Blogs and Articles

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.

Happy New Year!

From: Kathleen Rutherford, Executive Director, A Better Delaware

With a new year here, many of us have made plans for how to make 2022 a better year than 2021. At A Better Delaware we have done the same. This year we will be working harder than ever pursuing our mission of advocating for deregulation, responsible spending, and improved government accountability and transparency. We’ve created a list of resolutions for Delaware’s leadership that will help us fulfill our mission.

More Transparency

Delaware state government tends to minimize or even diminish the role of the citizen in decision-making, to the detriment of its constituency. Without transparency and accountability to influence better decisions, our officials are free to pass legislation to their own benefit, instead of that of its people.

A better way: Allow for maximum transparency by livestreaming the session (even after resuming full-time in-person), allow public access to session, file bills publicly with ample time for public and official review, and no longer pass important pieces of legislation overnight on the final day of session.

Improved Accountability

It seems every week we read new headlines about a Delaware politician engaged in a scandal that puts their own interests above those of the people, often with no consequences.

A better way: Formation of an independent advocate and guardian of legislative ethics in the form of an Office of Legislative Ethics. This commission should be made up of respected members of the community with expertise in law and legislative ethics who volunteer to serve.

End Corporate Welfare

Delaware’s game of corporate welfare is “a hell of an expensive lesson picking winners and losers,” and Delawareans are clearly the losers. Whether it was on the Delaware taxpayer’s dime or through federal relief funds, we saw many shortcomings in 2021.

A better way: Delaware lawmakers and leadership should reconsider their past failings and learn from their mistakes when approaching economic development via corporate incentives. After all, the definition of insanity is doing the same thing repeatedly and expecting a different result. Instead, we must attract businesses by having a better business climate with lower taxes and less regulation.

Develop a Strong Workforce

Delaware is now tied for 33rd overall among states in its unemployment rate, according to the U.S. Bureau of Labor Statistics. This is due in part to Delaware’s ineffective workforce development programing. There are several job training programs that do not connect planning with the training. Therefore, skills provided for professions do not always lead to gainful employment. Lack of information about how to access training is an obstacle for participation. Program evaluation is nonexistent making it impossible to measure performance.

 A better way: Delaware must move from a patchwork of semi-connected programs and services to building out the components of an integrated ecosystem which includes statistical evidence to support investments its workforce system and analysis of workforce training effectiveness, and outcomes. Only then will Delaware improve its standing in business competitiveness and economic growth.

Reform Individual and Corporate Taxes

According to the 2022 State Business Tax Climate Index from the Tax Foundation, Delaware is ranked 50th in the nation for corporate taxes and 44^th in the nation for personal income tax. We need to be kinder to our businesses and citizens.

A better way: With $950M surplus in our state’s budget, there should be no tax increases. Rather reduce corporate tax to retain and encourage business development in our state. Lower Delaware’s individual income tax rate and put money back in taxpayers’ pockets. Both tax reductions will encourage economic growth.

This may be a relatively short list in comparison to the many issues we at A Better Delaware see in the First State, but we will continue to tackle every issue that falls under our platform in 2022. We hope you’ll join us.

Our resolution is simple: continue to do what we can to fight for Delaware taxpayers and businesses and make Delaware a better place to live, work, and start or own a business. Happy New Year! We look forward to advocating for and with you in 2022.

Oversight within the Delaware Legislature is Overdue

By: Kathleen Rutherford, Executive Director of A Better Delaware

It seems every week we read new headlines about a Delaware politician engaged in a scandal that puts their own interests above those of the people, often with no consequences. The recent failures of either Chamber to take serious action with two legislators, who were both arrested and charged with assault, is a true reflection of the lack of accountability within our state government.

Delaware’s laws surrounding transparency and accountability are notoriously weak. Rankings from the Center for Public Integrity gave Delaware an F for our lack of laws and systems deterring public corruption, placing us 48^th among the 50 states. And it shows.

Currently the main authority to combat corruption in the state is the Delaware Public Integrity Commission. This is a seven-member committee (with one current vacancy) that only employs one licensed attorney. The core focus of this group is to ensure that ethics laws are properly administered for the Executive Branch, and financial disclosure laws/expense reporting laws are followed by all three branches. While this group should be capable of monitoring government behavior, their 2020 report indicates that they only conducted two investigations over the entire year. To make matters worse, the committee exempted itself from its oversight, making it extremely difficult to monitor its efficiency. Delaware is said to operate on an “honor system” in regard to public ethics laws, meaning most violations are not looked into unless an outside source informs the committee.

Having a committee that is not actively searching for misconduct is a hinderance to Delawareans since this makes individuals believe that they will not be prosecuted for their misconduct unless they are caught red handed. The solution for this would be to model our system after other states that are better suited to fight corruption. While still having room for improvement, Alaska ranked 1^st in the nation in state integrity. This was largely due to easily accessible political finance data, and strict ethics rules that are properly enforced on the executive and legislative branches. The main duty of the Alaska Select Committee on Legislative Ethics is to uphold the Alaska Legislative Ethics Act and maintain trust in the institute of government. This act does a better job of outlining specifically how these ethical breaches should be handled, something that Delaware Title 29 does not do.

The people of Delaware need an independent advocate and guardian of legislative ethics in the form of an Office of Legislative Ethics. This commission should be made up of respected members of the community with expertise in law and legislative ethics who volunteer to serve.

The OLE should be funded sufficiently to support a staff capable of performing rigorous investigations, and unlike current law, anyone should be able to file a complaint anonymously to protect and encourage whistleblowers.

The public also deserves more insight into the personal finances and business interests of individual legislators to assess potential conflicts of interest. The forms currently used provide little meaningful information and are not readily accessible to the public. That needs to change.

We also need to reform our freedom of information law to broaden public access to important records and keep public officials honest and accountable. First and foremost, we need to close the loophole in the public records law that is designed to keep legislators’ official correspondence secret. Executive branch and municipal officials are subject to our open records laws, but members of the legislature conveniently exempt themselves.

Our state government is also rife with conflicts of interest. Many legislators moonlight with organizations that receive funding from the state or get hired by those organizations after having played roles in securing funding for them.

Any legislator who works for an organization that receives a significant amount of their funding from the state should not be allowed to sit on the budget writing committees or those that author the Bond Bill or Grants-in-Aid bill. We should also have a cooling off period that prohibits these organizations from hiring legislators until after they have been out of office for two years.

Finally, the pandemic showed that we can provide more visibility into the inner workings of state government through online streaming. Every committee hearing and floor activity should be video streamed and archived so members of the public can see with their own eyes what goes on in the statehouse.

Transparency and accountability must be key tenets of state government to deter corruption and generate more confidence in our political system. Delaware does not live up to the high bar we must set for our public officials – not even close. These proposals would be an excellent step forward in reminding politicians that they work for us.

Delaware’s Workforce Development Plan Needs More Work

From: Kathleen Rutherford, Executive Director, A Better Delaware

Of the $1.9 trillion American Rescue Plan Act (ARPA) signed by President Biden on March 11, Delaware received $925 million to invest in one-time projects. One of the three largest projects in Delaware is a $50 million dollar investment in workforce development with a focus on job training.

While investing in jobs training seems like a noble and smart one, it leaves many questions unanswered. The primary issue with Delaware’s workforce development plan is that there is no information about how the money will be spent. Governor Carney stated of the allocations that “we’re focused on investments that will build on the strengths of Delaware’s world-class workforce and support Delaware families and businesses who were most affected by the COVID-19 pandemic. These workforce development programs will help Delawareans develop the skills they need to succeed in a 21st century economy.”

The goals Carney provides of “building on strengths” and “developing skills” are ones that cannot be measured, and we don’t know what time frame it should be measured over, as neither program has a specified end date.

The jobs training program will be broken into two primary components – the expansion of the Pathways Program and Forward Delaware. The Pathways Program focuses exclusively on students and is receiving one-third of this allotment – an investment in Delaware’s future that does not help the approximately 26,000 unemployed adults who are struggling to pay their bills right now.

Pathways began in 2015 serving about 20,000 high school students and with this funding will grow to serving 32,000 middle through high school students. An additional $8.3 million will be added to the program through the state budget.

Forward Delaware was founded in August 2020 and is managed by the Delaware Prosperity Partnership. It provides 20-week certification courses (directed toward those who became unemployed due to the pandemic) in the fields of healthcare, construction/trades, hospitality/food service, logistics and transportation, and computers/IT. In its first year, about 3,000 Delawareans took advantage of its offerings but only 1,476 – less than 50 percent – completed a training course. The initial investment in the program was more than $15 million. The certifications that can be acquired through Forward Delaware will make workers eligible for higher-paying, more specialized professions, but it’s a large investment few individuals have used and the Prosperity Partnership openly admits it has not tracked hiring details, and simply reports that “the fact that Forward Delaware exists is a good thing.”

A lack of alignment between workforce development and the training itself are one of the five major pitfalls of workforce development success – and the above statement proves it’s at least one of the reasons this initiative in Delaware is likely to fail.

A Workforce Innovation and Opportunity analysis has evaluated Delaware’s workforce development programs and noted one of its top weaknesses as providing skills and training for professions that may not lead to self-sufficiency.

According to the Education Commission of the States, Delaware does not have a policy or process in place to identify high-demand occupations. Without any data to support which industries need skilled workers, Forward Delaware may be missing out on training workers for areas employers need the most – and those that may produce the best outcomes for trainees.

Several other states have dedicated workforce training programs that put Delaware to shame. South Carolina’s Department of Employment and Workforce utilizes several different programs that give individuals the choice to find a specific program that works well for them. With so many different options, there are ample opportunities to get individuals back into the labor force once they have been properly trained. On the other side of the spectrum, there is Georgia QuickStart. This company has a single training program that can provide customized job training, which makes it easier to implement on a state-wide level. The program receives 44 percent of its funding from the state and has managed to create over one million jobs since its founding in 1967

In a more recent report, Delaware was ranked seventh out of eight states  in the mid-Atlantic region in the 2021 Regional Workforce Development Rankings – showing it’s one of the worst at providing a strong workforce development ecosystem. With a new failing job training program, it doesn’t seem like Delaware’s on track to move up the ladder.

Delaware must move from a patchwork of semi-connected programs and services to building out the components of an integrated ecosystem which includes statistical evidence to support investments its workforce system and analysis of workforce training effectiveness, and outcomes. Only then will Delaware improve its standing in business competitiveness and economic growth.

The Last Mile: Can Delaware Deliver?

From: Kathleen Rutherford, Executive Director, A Better Delaware 

On Sept. 16, 2021, Delaware lawmakers unveiled a plan to address a much-needed infrastructure improvement project – implementing high-speed broadband across the entire state. This $110 million investment was made possible with funding from the American Rescue Plan Act and if completed will make Delaware the first in the nation to make wired broadband available to every home and business in the state.

The need for statewide high-speed broadband was made glaringly obvious at the onset of the pandemic when many residents were forced to rely on internet service to work, learn, attend doctor’s appointments, worship, and communicate with friends and family.

Delaware is ranked first in the nation for overall internet speed but ranks 24th in rural access. Currently, 11,600 Delaware homes and businesses entirely lack broadband access. Prior to the pandemic, 16 percent of Delaware’s workers relied on internet use daily for teleworking, while after the onset of the pandemic, 45 percent relied on it. “Internet deserts” were quickly revealed, especially across western Sussex County.

Knowledge of these deserts is nothing new though, and is something the state has been working on since 2019 when it entered a $2 million contract with Bloosurf, a Maryland-based internet service provider which is able to serve areas not covered by the area’s leading providers, Comcast and Verizon, or not covered for a reasonable price. The upfront installation fees were paid by the state and contracts were offered for as low as $30 for low-income households with children.

A continuation of this type of assistance happened in October 2020 with the help of the CARES Act which funded Connect Delaware – a $20 million program which allowed Bloosurf, Comcast, and BridgeMAXX to expand service to 517 homes and increase internet speeds for 350 existing users to better serve students.

Connect Delaware also subsidized internet service for low-income students (typically with internet hotspots) who had suddenly come to rely on high-speed internet for their education, and a total of 25,789 were provided through AT&T, Comcast, Medicom, and Verizon. The Department of Technology and Information (DTI) managed the program and provided support throughout.

While the process seems to have run smoothly, it’s possible funds and resources could have been more thoughtfully allocated, but with the time constraints of the CARES Act, all funds had to be used by December 31, 2020.

Currently, the $110 million allocated should cover all expenses with some change to spare – according to a strategic plan developed in late 2020 and issued in May 2021, the project is estimated to cost $75 million. At this time, no official plan has been launched and the DTI website suggests that details regarding the plan will be released sometime in October.

Maryland is already a leader in broadband when it comes to overall connectivity, with service accessible to more than 95 percent of its residents with the goal of reaching 100 by 2026. Their goal is significantly more expensive, with an expected price tag of $300 million. Many other east coast states are similarly positioned with New Hampshire, New York, Massachusetts, Connecticut, and Virginia residing in the top 10 states for connectivity.

One of the main differences between these states and Delaware is that they all have either passed legislation or have legislation pending that addresses broadband issues. It’s important for Delaware to develop one as well to address the project comprehensively with specific goals, procedures, and authorities.

With the proper guidelines in place, getting to 100 percent connectivity is a reasonable goal. The strategic plan estimates that the number of Delawareans without access to high-speed broadband could be brought down by approximately 87 percent if providers were to extend their existing networks just half a mile from their current cutoff points. This approach is called “edge-out.” This approach lends itself to utilizing multiple means of connecting through cable, fiber, fixed wireless, mobile, wireline DSL, and satellite broadband. The plan also suggests using the funding to replace old and failing equipment to ensure that the investment is something that will benefit all Delaware residents for years to come.

The resiliency and success of broadband service and access in in our state depends on the utilization of  multiple technologies and a competitive marketplace which will ensure fair pricing and more choices for all Delawareans.

Is the Diamond State Port a Sinking Ship?

From: Kathleen Rutherford, Executive Director, A Better Delaware

The Port of Wilmington on paper should be a profitable industry that brings Delawarean’s many maritime jobs. It is a top importer of fresh fruits and is in a favorable geographic position to allow truckers easy access to the nations interstate system. Despite this, the state-run Diamond State Port Corp was operating in the area with a $10 million loss annually. Their solution was to lease the port in 2018 to Gulftainer, a port operator based out of the United Arab Emirates. This decision was celebrated at first, but it is currently unclear if the $600 million deal  will turn profitable.

According to Gulftainer, it has continually lost money over the past three years.  Yet according to the American Journal of Transportation, Wilmington Port’s revenue increased by 50 percent year over year, including with the pandemic. This lack of cash by Gulftainer  is even more troubling when observing that they received $7 million from the federal government’s PPP program as well as a line of credit through their mortgage worth up to $350 million. Why has our state investment been delayed compared to other ports,  when food shipments seem to have held up well and financial resources abundant?

Additionally during the peak of the pandemic the State allowed for the company to postpone investing an additional $250,000,000 into the construction of a new container terminal. State permits for the facility had been approved albeit through questionable legislation which gave Gulftainer an advantage against other competitors. Senator Thomas Carper used his congressional influence to insert terms into the America’s water Infrastructure Act of 2020 (which he co-sponsored) that were specifically favorable to the company. These provisions include allowing Gulftainer to dispose of dredged material at federal dredge disposal sites for almost no cost and changing the environmental rules surrounding the Edgemore former chemical site by allowing for development permits to be issued for the port without the environmental studies that are typically required.

Delaware Secretary of State Jeffery Bullock with the help of our legislators made an amendment to Gulftainers original lease agreement. This amendment has effectively lowered the annual fee that Gulftainer pays to Delaware in exchange for the erasure of debt that Delaware owed to the company. The debt was revealed to be $13,400,000, but they failed to disclose the interest rate that Delaware was paying on the loan. Without this information, it is impossible to tell if this was a move made in the taxpayers favor or a money saving maneuver for the state.

There was also an attempt to gain access to emails sent between Gulftainer officials and the executive director of the Diamond State Port Corp that were denied. Refusing to make this information public knowledge may be indictive of either wrongdoing or an even an unfavorable economic forecast of the company’s future.

The Port of Wilmington has the potential to become one of Delaware’s greatest assets. It remains to be seen if Gulftainer will be able to turn the port profitable, with its current lack of financial management. It is clear however that offering Gulftainer favorable treatment and failing to publicly disclose all its dealings are troubling business practices by our State that should be questioned. Continued lack of accountability and transparency within our state government will erode public trust and discourage economic growth in Delaware.