been hindered or closed for weeks and months.

“If the state and federal government don’t figure out how to address that number across the states–not just in Delaware–you’re going to see a lot of businesses and non-profit organizations struggle to pay unemployment taxes and struggle to hire people as we try to dig out of this hole.”

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University of Delaware faces multimillion-dollar budget shortfall as coronavirus slashes revenue

From The News Journal

Unexpected costs from the switch to online learning, along with revenue losses from closing campus and canceling events, have the University of Delaware figuring out how to overcome a $65 million budget shortfall, UD President Dennis Assanis said in an email Monday.

The economic downturn that has accompanied the coronavirus pandemic has affected universities across the country.

Since closing campus in early March, the school has seen a significant revenue loss after having to refund prorated housing, dining and parking fees. Early in the semester, travel restrictions reduced tuition revenue from international students. Canceled events and athletic programs have cut off expected revenue streams as well.

Federal stimulus funds, as well as cost-saving measures like closing dorms and academic buildings, have helped push the loss from $65 million to $50 million, said university spokesperson Andrea Boyle.

But in an effort to “tighten our belts,” she said, the university has also rolled out a number of other budgetary measures — namely, a hiring freeze that could impact the university’s approximately 850 adjunct faculty members.

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Will Delaware raise taxes by $200M again?

The Delaware Economic and Financial Advisory Council (DEFAC) released the updated revenue forecast for fiscal year 2020 this week, and the outlook is dim. DEFAC estimates show Delaware’s revenues for FY 2020 down by $416M and FY 2021 revenues down by $273.3M, creating a deficit of about $748.7M, but that may not be the final impact.

The sentiment was clear in Monday’s DEFAC meeting: there are many factors in play impacting financial futures. The shape of the recovery curve, process of reopening, unemployment numbers, business closures, use of federal funds, and endless more items can impact the ability to recover from COVID-19. Governor Carney expects as much as $500M to $1B in lost revenues.

For Delaware, the worries don’t stop there. A Federal Reserve Bank of Philadelphia index report predicted Delaware to be one of 9 states with an economy predicted to shrink in the first half of 2020. Delaware also ranks 45thin the nation for short-term fiscal stability, which is bad news for budgeting legislators and struggling businesses and residents.

Before the pandemic, Delaware saw unemployment rise for six months straight and above the national average and was 34thfor employment. Now, more than 71,000 Delawareans have filed for unemployment since the pandemic began, as businesses shut down or laid off workers.

Unfortunately, instead of meeting to make difficult decisions to cut current spending or tap into reserves, our leaders decided to wait for a Hail Mary from federal funding. These funds cannot be used to offset lost revenue, and Delaware’s leaders are scrambling.

Lawmakers faced a similar struggle in 2017, when Delaware’s deficit was close to $400M. Later, in 2018, Governor Carney said:

“We are presenting a balanced, long-term solution to Delaware’s structural budget challenges that will keep Delaware economically competitive. This proposal requires shared sacrifice – and that starts with a commitment by state government to operate more efficiently and spend taxpayer dollars wisely…”

Despite this claim, spending cuts and sacrifices were temporary. The real sacrifice came from Delawareans who saw new and higher taxes totaling $200M in new annual revenue.

When Delaware recovered, the taxes remained and the new “surplus” became an excuse to continue spending.

Now that Delaware faces a deficit that is double what we saw in 2017, Office of Management and Budget Director Mike Jackson says that postponing planned capital projects and accessing reserves may be part of the answer, however, “All options are going to be on the table.”

This signals that the response may resemble 2017, and Delawareans could foot the bill through higher taxes.

In 2017, it was only the state government in crisis. Now, it is every Delawarean.

Taxes should not have been the answer in 2017, and cannot be the answer in 2020. We cannot ask more from those who have already been forced to close their businesses, who have been laid off work, and who cannot afford to answer for the consequences of poor financial planning and action from state officials.

Cutting the $233M in recently proposed one-time capital expenditures, utilizing the $252.4M in Rainy Day Funds and $126.3M in Budget Stabilization Funds, reallocating the tens of millions in the Strategic Fund, freezing agency budgets, suspending budget increases, and a critical look at our spending habits are the key to our recovery.

We have the ability to afford this pandemic without increasing taxes.

The question is: will we?

How will local leaders across Delaware respond to big budget gaps in wake of coronavirus?

From The News Journal

The effects of a coronavirus-driven economic crisis that is causing more than a half-billion-dollar hit to the state’s revenues will surely soon be felt in the pocketbooks of cities across Delaware, local officials said.

From lost parking revenue at Rehoboth Beach to utility payments that will never come from now-empty Newark college apartments, city, county and town leaders will face the possibility of cutting services or even the salaries of city workers.

Some, like New Castle County Executive Matt Meyer, say now is the time to keep people employed and even hire more, whether that means taking on debt or draining rainy day funds.

But others, like Wilmington Mayor Mike Purzycki, aren’t ready to make that jump.

Already in Wilmington, officials are combing through their proposed budgets for the fiscal year that starts July, looking to cut expenses as the likelihood of layoffs looms.

Among the first items on the chopping block are uniforms and equipment for next year’s Fire Department recruits, a chunk of the Police Department’s 20 planned new security cameras, college scholarships awarded by the Mayor’s Office and the grants of a few thousand dollars that it gives annually to sustain community nonprofits, officials said during ongoing budget hearings before the City Council this month.

“There’s a possibility that it’s going to impact everybody,” Purzycki said.

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Carney outlines criteria Delaware needs to meet to reopen economy

From Delaware State News

DOVER – Widespread testing, along with a decline in the number of new coronavirus cases, will be needed for Delaware’s economy to gradually reopen.

Delaware Gov. John Carney said Tuesday that the state is following the guidance of the White House task force document “Opening Up America Again.”

That guidance has three phases, along with gating criteria to meet before beginning each phase.

The first check box is a decline in cases.

Delaware’s number of new cases, by day, had been dropping. However, there is some flaws in the timeliness of test returns that has to be considered.

“You can see on this bar chart that we are on a downward decline,” said the governor during his Tuesday press briefing.

The chart showed 248 cases on Friday, 215 on Saturday, 207 on Sunday and 186 on Monday.

The Delaware Division of Public Health reported 269 new cases for Tuesday. How the state will apply the case numbers in a trend is problematic because of the way results are reported.

“To get to the starting line, you need 14 days of declining cases,” said Gov. Carney. “We do have to factor in the fact that the test results we get back kind of aren’t even and consistent. So we might have to correct for that in our day-to-day analysis.”

Test results have taken anywhere from a few days to two weeks to come back, he said. The exception is that the state lab results arrive in 24 hours.

Another important part of the criteria is hospital capacity, and so far Delaware’s hospitals have been able to handle the demands of the coronavirus.

Additionally, Delaware will need widespread testing that allows public health to have a “rigorous contact tracking system,” the governor said.

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