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Blogs and Articles

Why Wilmington’s Climate Change Plan is Bad for the City – Part 2

Part I focused on the plans by Resilient Wilmington and the State of Delaware to address the impacts of sea level rise by focusing on limiting carbon dioxide emissions within the State.  These plans are based on bad science – carbon dioxide is not a magical climate control “thermostat” and attempts to limit such emissions will have virtually no impact on sea level rise – as well as being bad environmental policy – the economic effects will be potentially devastating to the State’s economy.  But if sea level is rising and coastal communities are threatened by tropical storms and nor’easters, what prudent response should Delaware be taking?

First, we must not be spending taxpayer money on so-called “solutions” that will have no positive effect on Delaware; on the contrary, such “solutions” will adversely affect our economy.  For more than a decade, Delaware has participated in the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade scheme that focuses on subsidizing wind and solar energy and penalizing participating states for using fossil-fuel-based energy sources.  David Stevenson of the Caesar Rodney Institute has shown that RGGI has caused our out-of-state electric demand to increase from 22% to 64% in just the last five years, and it may reach 100% as early as 2024.  

This leads to lost local jobs, decreased tax revenues statewide, and higher electric rates with lower reliability.  Delaware’s participation in RGGI is the most significant force that keeps us focusing on reducing greenhouse gases.  Thus, Delaware must terminate its participation in RGGI.   Anything that makes energy more expensive and costs jobs to Delawareans is anathema to making Delaware better.

Mitigation and adaptation are the keys to addressing sea level rise and climate change, in general – not the red herring of cutting greenhouse gas concentrations.  And all of this starts with education so that all participants and those with vested interests understand the problem and are equipped with viable solutions that will affect a positive outcome.  It is a strange and very human flaw that newfound solutions always seem to leave behind common sense and traditional approaches.  The latter are almost always more effective and less expensive.

Our longest tide gauge record on the East Coast lies in The Battery in New York City.  Its record extends more than 165 years and indicates that sea level rise in lower Manhattan has risen steadily and consistently at a rate of about 1.14 inches per decade.  In Delaware, the rate has been 1.48 and 1.42 inches per decade at Reedy Point and Lewes, respectively.  As discussed in Part I, sea level rise in Delaware is greater due to extreme coastal subsidence in the mid-Atlantic region.  This, of course, has nothing to do with carbon dioxide levels and the rate of sea level rise will not be affected by reducing them.

The bigger threat to Delaware is coastal erosion from normal beach processes, which are exacerbated during times of storms (i.e., tropical storms/hurricanes and nor’easters).  Delaware’s Atlantic coast is a barrier island that is constantly being reshaped by coastal processes.  During storm periods with high wind and waves, these coastal processes and its concomitant coastal erosion are accentuated.

Consider the Cape Henlopen Lighthouse.  Completed in 1767, it was located at least 1500 feet from the ocean.  The Delaware Geological Survey (DGS) has documented changes to the Delaware coast  since the mid-1850s showing that Cape Henlopen has become more elongated to the northwest and thinner (along the Atlantic coast) over time.  This erosion led the Cape Henlopen lighthouse to fall into the ocean in April of 1926 during a nor’easter.  Almost a century later, the location where the lighthouse once stood is now several hundred feet offshore.

The loss of coastal areas from natural sea level rise, coastal subsidence, and storm-induced erosion is, therefore, a fundamental problem in Delaware.  Coastal communities such as Bethany Beach, for example, regularly require beach replenishment by the expensive process of dredging sand from offshore to rebuild an eroded beach.   Prior to 2009, a discussion was begun to decide what to do about the expense incurred by beach erosion in Bethany.  Should the state continue to pay for beach replenishment, or should it simply allow nature to take its course and cede the boardwalk and then Atlantic Avenue, when the time comes?  If we decide to fight the natural process of erosion, then who should pay for it?  Residents who live there?  Tourists who enjoy Bethany during the summer?  Citizens of the State because what benefits Bethany Beach also benefits the State’s economy? Or should there be an equitable sharing of the cost among these three entities?

But before that discussion could get underway, then Governor Markell appointed Collin O’Mara as his DNREC Secretary.  Secretary O’Mara, who was the creator of San Jose’s “Green Vision” – a plan to reduce greenhouse gas emissions by enhancing economic growth through investment in green energy boondoggles.  O’Mara brought Bloom Energy to Delaware, where the State and its energy ratepayers have lost almost $500M to create less than 400 jobs.  Through the Bloom Energy fiasco, natural gas has been redefined as a “renewable energy source”, but only if consumed in a Bloom Energy fuel cell – even though the process releases greenhouse gases into the environment.

But O’Mara’s statewide emphasis on solving our problems by addressing climate change, derailed the discussion of what to do in Bethany Beach.  According to O’Mara, if Delaware greatly reduced its greenhouse gas footprint, the rise in sea level would be “solved”.  The science was blatantly ignored by Delaware’s leaders and the loss of our beaches through a long-term, natural trend in rising seas, coastal subsidence, and coastal erosion during storm events was to be addressed by reducing our greenhouse gas footprint.  Nothing could be farther from the truth.  Coasts are eroding and being inundated over time, but the process has nothing at all to do with carbon dioxide emissions.

Moreover, this affects a variety of different types of businesses and people from all walks of life in all parts of the State.  Along the Atlantic Coast and the Inland Bays, it affects those affiliated with the summer tourism industry and many of the more affluent who can afford to buy and build on land along the coast.  In the Delaware Bay, it affects seasonal fishermen, boaters, and bird watchers who enjoy the annual migration of the many bird species that pass through the region.  In New Castle County, industry and businesses in the cities along and affected by the Delaware River are affected.  From diverse populations such as those living in Bethany Beach, Slaughter Beach, Kitts Hummock, New Castle, and Wilmington, much of Delaware will be affected by sea level rise in the coming decades – and the impact will be completely unaffected by our greenhouse gas footprint.

Since reducing greenhouse gases in Delaware will have no effect whatsoever on our climate or on sea level rise, what should a prudent response strategy be?  We need to return to science and adopt scientifically defensible solutions.  Education of the true causes in sea level rise are necessary to allow citizens to understand the problem.  A true discussion among all parties with vested interests must be begun to decide where we should fight natural processes and protect our interests and where we must adjust to these natural processes.  As suggested earlier, adaptation and minimization of the direct impacts of coastal processes are the keys to addressing sea level rise – cutting greenhouse gas concentrations are expensive “non-solutions” that will have virtually no impact.  But, most importantly, all of this starts with education so that all participants and those with vested interests understand the problem and are equipped with viable solutions to affect a positive outcome.

                                           ABOUT A BETTER DELAWARE

A Better Delaware is a non-partisan public policy and political advocacy organization that supports pro-growth, pro-jobs policies and greater transparency and accountability in state government. A Better Delaware can be found on Facebook @abetterdelaware and at www.ABetterDelaware.org.

Why Wilmington’s Climate Change Plan is Bad for the City – Part I

From: Kathleen Rutherford, Executive Director, A Better Delaware

WILMINGTON, Del.-Recently, the City of Wilmington and the Delaware Department of Natural Resources and Environmental Control (DNREC) announced the release of a report on how Wilmington will prepare for tomorrow’s climate risks.  This follows several years after DNREC issued a similar report for the State.

The report focuses on how Wilmington will experience resilient economic growth through the development of innovative green solutions, update the City’s transportation system to be more environmentally friendly, and protect the City’s infrastructure and connect residents to resources that will protect them from climate change.  This plan is bad for the City of Wilmington owing to a number of reasons.

First, Wilmington has many other issues that are more pressing than climate change.  When adjusted for technological developments, we have experienced no significant increase in the events that kill the most people and adversely affect our lives—heat waves, cold spells, floods, droughts, hurricanes, and tornadoes, for example.  Changes in land use and a rising population, rather than increases in greenhouse gases, are most responsible for the occurrence of heat waves, floods, and droughts in Delaware.

The biggest climate-related scare posed by this report is sea level rise.  While sea level is indeed rising, it is rising for two primary reasons, neither of which are related to greenhouse gases.  Globally, sea level has been rising at a relatively constant rate of about 7 inches per century, with no observed increase due to carbon dioxide.

Indeed, we are still emerging from the last Ice Age and sea levels will continue to rise until virtually all of the polar ice caps are melted—or until we descend into another Ice Age.  But Delaware lies at the margin of the Laurentide Ice Sheet, which reached its maximum extent 21,000 years ago.  Isostacy caused the Earth’s crust to depress beneath the ice and to rise at the perimeter of the ice sheet during the glacial period.  Now that we are in an interglacial period, the station at Reedy Point is descending at a rate faster than anywhere on the East Coast.  Thus, rising sea levels in Delaware are due to melting ice from the demise of the last Ice Age and from isostacy due to the loss of the ice sheet—not from increasing greenhouse gases.

Moreover, Delaware is down more than 50% in per capita carbon dioxide emission over the last half century and is the fourth lowest state in carbon dioxide emissions overall.  Thomas Wigley, an alarmist scientist from the US National Center for Atmospheric Research, argued that if every nation on the planet followed the Kyoto Protocol, the global change in temperature would be only 0.13°F by 2050.  This would come at enormous cost but would be undetectable.  Thus, the impact of Delaware reducing its carbon footprint further would be all cost and no benefit.

But the “green remedy” to climate change in Delaware is potentially more disastrous than the supposed effects of climate change.  The proposal will make energy more expensive (so people will use less of it) and develops technology such as wind- and solar-energy programs and electric vehicles, all of which are still experimental.  Someone has to pay for this expensive technology because this so-called “renewable” energy either causes utility bills to rise drastically, or, with government subsidies, taxes rise drastically.  Businesses will suffer harm because the added cost of energy is a business expense that would either be (1) passed on to the consumer or (2) alleviated by moving to another state or country (if they can) which will cost Delaware jobs.

It is always suggested that the ‘green revolution’ will create jobs; in fact, it never does.  Bloom Energy was sold to the State legislature because it would create 900 jobs (a pittance, compared to the jobs lost by the exit of Chrysler and GM) but it has never created as many as 400, despite the cost of more than $325M to Delmarva Power ratepayers and a total take of almost $500M by Bloom Energy.  Consider Spain, where the concept of green energy has failed miserably.  After spending more than 100B€ in subsidies, their power is inconsistent at best and must be matched by energy from fossil fuel sources to keep from experiencing blackouts.  The price for energy has spiraled out of control as it has more than doubled in just the last year.

Furthermore, the argument that wind and solar can meet our energy needs would “require an outsized amount of land or offshore areas for wind and solar farms.”  Efforts in Delaware are pushing the legislature to approve wind turbines off the coast of Bethany Beach (which require a significant right-of-way to connect the energy to the grid) and an extensive buyout of farmland in Kent and Sussex counties is underway to install large arrays of solar panels.  We are trading food for energy and consequently, the cost of both will skyrocket.  Delaware is poised to become the next Spain, with respect to energy.

One of the most devastating “solutions” proposed by proponents is to have the State legislature limit utility increases.  Price controls always result in scarcity because if we force a business to charge less than the cost of manufacturing plus a reasonable profit, they won’t produce.  Green energy is an expensive proposition and can be facilitated only by large subsidies. But what is forgotten in this discussion is that wind and solar are not dispatchable and require backup energy (usually from fossil fuels) when the wind stops blowing and the sun stops shining.  Delaware presently pays $100M per year to keep the coal-fired power plant in Millsboro available to cover for the intermittency of wind and solar energy.  In 2021, the plant was dispatched for only 20 hours.  The additional expense (over that returned by selling the electricity) is paid by Delaware’s energy ratepayers.

The reliance on these intermittent energy sources to run our grid makes energy more expensive, less dependable, and will hurt beach towns, small coastal municipalities, restaurants, hotels and all other businesses and citizens who need to use energy.  So, if the plans set forth by Resilient Wilmington and the State of Delaware to address the impacts of sea level rise by focusing on limiting carbon dioxide emissions is scientifically useless and bad environmental policy, what should our coastal communities be doing?  Stay tuned for Part II to find out!

Increased Tax-Free Benefits for Military Retired: Too Little, Too Late?

From: Kathleen Rutherford, Executive Director, A Better Delaware

On July 21, 2022, Governor Carney signed SB 188-1 into law before a roomful of National Guard who will not benefit from it.

Amending Delaware Code, Title 30 will exclude an additional $10.5K of military pensions from taxable income. Lawmakers in Dover say it’s “an incentive for military retirees under age 60 to locate in Delaware,” ignoring three dozen other states where military pensions are 100% tax-free.

Many others, like Virginia, are working to phase in tax exemptions in progressive $10K increments to a maximum of $40K in 2025.

In 2004, when advocates first began beating the 100%-military-pension-exemption-drum, about 20 States were income tax-free. SB 95 was born in 2005, SB 48 followed two years later. Both ended up in desk drawers.

Senator Mantzavinos introduced SB 188 (originally 100% tax-free) in January 2022 when there were 26 tax-free states. While Delaware struggled to whittle SB 188 down to an amended $10.5K benefit immediately upon retirement, two more States came on line. On the day SB 188-1 became law, Delaware trailed 75% of America.

Furthermore, the bill excludes National Guard even though the Reserve Component (RC) was in previous versions. One “grey zone retiree” –an RC member with “20 good years,” vested for retirement but not yet 60, the age at which they draw their pension–told me he will leave Delaware so he can keep all his military pension.

Delaware’s new law is unlikely to entice anyone unless they were already coming for other reasons. Our Governor points to our excellent retiree tax benefits. Kiplinger Newsletter agrees: Delaware is the most tax-friendly place to retire.

And that is precisely the problem! With so many retirees flocking to Delaware, who will provide goods and services to this aging population? Veterans and Military Retirees (MR) provide a solution since they tend to be community-minded, physically fit, and with solid work ethics in skill sets employers seek.

Delaware ranks 15% in the nation based on the percentage of veterans (in 2019, 66,896 of them –8.8%– were veterans.) But working-age veterans only make up 18% of that total (12,053 are Gulf War II era vets). The same is true for our 9,000 MR; less than 2,000 are of “working age.”

Veteran v. Retiree. According to USC Title 38, a veteran is anyone who served on active duty for as little as 180 days and was not dishonorably discharged. The majority of veterans (81%) never reach retirement, either by their own choice or the military’s up or out system. While 85% of veterans receive Honorable discharges, a veteran may be homeless or have been terminated for medical problems or needs of the service. On the other hand, MR stood the test of time, proven worthy in the knowledge of the job, of dedication to duty, and leadership.

Civilian v Military Retirees:  Whereas retired civilians cease working, the MR is just beginning a new career. The average MR is a 38-year-old sergeant with a working spouse and college-aged kids. Officers might be 52 because they entered after college. Enlisted or officers, most MR are college educated. Eighty percent of the force are enlisted, so 80% of retirees are enlisted. The average enlisted military pension is < $35K per year, <$46K for officers.

Unlike civilians, MR earns more in their second careers than the amount of their military pension. Hence, a tax-free MR pension is a “loss leader” to attract highly skilled talent to Delaware, whose civilian income (and that of their spouse) remains 100% taxable.

Military skills are needed. Most MR excel in highly technical jobs that are in demand. Any job you can think of, there is a military MOS equivalent. But we cannot attract these skills because Delaware ranks middling to worst as a place for RM.

Kiplinger Newsletter ranks Delaware as worst in “The Ten Least Tax-Friendly States for Military Retirees”.  According to Kiplinger, our $12,500 tax-free pensions “is smaller than similar exemptions available in other states that do not fully exclude military pension.”  Our new bill does not change this fact. It only makes it available sooner.

Delaware fares better in WalletHub, ranking 26th because WalletHub included non-financial comparisons, one of which is Delaware’s low homeless vet population. This factor may apply to veterans but rarely to MR.

Too little, too late. Delaware needs 100% tax relief on military pensions now, not just an additional $10.5 tax-free advantage for those under 60.

DE’s Legislative Session: Partisan Rule Leaves Delaware Taxpayers Out!

From: Kathleen Rutherford, Executive Director, A Better Delaware

As America enters a recession and inflation reaches a 40-year high, one might think Delaware would take some of its $1 billion budget surplus to ease the burden on taxpayers and small businesses. If you ask a legislator, they might point to the one-time $300 “relief check” they graciously returned to each Delaware taxpayer. But the reality is, every opportunity the General Assembly had to provide meaningful relief that would incentivize growth and create economic opportunity — they met with inaction. That’s in stark contrast to 24 states which, during the same period of time, enacted lasting tax cuts.

According to the Tax Foundation, ten states enacted individual income tax rate reductions, six states enacted corporate income tax rate reductions, and two states permanently exempted groceries from their respective sales tax bases.

Though meaningful tax relief didn’t happen, there were a few good bills that made it across the finish line. Senate Bill 188, for example, increases the $2,000 pension exclusion otherwise available for military pensioners under age 60 to $12,500, providing an incentive for military retirees under age 60 to locate in Delaware. The bill passed in both chambers and awaits the governor’s signature.

Yet, there were numerous bills that would have helped struggling taxpayers that never saw the light of day. Consider House Bill 358, a bipartisan bill introduced by Rep. Bill Bush, D-Dover, that would have cut the realty transfer tax by 25%. Delaware currently has the highest realty transfer tax in the nation. The realty transfer tax is levied on the purchase price of the home and is usually split between the buyer and seller. According to Zillow, the median price of a home sold in Delaware as of June was $356,744. Had it passed, HB 358 would have reduced the transaction cost for the sale of such a home by more than $3,500 and collectively saved homebuyers an estimated $83 million in its first year. According to the National Association of Realtors, realty transfer taxes are regressive because the tax burden is higher for lower-income households. Additionally, increased closing costs on the transfer of existing residential property are likely to reduce the ability of new and current homebuyers to purchase a home, the association notes. “As a result, these taxes have a negative impact on housing purchases and therefore economic development.” Even if the bill passed, Delaware’s transfer tax would still be higher than most: Only Delaware, the District of Columbia, New Hampshire, New York, Washington, and Pennsylvania, have transfer taxes above 1%. Unfortunately, the bill was assigned to the House Revenue & Finance Committee where it never received a hearing.

House Bill 191 would have cut each personal income tax bracket by 10%. The bill was assigned to the House Revenue & Finance Committee in May 2021 and never received a hearing. The bill would have also cut the corporate tax rate from 8.7% to 6.1%. At the same time, West Virginia’s House of Representatives passed a bill to cut each income tax bracket by 10%.

House Bill 445 would have cut Delaware’s gross receipts tax by 50%. Gross receipts taxes are viewed as some of the most economically damaging, as they are assessed at each stage of a supply chain rather than at the final point of sale. This leads to tax pyramiding, which causes prices to rise as the cost of taxes is often shifted to the consumer. Reducing the gross receipts tax would have allowed small businesses to be more competitive and created a tax environment that benefits both businesses and consumers. Some refer to the gross receipts tax as “Delaware’s hidden sales tax” because it is applied to the business rather than the consumer. Inevitably, though, that cost is passed on to the consumer. 45 states have repealed the gross receipts tax.

Charlie Copeland, director of Caesar Rodney Institute’s Center for Analysis of Delaware’s Economy & Government Spending, writes, “In short, during bad economic times, Delaware’s hidden sales tax, [also known as] the gross receipts tax, ensures that Delaware small business owners pay among the highest personal income tax rates in the nation – taking money out of the business at the exact moment the business most needs that money.”

The bill was assigned to the House Revenue & Finance Committee where it never received a hearing.

With the state consistently bringing in hundreds of millions in surplus funds, now is the time to give taxpayers the chance to thrive, not to burden them with additional economic baggage.

Most importantly, voters must look beyond the $300 checks and realize how much of their hard-earned money Delaware’s government is keeping — not giving back — and keep that in mind in the upcoming elections.

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.

Infrastructure Investments in Delaware, Let’s Make it Count!

From: Kathleen Rutherford, Executive Director, A Better Delaware

To quote one of the most famous rappers in popular culture, when it comes to the incoming and massive federal infrastructure funding, “You only get one shot, do not miss your chance…this opportunity comes once in a lifetime.”  Delaware: We have only one chance to get this right and we have every ability to do so. The state is set to receive a minimum of $2 billion in funding for roads, bridges, public transit, electrifying the transportation system, airports, water, and other infrastructure over the next five years. As we determine how best to allocate these funds, we must think differently, and we cannot rely on the same state and local agency-led project prioritization and delivery processes that have been used in the past. Those processes do not prioritize the leveraging of private funding, nor do they weigh heavily enough the importance of economic development. This is not meant to minimize the efforts of state agencies like the Department of Natural Resources and Environmental Control or the Department of Transportation as they do have prioritization processes in place, but those processes are not broad enough and have been utilized to make the most from extremely limited resources. With $2 billion in resources, Delaware’s agencies must be more forward-thinking.

Other states are thinking big and outside the box, and we should as well. For example, California has said it will use its funds to address the top public needs associated with climate change and wildfires. This is outside of their normal project prioritization process and has been deemed a priority. We can also look to West Virginia, where they have determined they will use some funding specifically for rural programming to connect Interstate 79 to Interstate 81 — a project which has been planned for over a half-century. West Virginia has also indicated they will use some funds to address the cleanup of toxins from abandoned mines at an estimated cost of $11 billion over 15 years. On the Gulf Coast, Louisiana officials are looking to fund a high-speed passenger rail system between Baton Rouge and New Orleans — a project that has been studied for decades. Florida has allocated hundreds of millions for rural communities to improve infrastructure while simultaneously expanding the local workforce. Funds from that program are designed to encourage job creation, capital investment and the strengthening and diversification of rural economies by promoting tourism, trade, and economic development. Florida is also dedicating more than a half-billion dollars to resilience efforts to protect the state against rising seas, stronger storms, and flooding. These are just a few examples of states that are thinking big with their incoming infrastructure dollars.

Delaware must also think big. We have a tremendous opportunity to bring together the business community with the state and local governments to take a comprehensive look at how we leverage public and private investments to get the most for Delaware’s infrastructure. Delaware could maximize its share by partnering with private firms to incentivize necessary projects. Just think about that for a moment: By partnering with companies that are looking to make their own investments in and around their businesses to expand and grow, Delaware can leverage its funds to create jobs, spur economic development and expedite the timeline for major infrastructure projects. The wonderful thing about this concept is — as a small state with highly productive business-led organizations such as the Delaware Business Roundtable and the state’s 14 chambers of commerce — it would only take some courageous moves from members of the General Assembly and the Governor to create this mechanism.

Infrastructure is not and should not be a partisan issue. Delaware has done a fine job — within its resources — to put mechanisms in place aimed at increasing and spurring economic development. Some examples include the Strategic Fund, Site Readiness Fund, and Transportation Infrastructure Investment Fund. Why not build on those mechanisms? Delaware is presented with a great opportunity — one of the greatest infrastructure investments in its history — and Delawareans must be concerned about our ability to meet the moment with sound policy that benefits everybody. As much as Delaware stands to gain, poor decision-making stands to jeopardize economic and sustainable growth, tens of thousands of jobs, safer communities, the environment, and overall increased quality of life for all Delawareans. We should all want these things for ourselves, our families, and our communities. So, let’s make sure we get this right! Talk with your legislators and make sure they hear you. With the entire General Assembly up for re-election, the temptation to not focus on the big picture is greater than ever. We cannot let that happen. “Look if you had one shot, or one opportunity…would you capture it or just let it slip?”

 

Delaware Bond: It’s Time… to Improve!

 

From: Kathleen Rutherford, Executive Director

The annual Bond Bill process in Delaware is one ripe for re-development. While the Bond Commission is a bi-partisan effort in design it delivers a very basic product which is missing many explanatory details.  Text with strike-through lines, distinguishes between capital projects of last year and those upcoming for next fiscal year. With this setup, the average Delawarean would have to remember the long list of initiatives previously supported to discern which projects are old and which are truly new. What proves necessary here, are clear statistics to show contrasts in funding for groups of items from one year to the next, which MUST be supported with robust legislation to promote greater transparency around the bidding process for Bond-Bill eligible projects.

While Connecticut and Maryland have similar reporting styles for Bond Bills to that of Delaware, the first state’s City of Wilmington adds a heightened focus on quantitative data with their capital budget reporting. Seen in the publicly available budget books, dollars allocated to principal and interest expenses are noted within the context of the year’s total budget. Additionally, spending is shown for each year and tied to each department’s expenses, clearly stating increases and decreases, while also showing percentages attributed to capital projects. Thus, points of contention center around a short list of staggering increases with arguments made for how to spend funds differently.

Another layer of improvement needed for the nation’s first state is the in-the-background process of contractual reporting. With many of the Bond Bill projects the subject of several bids, minimal information is readily available to the public. Did you know that any money put out with the Bond Bill requires the project to use the prevailing wage? So, if a nonprofit needs $50,000 from the Bond Bill to help with a $150,000 project the entire project rated at the prevailing wage is 25% more expensive. What is published, consists of names, projects, amounts, and dates of approval. A thorough performance evaluation to track how long projects take to complete and how much projects are over or under budget would create better accountability and efficiency in spending taxpayer’s money. Furthermore, the screening of contractors must be more transparent, tagging those with direct political connections as such, so that exclusions are made to prevent backroom deals.

On a federal level, the US Senate Committee on Homeland Security and Government Affairs has recently taken this charge to more completely investigate the ties of contractors. In this report, a well-known firm failed to disclose interests in the supporting several pharmaceutical companies and their development of new prescription drugs. With the proper facts established, the consultant’s advice to the FDA should have been thoroughly scrutinized for bias. The new federal bill, a bi-partisan effort recently introduced at the end of March, shows the urgency by which Delaware will benefit from quickly implementing safeguards to additionally protect citizens’ tax dollars spent. And the time is tomorrow and not next year to act, as these inefficiencies which will only continue with each Bond Bill cycle, while capital needs across the state become more dire.

Apprenticeship Ratio Requirements: A Helper or Hinderance in Job Growth?

From: Kathleen Rutherford, Executive Director, A Better Delaware

 As Delaware’s trades rebound from the pandemic and billions of dollars come to the state in federal infrastructure funds, it’s time for lawmakers to free our businesses from the strict regulations that keep them from filling jobs, including apprenticeship ratio requirements.

Apprenticeship programs train skilled workers by combining classroom instruction with on-the-job training under experienced journeymen.

Many employers in Delaware want to hire and train new apprentices but are restrained from doing so because current regulations require multiple journeymen or full-time workers to also be hired — a cost many small businesses can’t afford.

For electricians, Delaware has an apprentice-to-journeyman ratio of 1:1, then 1:3. That means a company with one journeyman may hire one apprentice, but then must hire three more journeymen before it can hire its second apprentice.

Other ratios include:

 

Sheet Metal Worker                                          1:4

Insulation Worker                                              1:3

Structural Metal Worker                                 1:4

Painters, Construction and Maintenance 1:3

Asbestos Worker                                               1:3

Industrial Maintenance Mechanic              1:3

Plumber/Pipefitter                                             1:3

Electrician                                                             1:3

Precision Instrument Repairer                     1:3

Glaziers                                                                   1:3

Construction Laborer                                        1:3

Dry Wall Finisher                                                1:3

Hard Tile Setter                                                   1:3

Roofer                                                                      1:2     

Sprinkler Fitter                                                    1:1

Child Care Worker                                              1:1

Elevator Constructor                                         1:1

 

Most trades require three or even four journeypersons for each apprentice. These ratios cripple contractors’ ability to fill the jobs that so many Delawareans desperately need.

Associated Builders and Contractors Delaware, the trade association that represents the construction industry, has requested that the secretary of labor reduce the apprentice ratio to 1:2 for all trades for 24 months. Doing that, the group argued, would allow construction companies to replenish the workers that have been lost throughout the last decade.

New Jersey and Maryland have 1:4 ratios for all trades, something Delaware’s unions and labor department have pointed to in response to the request to lower Delaware’s ratios.

Other states, like Montana, are taking action to support small businesses by reducing ratios.

In Nov. 2021, Montana’s governor, Greg Gianforte, reduced the apprentice to journeyman ratio 1:1 across the board. He emphasized that reducing the ratio would preserve workplace safety and training standards while also making Montana more competitive with our neighbors.

Industry leaders and experts praised the move, arguing it will especially benefit small businesses in rural areas where it is more difficult to recruit additional journeymen to supervise apprentices.

“For too long, unnecessary red tape has tied up employers looking to offer apprenticeship opportunities and build a more highly-skilled workforce,” Gianforte said at the time. “With this commonsense rule change, we can dramatically increase apprenticeship opportunities for hardworking Montanans to meet current and future workforce needs.”

Gianforte faced fierce opposition before enacting the rule change.

Critics argued it would be impossible to oversee and safely train if the ratio was decreased, despite Wyoming allowing two apprentices per journeyman, North Dakota allowing three apprentices per journeyman and Idaho allowing up to four apprentices per journeyman.

In those states, builders continue to safely build houses and staff job sites with even more flexible regulations than those enacted by Gianforte.

Because of decisions like that, Montana’s construction sector grew 12.3% between February 2020 and February 2022. Data released by the U.S. Bureau of Labor Statistics in March 2022 shows that 34,700 Montanans were employed in the construction sector in February, up from 30,900 in February of 2020.

In Montana and across the country, reducing ratios has proven to lower costs and enable companies to expand apprenticeship opportunities to new entrants to the trades at rates commensurate to their ability and experience.

Another reason to do it: Powerful labor unions benefit significantly from higher apprentice to journeyman ratios, while small businesses suffer.

Unions are comprised of many skilled workers across multiple jobsites and employers, giving them a larger pool of journeymen who can oversee an apprentice, making it easier for them to comply with apprentice-to-journeyman ratios than it is for small contractors who would have to hire more journeymen to gain an apprentice.

This gives unions a significant advantage when competing against small businesses in a short labor market.

Additionally, when companies are hiring, workers can still enter an apprenticeship program if they are not selected by the company due to being over their ratio limit.

Those apprentices are considered “trade extension students” and are able to attend class at night like apprentices and get credit for that, but they can’t count their on-the-job training hours which they are earning during the day and are needed to complete the programs.

Those trade extension students are in the same classes as apprentices from the companies where they work, but they don’t get the same credit for their work hours during the day because they aren’t considered apprentices.

That puts them at a career-altering disadvantage compared to their apprentice counterparts, and everybody loses. This is just another example of a simple problem that could be fixed by reducing ratios.

According to the Bureau of Labor Statistics, the construction industry needs 2.5 million workers to satisfy the demand created by federal infrastructure legislation.

Prior to the Infrastructure Investment and Jobs Act, Delaware’s Department of Labor identified construction as the third fastest-growing industry throughout the next five years.

Without the infrastructure bill, the department estimated the industry would need to immediately fill 5,380 positions to meet demand. That number is significantly higher now.

One way Delaware can fill that void and maintain a competitive edge over neighboring states is by following Montana’s lead and reducing apprentice to journeyman ratios.

Doing so will be especially important as the state seeks contracts to complete more than $1.2 billion worth of infrastructure improvements authorized by the federal infrastructure bill.

Delaware’s Regulations, A Barrier to Business

From: Kathleen Rutherford, Executive Director, A Better Delaware

Delaware businesses and workers are subject to some of the most stringent regulations in the nation, leading to slower economic growth, less competition, and higher costs. The result is that companies able to afford regulatory compliance are often large corporations — a barrier to entry for Delaware’s small businesses.

According to a Feb. 2022 study by the Mercatus Center at George Mason University, Delaware has 95,976 regulatory restrictions on the books, ranking 30th in the United States overall.

When considered proportionally to the state’s workforce, however, Delaware ranks first in the nation for most regulations per capita. According to a 2019 study from the Mercatus Center, Delaware far exceeds other states with 11 words of regulatory language per Delaware worker.

In fact, the Center found that it would take 374 hours to read the entire Delaware Administrative Code.

Given those statistics, it’s no wonder that the CATO Institute cited Delaware’s expanding regulatory code as one reason the state has fallen from the top of economic freedom indexes.

“Delaware has lost tremendous ground during the past 20 years,” a CATO Institute analysis says. “It now ranks in or near the bottom third on all three dimensions of freedom, earning its 44th place by all-around poor performance.”

One area of particular concern is the over-regulation of occupational licensing, wherein trained professionals are required to get permission slips from the state to begin working.

A 2015 report published by the Obama administration warned that the current licensing regime in the United States creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job.

“There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines,” the Treasury Department report says. “Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing. In some cases, alternative forms of occupational regulation, such as state certification, may offer a better balance between consumer protections and flexibility for workers.”

The report further found that more than 25 percent of workers in the United States require a license to do their jobs, with most workers licensed by the states. That’s a five-fold increase since the 1950s.

Delaware is no exception. According to a 2018 Institute for Justice study on the economic costs of occupational licensing, 15.15% of workers in Delaware are required to be licensed by the state and 8.73% are required to have additional certification.

While licensing requirements do, in some cases, offer health and safety protections to consumers and employees, many regulations simply hold small businesses down and prevent upward mobility for trained workers.

So, what can Delaware do to expand economic freedom and unleash workers from burdensome and unnecessary regulations?

One might look to a proposal in Tennessee, where a whopping 30% of workers require licenses to enter the profession of their choice, collectively costing them $279 million annually in new licenses and $38 million in license renewals.

There, the Beacon Center of Tennessee proposed a four-step plan to reduce the regulations’ drag on the state’s economy:

  1. Occupational licensing should be curtailed or eliminated on low-income professions.
  2. Tennessee should eliminate occupational licensing for professions with no measurable and realistic threat to consumer safety.
  3. Policymakers should strictly control the extension of occupational licensing to new professions
  4. Improve public access to data on licensed occupations so researchers can better measure the costs and burdens of licensure and how many Tennesseans

These common-sense steps would work as well in Delaware as they would in Tennessee and would do nothing to eliminate licensure requirements that legitimately protect the health and safety of consumers and workers.

Lack of Focus Not Funding: Delaware’s FY23 Budget

From: Kathleen Rutherford, Executive Director, A Better Delaware

WILMINGTON, Delaware – In Governor John Carney’s budget presentation, he proposes a whopping $4.9B operating budget – 4.6% higher than the unprecedently enormous FY22 budget. Top spending priorities include education and workforce development –– two areas that have had marginal results despite increased funding year over year. Absent were any plans to reduce Delaware’s unfunded pension debt, reduce healthcare costs, or significant tax relief. More focus on delivering effective outcomes rather than increased spending would be more beneficial to Delawareans.

EDUCATION: Increased spending on education is not producing better results for our students. Spending per student in Delaware has increased by $5,000 ($13,000-$18,000) over the past eight years, while test scores have stagnated or declined. This year 26% of students tested from grades 3 to 8 were proficient in math, and 41% of students tested were proficient in English. The current proposed education budget focuses on spending – 10% of the allocation on infrastructure and approximately 70% for staffing following Delaware’s 80-year-old funding method.

Added to that pile of cash is Delaware’s supplemental federal funding that amounts to nearly $411M through the Elementary and Secondary School Emergency Relief Fund (ESSER). The DOE (Delaware Department of Education) can spend funds on programs to address learning loss due to remote learning during the pandemic. Our neighbors in Virginia spent $12,216 per pupil in the 2020-2021 school year, with 69% of their students proficient in reading and 54% proficient in math. Delaware’s educational focus is missing the mark.

WORKFORCE DEVELOPMENT: Delaware is not getting enough people back to work. Our state ended 2021 with 5.1 % unemployment, landing us in the bottom third of all states with 6,500 fewer people employed than in 2019, pre-pandemic. The Governor’s announcement of $50M in workforce development will not work if the plan does not focus on training for jobs that need to be filled now. Georgia shows us how to fill worker shortages without extra funding. This state had the fifth lowest unemployment rate in 2021 (2.8%) in the nation. Its Quick Start workforce training program is credited with getting people back to work by offering skills-based training to qualifying businesses at no cost, passing savings along to business owners who can reduce and, in some cases, eliminate training costs.

Helping the 75% of Delawareans who lost jobs in the early months of the pandemic who had a 12th grade or below education with only 49% of 12th graders proficient in reading and 28% proficient in math in the 2020-2021 school year would be a good place to start.

HEALTHCARE: Delawareans have suffered from high health care costs and limited access for years, something that the FY23 budget does not properly address. Medicaid is approximately 25% of our state’s budget and is expected to grow larger. Over half of Delaware’s Medicaid funding comes from the federal government, but that money is expected to shrink in the future, placing the burden on Delaware taxpayers. Delaware’s health care costs are already one of the highest per capita in the nation. The best path forward that Delaware could take would be to abolish the Health Resources Board. The Governor’s office and the Delaware Prosperity Partnership could work together with strategic funds to incentivize and entice new hospital systems to come to Delaware. This would improve access to health care at reduced costs, with quality outcomes.

PENSION DEBT: How long is our Governor going to ignore the elephant in the room? Year after year, Delaware’s ballooning pension debt is not addressed in the budget. Delaware’s overall financial condition worsened by 21% during the onset of the pandemic, mostly because of post-employment liabilities. A Truth in Accounting report from 2021 revealed that Delaware still has $1,819,158,000 of unpaid pension debt. With more than an $800M surplus, it is time to pay down this massive debt.

TAXES: While Governor Carney’s budget did include a 2021 unemployment insurance benefits tax exemption, this does nothing to help the workers who never took a day off during the pandemic or struggling small businesses. A 2022 study by the Tax Foundation shows that Delaware ranks dead last in corporate tax burdens and 44th in individual income taxes. With a burden of $31,300 per taxpayer. Several tax relief bills have been proposed this year which would make a 10% across-the-board cut to the state’s personal income tax rates; would reduce the corporate income tax by 30% and slash the gross receipts tax – sometimes referred to as Delaware’s hidden sales tax – by 50%. These proposals will collectively allow the taxpayer to retain more than $282M this year and more than $321M next year.

In the coming weeks, the Joint Finance Committee will conduct hearings where the Executive Branch will present their spending priorities which will eventually culminate as the General Fund Budget to be approved by the end of session on June 30th. Please contact your legislators in Dover and let them know why it is important for them to use these unprecedented resources more efficiently, enabling tax relief for you and your family.