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Revenues rise again as lawmakers prepare to vote on Delaware’s 2023 budget

From: Delaware Public Media

Delaware gets another revenue boost as lawmakers prepare to finalize the state’s 2023 budget.

The Delaware Economic and Financial Advisory Council added another 89 and a half million to the budget bottom line with its June revenue forecast.

Continued strength in personal income tax and corporate tax revenue fueled latest projected upgrades for both the current fiscal year and 2023.

The latest numbers allow lawmakers to spend up to $6.57 billion dollars next fiscal year.

The budget-writing Joint Finance Committee has finished work on the state’s 2023 operating budget, submitting a nearly $5.1 billion spending plan with just over 378 million in one-time supplemental spending.

That’s well above the $4.9 billion budget and $200 million in one-time supplemental spending Gov. John Carney proposed in January.

Lawmakers need to approve the operating budget – along with the state’s capital spending bill and Grant-in-Aid bill before the legislative session ends June 30th.

States Whose Unemployment Rates Are Bouncing Back Most

From: Wallet Hub

May’s jobs report showed a slight slowdown in growth. The economy gained 390,000 nonfarm payroll jobs, a decrease from 436,000 the previous month. In May, there were notable gains in sectors including leisure and hospitality, professional and business services, and transportation and warehousing.

Now, the U.S. unemployment rate sits at 3.6%, which is still slightly higher than it was before the pandemic but is far lower than the nearly historic high of 14.7% in April 2020. This overall drop can be attributed largely to a combination of vaccinations and states removing restrictions. It will take more time for us to reduce the unemployment rate to pre-pandemic levels than it did for the virus to reverse over a decade of job growth, though.

In order to identify the states whose unemployment rates are bouncing back most, WalletHub compared the 50 states and the District of Columbia based on six key metrics that compare unemployment rate statistics from the latest month for which data is available (May 2022) to key dates in 2019, 2020 and 2021.

 

Bill aims to cut real estate transfer tax

From: Delaware Business Times

A new bipartisan bill is seeking to reduce Delaware’s real estate transfer tax by 25%, essentially undoing a state increase from five years ago.

House Bill 358, introduced on March 31 by lead sponsor Rep. Bill Bush (D-Dover), has already garnered 17 House sponsors and 10 Senate sponsors spanning both the Republican and Democratic parties, including both party leaders in the House.

The bill will be first heard in the House Administration Committee, although a hearing has yet to be scheduled.  If enacted, the tax cut would take effect July 1.

HB 358 would reduce the state’s portion of real estate transfer tax back to 1.5% from 2.5%, while local jurisdictions would continue to collect 1.5% of a sale’s value. Seeking to close a budget deficit of hundreds of millions of dollars in 2017, legislators raised Delaware’s realty transfer tax from a longtime 3% on most properties to the current 4% with the state collecting the extra percentage point – in rare instances when no local tax is collected, the state collects 3%.

“Typically, this cost is split between buyer and seller. However, in the current competitive housing market, prospective buyers are often paying the entire tax to convince sellers to accept their offers,” Rep. Kevin Hensley (R- Odessa), who works in the real estate industry, said in a statement.

Rep. Mike Ramone (R-Pike Creek) said that legislators agreed to raise the transfer tax for only two years to cover the budget gap, but that expiration date wasn’t in the final bill, and it continues to be paid on sales small and large.

“Our high realty transfer tax is impacting two groups that can least afford it – millennials and seniors,” Ramone said in a statement. “If we can do something to both facilitate home ownership among young people while giving our older citizens a less costly opportunity to gracefully transition into their golden years, I think we have an obligation to do it.”

A decrease in tax revenue would come at a time when Delaware is seeing booming real estate sales. The state’s independent fiscal analysts board, the Delaware Economic and Financial Advisory Council (DEFAC), estimates that Delaware will pull in nearly $300 million this fiscal year from the real estate transfer tax alone, about 25% more than it did last year. That increase has been spurred along by rising property values across the board, but also by a number of high-value sales, including nearly all of the prior decade’s Top 10 sales, that have contributed millions to state coffers on their own.

Delaware has traditionally ranked at or near the top of all states in terms of its real estate transfer tax, a distinction that has led the state’s Board of Realtors to lobby for a reduction for several years. There are 14 states that have no such tax on property sales, while neighboring states like Pennsylvania and Maryland charge 1% or less on a sale.

According to Long & Foster Real Estate, the median price of a home sold in Delaware as of February was $335,000. HB358 would reduce the transaction cost for the sale of such a home by almost $3,400.

Based on the latest estimates from DEFAC, HB358 would allow homebuyers and sellers to collectively retain more than $100 million annually from the tax cut. DEFAC has projected to end the current fiscal year with a budget surplus of nearly $800 million, which has pushed lawmakers to find ways to return those savings to residents.

One bill that has already received bipartisan support will cut checks of $300 per taxpayer as a direct stimulus. Now HB358 appears poised to make the change that real estate agents have been seeking for years.

“As stewards of the American Dream of homeownership, we are excited about the introduction of HB358. This legislation could make that dream a reality for many families throughout the state. Delaware has the highest state-level Realty Transfer Tax in the nation, and while we pride ourselves on being the First State, this is not a ranking that any of us want,” Susan Giove, president of the Delaware Association of Realtors, said in a statement. “The realty transfer tax can become a major obstacle to homeownership because it must be paid in cash at the settlement table in addition to other closing costs. We believe that this legislation will make housing more affordable for all who wish to buy or sell a home and are grateful to all the sponsors for introducing this legislation at a critical time in the current real estate market.”

US Offshore Wind Jobs are Highly Exaggerated

From: Caesar Rodney Institute

Offshore wind supporters like to quote a Wood Mackenzie research study that says building 29,000 megawatts (MW) of offshore wind electric generating capacity on the Atlantic seaboard by 2030 will create 80,000 annual full-time US jobs between 2025 and 2030.

Extrapolating from an actual approved project leads to an estimate of only about 5,500 jobs, and even that number may be high. Further, the study ignores possibly over 25,600 jobs potentially lost from huge electric premiums that redirect consumer and business spending elsewhere in the economy.

The Maryland Public Service Commission (PSC) recently approved the 846 MW Skipjack 2 offshore wind project off Delaware’s coast. A review[i] of the project by the PSC consultant indicates there will be 857 temporary construction jobs and 25 permanent Operational & Maintenance jobs.

There are limited plans to build the turbines in the US, which accounts for 56% of the forecasted jobs. Induced jobs are indirect jobs created by the wages spent by direct employees and change as payroll estimates change.

The Wood Mackenzie study assumes that over half the new projects would be off the Carolinas. However, any new project needs massive state subsidies, and neither North Carolina nor South Carolina has such legislated mandated subsidies.

Money spent on higher utility bills reduces spending on everything else, like going to a restaurant or the movies.

The Skipjack project premiums[ii] will be passed onto electric customers and may average $125/MWh for the 3.3 million MWh of wind energy produced each year, or about $410 million a year. That extrapolates to $2.05 billion a year for the 4,200 MW construction the study expects. A job may be lost for every $80,000[iii] spent on higher electric bills, so up to 25,600 jobs may be lost.

Wood Mackenzie is generally reliable, but this study misses by a country mile and is misleading elected officials and the public.

Does Your State Have a Gross Receipts Tax?

From: Tax Foundation

Today’s map looks at which states levy a gross receipts tax, which is often considered one of the most economically damaging taxes. Shifting from state gross receipts taxes would represent a pro-growth change to make tax codes friendlier to businesses and consumers alike, which is especially necessary in an increasingly mobile economy.

Gross receipts taxes are applied to a company’s gross sales, without deductions for a firm’s business expenses, like compensation and cost of goods sold. These taxes are imposed at each stage of the production process, leading to tax pyramiding.

Seven states (Delaware, Nevada, Ohio, Oregon, Tennessee, Texas, and Washington) currently levy gross receipts taxes, while several others, including Pennsylvania, Virginia, and West Virginia, permit local taxes imposed on a gross receipts base. South Carolina converted a local gross receipts tax into a tax on net income (profits) in 2020. Gross receipts taxes gained popularity among states in the 1930s but began to be repealed or struck down as unconstitutional by state courts in the 1970s. Although they have been dismissed for decades as inefficient and unsound policy, they have returned in recent years as states seek to limit revenue volatility and to replace revenue lost by eroding corporate income tax bases.

As the map indicates, states often designate multiple gross receipts rates, typically by industry, to mitigate some of the economic costs associated with these taxes. Businesses and industries with lower profit margins or more stages in the production process—each one taxed separately—are hit harder by gross receipts taxes than are high-margin businesses that are vertically integrated, meaning that more of the work is done in-house (resulting in less exposure to the tax because there are fewer transactions). Differential rates attempt, albeit somewhat crudely, to adjust for these differences on an industry-by-industry basis. Washington’s Business and Occupation Tax has the highest top rate of 3.3 percent, followed by Delaware’s Manufacturers’ and Merchants’ License Tax with a top rate of 1.9914 percent. Ohio and Oregon have flat rates of 0.26 percent and 0.57 percent, respectively.

The tax base and allowable expenditures vary depending on the design of the gross receipts tax. Texas’ Margin Tax allows for a choice of deducting compensation or the cost of goods sold. Nevada allows a firm to deduct 50 percent of its Commerce Tax liability over the previous four quarters from payments for the state’s payroll tax. And Oregon allows a 35 percent deduction for the greater of compensation or cost of goods sold.

Gross receipts taxes impact firms with low profit margins and high production volumes, as the tax does not account for a business’ costs of production as a corporate income tax would. These taxes can be particularly severe for start-ups and entrepreneurs, who typically post losses in early years while still owing gross receipts payments.

These taxes also do not focus on final consumption, as a well-structured sales tax would. They penalize companies that include multiple transactions in their production process, with the tax imposed on each stage of production—called tax pyramiding. Prices rise as these intermediate taxes are shifted onto consumers, impacting those with lower incomes the most.

Gross receipts taxes impose costs on consumers, workers, and shareholders alike. Shifting from these economically damaging taxes can thus be a part of states’ plans for improving their tax codes in an increasingly competitive tax landscape.

Community Workforce Act: Opportunity for All?

From: Kathleen Rutherford, Executive Director, A Better Delaware

Recently HB 435 was introduced in the Delaware House of Representatives. Otherwise known as Community Workforce Act, this bill would require that all state funded construction projects totaling over $3 million must be completed by union only project labor agreements. This decision would have disastrous consequences to Delaware’s economy. Currently, over 80% of construction work inside the state is done using non-union contractors. Taking away their ability to bid on high-cost projects would diminish competition in the bidding process and potentially lead to less-than-ideal results. Non-union employees should have an equal opportunity to complete state funded construction projects, otherwise contracts may not be awarded to the people who will perform the best work at the best price.

The bill claims that allowing these large public works construction projects to be governed by a Community Workforce Agreement with labor organizations would “provide structure and stability and promote efficient completion.” A New Jersey DOL study recently found that the cost of PLA projects was 30.5% higher per square foot than non-PLA projects. This same study also demonstrated that PLA projects take an average of 23% longer to complete than non-PLA projects. It comes as no surprise that placing limiters on the labor market leads to diminished results. Delaware is no stranger to construction projects running over budget and over the expected time constraints, but this would only exacerbate the issue. The recent Federal Bipartisan Infrastructure Law (championed by Tom Carper, Chris Coons, and Lisa Blunt Rochester) would give Delaware $48.5 million over a five-year period to address at-risk coastal infrastructure. Allowing this work to only be performed by union contractors would hinder these infrastructure projects.

One key way that states have prohibited this is by enacting bills to prohibit government-mandated PLA’s. Florida passed HB 599 in 2017, which required that construction projects that are projected to cost more than $200,000 must be competitively bid on. It also prohibits local governments from imposing discriminatory pre-bid mandates onto contractors when the project they are working on receives more than 50% of its funding from the state. Bills like this attempt to mitigate the  excessive costs and lower quality that unnecessary government mandates have on public construction projects. Wisconsin took a similar approach to the issue by signing SB 3 into law. This bill prohibits the government from mandating PLAs on state or local construction projects. The difference between this bill and HB 599 is that it still allows contractors to use PLAs with unions if they are operating outside of the governments method of ensuring fair competition. The goal of this bill was to create a fair and level playing field for publicly funded construction contracts by increasing competition and helping smaller businesses.

To keep Delaware on the right path to economic prosperity, it is essential to prevent barriers like HB 435 from hindering competition between contractors. With projects like these being funded by taxpayers, it is important to make sure that the best possible contractor receives the contract after they have demonstrated the ability to perform the job at the lowest cost and shortest timeframe. Contractors should have an equal opportunity to work on state funded construction projects regardless of their decision to affiliate with a union or not. It is the responsibility of the state government to be fiscally responsible and avoid showing any signs of favoritism to union contractors by mandating PLAs.

The Hottest Job Markets in the Country: What Policies are Driving Americans to These Cities?

From: State Policy Network

In April 2022, The Wall Street Journal released their annual rankings of the best job markets in the country. Top of the list? Not the big cities that may first come to mind. The cities with the hottest job markets are all mid-size, and each is in a different state. They are:

  • Austin, Texas
  • Nashville, Tennessee
  • Raleigh, North Carolina
  • Salt Lake City, Utah
  • Jacksonville, Florida

What state and local policies are creating jobs and attracting workers to these cities? We sat down with the local policy organization in each of these states to get their take.

Low taxes

As The Wall Street Journal pointed out, Florida, Texas, and Tennessee have no income tax—while North Carolina and Utah have an income tax rate of below five percent. A state with no income tax means people get to keep more of what they earn—an attractive policy for workers that also spurs economic growth.

The Beacon Center of Tennessee, Joh Locke Foundation (North Carolina), Libertas Institute (Utah), Texas Public Policy Foundation, and The James Madison Institute (Florida)—which are based in (or close by) the cities with the hottest job markets—pointed to their state’s income tax policy as one of the main reasons why those cities have seen such enormous job growth in the past few years.

And some of those state think tanks played a role in helping their state reduce or eliminate the income tax. In 2017, through a comprehensive campaign, the Beacon Center helped Tennessee become truly income tax free. In June 2021, the John Locke Foundation played a key role in North Carolina reducing its income tax rate from 5.25 percent to 4.99 percent.

It’s not just their income tax policy that leads to more job opportunities. Low taxes overall are also a key driver of job growth. Overall, the cities with the best job markets have a low tax burden.

Beacon Center’s Director of Policy and Research, Ron Shultis, observed: “Every year, thousands of people across the United States move to Tennessee. While their reasons may vary, many choose to live here due to state-level policies such as the lack of a state income tax, low taxes per capita, and low levels of debt.”

Dr. Robert McClure, president and CEO of The James Madison Institute, added: “Florida boasts responsible fiscal policies, great infrastructure, a reasonable regulatory load, and no state income tax.”

In their 2022 report, “Rich States, Poor States,” the American Legislative Exchange Council noted: “Generally speaking, states that spend less—especially on income transfer programs—and states that tax less—particularly on productive activities such as working or investing—experience higher growth rates than states that tax and spend more.”

Minimal regulations

Small businesses provide jobs for the people in their community. However, burdensome regulations make it hard for business owners and entrepreneurs to open and run a business. States that understand the plight of business owners and work to make it as easy as possible for them to run a business see more growth than states with more regulations. Austin, Nashville, Raleigh, Salt Lake City, and Jacksonville are all located in states with relatively minimal regulations.

These low regulations attract out-of-state businesses and are a big reason why so many companies are relocating to these five cities. Tesla, Space X, Oracle, and Hewlett Packard Enterprise have all moved from California to Texas. Tennessee has seen a similar pattern, with 25 California companies moving to the Volunteer State from 2018 to 2021. Those businesses bring thousands of job opportunities along with them.

The Texas Public Policy Foundation added: “It is no secret that pro-growth policies — low taxes and a light regulatory burden—have propelled population growth in Texas and Florida while the opposite has occurred in California, Illinois, and New York. Elected officials’ response to COVID-19 likely accelerated this trend in 2020, with Florida and Texas netting more than half of the nation’s 1.15 million population increase from mid-2019 to mid-2020.

In Utah, an innovative policy called a regulatory sandbox is attracting entrepreneurs and workers from all over the country. A regulatory sandbox is a legal classification that creates a space where participating businesses won’t be subject to onerous regulations—usually for a limited amount of time.

Pioneered by the Libertas Institute, Utah was the first state to pass an all-inclusive regulatory sandbox in 2021. Sandboxes allow new businesses to develop more easily—which can create jobs and opportunities for communities.

A regulatory sandbox is just one example of a Utah policy that is contributing to job growth in Salt Lake City and beyond. Connor Boyack, the CEO of the Libertas Institute, added:

“While Utah typically ranks well for having a low overall tax burden, good fiscal management, and low business regulations compared to most states, the state is particularly attractive to families who want friendly neighbors, and outdoor playground for all seasons, and a good place to raise their children. Salt Lake City and our surrounding communities boast a very low unemployment rate with high-paying jobs in an environment that supports entrepreneurship and attracts significant capital investment. For anyone looking to prosper, Utah is a great place to be.”

Ample housing supply

An affordable home is becoming out of reach for many middle class and lower income families. To address this problem, many states, including Florida, North Carolina, Tennessee, Texas, and Utah, are adopting housing reforms that increase housing supply and lower costs.

Brooke Medina, vice president of communications at the John Locke Foundation in Raleigh, noted:

“Affordability and opportunity make Raleigh one of the hottest cities in the country. The research, tech, and economic clout Raleigh boasts stem from an extensive talent pool and pro-growth policies that Locke has championed, such as reducing the corporate and personal income tax, creating a regulatory sandbox, a K-12 education environment that is teeming with innovations, and efforts to ensure the housing supply keeps up with population growth. For these reasons, and more, Raleigh is increasingly recognized as a place where individuals, families, and businesses can thrive.”

Logan Padgett, vice president of communications and government affairs at The James Madison Institute in Jacksonville, added:

“Jacksonville is like many of Florida’s major metropolitan areas—booming. More than 800 people a day move to the sunshine state and as south Florida becomes more congested, Jacksonville’s culture, climate, and proximity as a beach city make it extraordinarily attractive as a destination. In addition, it’s size in land mass makes it more amenable to growth.”

Right-to-work state

Another thing Austin, Nashville, Raleigh, Salt Lake City, and Jacksonville have in common? They are all located in right-to-work states.

Right-to-work laws state no person should have to join a union or pay union dues in order to have or keep a job. If a person wants to join a union, they can; right-to-work just ensures they have the freedom to choose for themselves. Twenty-seven states have right-to-work laws on the books. Studies show that right-to-work states attract more new businesses than non-right-to-work states. In addition, workers in right-to-work states enjoy higher incomes than workers in non-right-to-work states.

Ron Shultis, Beacon’s director of policy and research, added: “Right-to-work is one of the reasons—even if you didn’t understand or know what it is—why those people moved here [Tennessee]. It’s what creates the environment for you to be able to get that job, a good house, a lower cost of living. It’s what makes Tennessee attractive for people and businesses.”

Other states can learn from these cities driving job growth and opportunity

The cities with the hottest job markets all have policies that encourage innovation, reduce regulations, and incentivize work. These policies can serve as a model for other states looking to attract more jobs and opportunities to their state.

Kentucky’s big move in the Rainy Day Fund rankings

From: Bluegrass Institute

The progress Kentucky has made establishing legitimate budget reserves received some nice validation last week when the Pew Charitable Trusts reported their FY ‘21 “Rainy Day Fund” state trends. From their Fiscal 50: State Trends and Analysis update:

Rainy day funds, also known as budget stabilization funds, grew in more than two-thirds of states — 35 — during fiscal 2021, according to figures reported to the National Association of State Budget Officers (NASBO). A slightly greater number of states—36—posted increases in the number of days they could run government operations using rainy day funds alone compared with the previous year.

Their Rainy Day Fund Highlights section included:

Kentucky had the greatest increase in days (+51.2 days), followed by California (+40), Colorado (+34.4), New Hampshire (+34), and Connecticut (+27.6).

Pew’s website allows for graphical representations of longer term trends from the data. Look at how Kentucky moved past the 50-state median from FY ‘20 to FY ‘21:

Kentucky Rainy Day

Based upon the FY ‘21 figures, Kentucky ranked 12th among the states with the strongest budget reserves relative to their total spending. (Note from Pew on their metric to compare states: “One way to standardize the size of reserves and balances is to calculate how many days a state could run solely on those funds, even though the scenario is highly unlikely.”)

Frankfort’s arrival at a bipartisan Rainy Day Fund consensus has been impressive. It should not, however, be taken for granted.

For decades, government spending has been the first prerogative in Kentucky’s state capital. Establishing sufficient budget reserves to deal with cyclical revenue fluctuations or to prepare for unforeseeable circumstances hasn’t been a high priority.

This seems to be changing, due in no small part to the leadership of the current chairmen of the legislature’s Appropriations and Revenue Committees.

The next critical task is developing a statutory framework around the budget reserves. It must become more than an account with money tucked away. Instead, the Rainy Day Fund should become a program with clear guidelines on how to manage it, in good times and in bad.

State unemployment by race and ethnicity

From: Economic Policy Institute

EPI analyzes state unemployment rates by race and ethnicity, and racial/ethnic unemployment rate gaps, on a quarterly basis to generate a sample size large enough to create reliable estimates of unemployment rates by race and ethnicity at the state level.

We report estimates only for states for which the sample size of these subgroups is large enough to create an accurate estimate. For this reason, the number of states included in our maps and data tables varies based on the analysis performed. The following analysis contains data on the first quarter of 2022 and the fourth quarter of 2021.

First-quarter 2022 state unemployment rates, trends, and ratios

Two years into the COVID-19 pandemic, with over 80 million reported cases and nearly 1 million deaths in the United States, the labor market is approaching its 2020 pre-pandemic level of tightness. As the Omicron variant of COVID-19 subsided, many state economies continued their return to more normal economic activity. Unions worked to solidify the gains in worker power afforded to them by the conditions of the pandemic and the “Great Reshuffling,” with high-profile grassroots wins secured by Amazon and Starbucks workers.

Overall unemployment rates 2022Q1
  • Highest: D.C. (6.1%) • N.M. (5.6%) •
    Alaska & Calif. (5.3%) • Nev. & Penn. (5.1%)
  • Lowest:
    Neb. & Utah (2.1%) • Ind. (2.3%) • Kan. & Mont. (2.5%)
  • National: 3.8%

The national unemployment rate in 2022Q1 was 3.8%, matching its rate in 2020Q1 and continuing an overall labor market tightening that brought with it some measure of increased worker bargaining power. A majority of states had unemployment rates less than or within 1 percentage point of their pre-pandemic (2020Q1) unemployment rate.

The lowest unemployment rates were found in Nebraska (2.1%) and Utah (2.1%), while the highest rates were in D.C. (6.1%) and New Mexico (5.6%). Twelve states had unemployment rates under 3% at the beginning of the year, underlining the overall tightness seen in the recovery since the pandemic that began two years prior. Even so, the return to normalcy proceeded at different paces across different groups.

First-quarter 2022 trends among white workers

The white unemployment rate nationwide dropped to 3.0% in 2022Q1, matching its 2020Q1 level. A majority of states had white unemployment rates less than or within 1 percentage point of their pre-pandemic (2020Q1) white unemployment rate.

White unemployment rates fell as low as 1.7% in D.C. and Nebraska, even lower than their 2020Q1 rates (2.0% and 2.7%, respectively). Nearly half the states (24 plus D.C.) had white unemployment rates at or below 3%. The highest unemployment rates for white workers were found in California (4.5%) and Maryland (4.4%)—higher than their 2020Q1 rates (3.5% and 2.9%, respectively), but low by most standards of labor market tightness.

First-quarter 2022 trends among Black workers

At the national level, Black workers saw an unemployment rate of 6.5%, still slightly higher than their 2020Q1 rate of 6.2%. Georgia (5.0%) and Florida (5.3%) saw the lowest rates among those states with large enough samples to analyze. No state saw a Black unemployment rate below 5%. The Black unemployment rate remained above 10% in D.C. and Illinois, at 12.5% and 12.2%, respectively.

Less than half of states for which data are available had Black unemployment rates less than or within 1 percentage point of their pre-pandemic rate.

The national Black–white unemployment ratio remained unchanged at 2.2-to-1, reconfirming one of the most persistent trends in this area of research. This ratio remains highest in D.C., where it rose sharply over the previous quarter: A 31% decline in white unemployment combined with persistent high Black unemployment to bump the ratio to 7.2-to-1. In contrast, the Black–white unemployment ratio in the neighboring state of Maryland was the lowest in the country, at 1.3-to-1. This again points to the unique nature of the D.C. labor market and its emphasis on white-collar federal employment.

First-quarter 2022 trends among Hispanic workers

Hispanic workers had an unemployment rate of 4.6% at the national level in 2022Q1, slightly below their 2020Q1 pre-pandemic rate of 4.8%. Hispanic state-level unemployment was lowest in Georgia (2.0%) and North Carolina (2.5%), and highest in Massachusetts (7.5%) and New York (6.3%).

In eight states (among the 13 states with sufficient sample size for analysis), the Hispanic unemployment rate was at or below 5% in 2022Q1. In all but one of the 13 states analyzed, the Hispanic unemployment rate was less than or within 1 percentage point of the pre-pandemic rate.

Nationwide, Hispanic workers were 55% more likely than white workers to be unemployed in 2022Q1 (a Hispanic–white unemployment ratio of 1.55-to-1, rounded to 1.6-to-1).

Massachusetts had the highest Hispanic–white unemployment ratio at 1.9-to-1. North Carolina and Georgia both had unemployment ratios of 0.8-to-1, meaning that in those states Hispanic workers were less likely to be unemployed than white workers were.

First-quarter 2022 trends among Asian American and Pacific Islander (AAPI) workers

AAPI workers saw a national unemployment rate of 3.4% in 2022Q1, slightly above the rate for white workers yet below the rates for Black and Hispanic workers. The AAPI unemployment rate for 2022Q1 remains slightly above its 2020Q1 pre-pandemic rate of 3.1%.

Among the five states with sufficient sample size for analysis, AAPI state unemployment rates were lowest in Texas, New York, and Hawaii (all tied at 3.8%), and highest in New Jersey (5.0%) and California (4.7%). Of these five states, only New Jersey and Texas had AAPI unemployment rates less than or within 1 percentage point of their pre-pandemic rate.

Fourth-quarter 2021 state unemployment rates, trends, and ratios

The fourth quarter of 2021 saw steady improvement in the labor market, even as the Omicron variant of COVID-19 continued to spread across the country. Though the incidence of cases was relatively high throughout the Omicron outbreak, the widespread availability of vaccines and boosters limited the severity of those cases. As workers moved back into the labor market, the economy continued to grow, though at a slower pace than in previous quarters of the recovery from 2020’s recession.

Inflation remained a presence throughout the economy, leading Fed Chair Powell to announce an increase in the pace of the Fed’s tapering policy (slowing down their economy-stimulating strategy of purchasing bonds).

The national unemployment rate in 2021Q4 fell to 4.2%, consistent with what many economists refer to as a “tight” labor market. Unemployment rates fell to as low as 2.3% and 2.4% in Utah and Nebraska, respectively. No states had overall unemployment rates higher than 10%; the highest unemployment rates were found in D.C. (6.2%), New Mexico (6.0%), and California (5.9%). A majority of states had unemployment rates less than or within 1 percentage point of their pre-pandemic (2020Q1) unemployment rate. These trends of course mask disparities across groups.

Fourth-quarter 2021 trends among white workers

At the national level, white workers had an unemployment rate of just 3.3% in 2021Q4, nearly as tight as the labor market for white workers prior to the pandemic (3.0% in 2020Q1).  A majority of states had white unemployment rates less than or within 1 percentage point of their pre-pandemic (2020Q1) white unemployment rate.

White workers saw the highest unemployment rates in Hawaii (5.5%), Maryland (5.2%), and Connecticut (5.0%). That said, even these highest rates are relatively low in the context of other groups and previous periods. White unemployment rates fell to 2.0% or lower in Nebraska (1.9%), Utah (2.0%), and South Dakota (2.0%). Low rates were not experienced across all groups, however, as seen in the following sections.

Fourth-quarter 2021 trends among Black workers

Black workers saw a national unemployment rate of 7.2% in 2021Q4, higher than the highest state unemployment rate for white workers. It is also higher than the pre-pandemic (2020Q1) rate by 1 percentage point. Less than half of states for which data are available had Black unemployment rates less than or within 1 percentage point of their pre-pandemic rate.

There were still states in which the Black unemployment rate exceeded 10.0% this late into the recovery: Illinois (13.1%), D.C. (11.4%), California (11.1%), and Michigan (10.7%). Among the states with population sizes large enough for analysis, the lowest Black unemployment rates were found in Florida (4.7%) and Georgia (4.9%). These were the only states in which the unemployment rate for Black workers fell below 5.0%.

Nationwide, Black workers were more than twice as likely as white workers to be unemployed in 2021Q4, with the Black–white unemployment ratio at 2.2-to-1. Black–white state unemployment ratios were highest in D.C. (4.5-to-1) and Illinois (3.4-to-1), and lowest in Maryland (1.1-to-1). The sharp discrepancy between D.C.’s high ratio and Maryland’s low ratio reflects the specific makeup of the D.C. labor market, skewed as it is toward white-collar federal employment.

Fourth-quarter 2021 trends among Hispanic workers

Hispanic workers nationwide saw an unemployment rate of 5.2% in 2021Q4, in between the rates for Black and white workers, and slightly higher than their 2020Q1 rate (by 0.4 percentage points).

Of those states where population sizes met the threshold for analysis, the highest Hispanic state unemployment rates were found in Massachusetts (7.9%) and New York (7.1%), while the lowest rates were found in Georgia (1.7%) and Utah (2.9%). A majority of the analyzed states had Hispanic unemployment rates less than or within 1 percentage point of their pre-pandemic (2020Q1) Hispanic unemployment rate.

Hispanic workers were 60% more likely to be unemployed than white workers when considering the entire country (a Hispanic-white unemployment ratio of 1.6-to-1. Hispanic workers were twice as likely as white workers to be unemployed in Massachusetts, the state with the highest Hispanic–white unemployment ratio in 2021Q4 (2.1-to 1). In some states, Hispanic workers were significantly less likely to be unemployed than white workers; in Georgia and Washington state, the Hispanic–white unemployment ratios were 0.6-to-1 and 0.9-to-1, respectively.

Fourth-quarter 2021 trends among Asian American and Pacific Islander (AAPI) workers

AAPI workers saw a national unemployment rate of 4.1% in 2021Q4, above the rate for white workers but still below the rates for Black and Hispanic workers. The 2021Q4 AAPI rate was about 1 percentage point higher than the pre-pandemic (2020Q1) AAPI rate.

The highest unemployment rates for AAPI workers among those with a large enough population size for analysis were New Jersey (6.8%) and California (5.6%), while the lowest rates were found in Texas (2.8%) and Hawaii (4.0%). Only one of the five states for which data are available had AAPI unemployment rates less than or within 1 percentage point of their pre-pandemic rate.

Methodology

The unemployment rate estimates in this report are based on the Local Area Unemployment Statistics (LAUS) and the Current Population Survey (CPS) from the Bureau of Labor Statistics (BLS). The overall state unemployment rate is taken directly from the LAUS. CPS six-month ratios are applied to LAUS data to calculate the rates by race and ethnicity. For each state subgroup, we calculate the unemployment rate using the past six months of CPS data. We then find the ratio of this subgroup rate to the state unemployment rate using the same period of CPS data. This gives us an estimate of how the subgroup compares with the state overall.

While this methodology allows us to calculate unemployment-rate estimates at the state level by race and ethnicity by quarter, it is less precise at the national level than simply using the CPS. Thus, the national-level estimates may differ from direct CPS estimates.

In many states, the sample sizes of particular subgroups are not large enough to create accurate estimates of their unemployment rates. We report data only for groups that had, on average, a sample size of at least 700 in the labor force for each six-month period. Data collection for the BLS surveys used to produce this report was affected by the pandemic, in some cases limiting sample sizes such that some states that usually meet sample size thresholds no longer did so.

UD offshore wind proposal has scary-high cost

From: Cape Gazette

A recent letter dismissed my analysis of a University of Delaware proposal to force Delaware electric customers to pay for a large offshore wind project. The writer correctly states my analysis concludes I found such a project would cost 3.5 to 5.7 times as much as other options that would have comparable environmental results. Left out was the conclusion the average annual cost to a residential electric customer could be as high as $400 to $545 a year over the 20- to 25-year life of the project.

The writer says, “These higher costs from a few scary examples may lead voters to toss the entire plan into a dumpster.” My so-called scary examples include price forecasts from the U.S. Energy Information Agency that many consider to be the gold standard of forecasts. EIA forecasts are levelized over the entire expected life of the projects. EIA forecasts solar power coming online in 2027 will produce power at $36.49/megawatt hour, onshore wind $40.23 and offshore wind $136.51. That is about the amount of power a typical residential customer uses in a month. 

I also quote consultants hired by the Maryland Public Service Commission that very recently approved Skipjack offshore wind projects to be built off our beaches, and from an ongoing utility commission case in Virginia. These sources can hardly be considered unreliable. 

In contrast, the UD study found there would be no price premium. What did they do differently? Maryland and Delaware both mandate the use of wind and solar electric generation in ever-increasing amounts. Public utilities must buy Renewable Energy Credits issued every time one megawatt hour is produced from these sources with the cost passed on to consumers. The RECs are sold separately and represent the premium cost of power.

Onshore wind and solar RECs are sold to utilities in competitive auctions, and are forecast to sell for about $10 to $15 each. Offshore wind RECs for the Skipjack project were set at fixed prices. While the price schedule was redacted, a starting price of $71.61 in 2012 dollars escalating automatically at 3% a year was published. Adjusting to current dollars, the RECs will start in 2026 at about $100 each and average about $137 over the 20-year project, or perhaps 10 times as much as onshore wind and solar RECs.

The UD forecast ignored the average lifetime cost and only used the first year cost. They also assumed offshore wind would replace carbon-based power, and there would be health and global-warming savings to offset the premium cost. However, both Maryland PSC consultants concluded offshore wind would simply replace onshore wind, and one concluded offshore wind would increase emissions because of longer transmission lines. The UD study also assumed offshore wind would be cheaper in the future, but a Virginia-based project facing higher materials costs just increased its cost estimate 25%, a wind turbine supplier just increased its prices 20%, and the EIA forecast is for 2027.

Finally, the UD study took federal tax credits into account as if it was free money. We pay for those tax credits in higher taxes, and onshore wind and solar also receive federal tax credits.

Sorry, UD, all your key assumptions are wrong, and your idea belongs in the dumpster.

David T. Stevenson
Director, Center for Energy & Environment
Caesar Rodney Institute