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What’s New

INELIGIBLE MEDICAID ENROLLEES ARE COSTING TAXPAYERS BILLIONS

From: The Foundation for Government Accountability

KEY FINDINGS

Overview

While initially meant as a program for the truly needy, Medicaid has bloated into a massive welfare program for millions of able-bodied adults dependent upon the government.12 Medicaid has rapidly become the largest line item in state budgets, reaching more than $700 billion per year.34 More than 89 million people are now dependent on the program, nearly two and a half times as many as in 2000.567 Unfortunately, as Medicaid has grown, so has its mismanagement.

Today, more than one in five dollars spent on Medicaid is improper.8 Virtually all improper payments are due to eligibility errors, administrative oversights, or outright fraud.9 And because eligibility errors make up more than 80 percent of improper payments, countless individuals are receiving Medicaid benefits for which they are not eligible.10

However, never-before-released data shows the improper payment crisis is even worse in several states. Improper payment rates have reached staggering proportions that threaten the sustainability of the Medicaid program.

While the national improper payment rate for Medicaid is nearly 22 percent, in some states the situation is far more dire.11 Never-before-released data from state Medicaid agencies reveals that improper payment rates have reached as high as nearly 50 cents for every Medicaid dollar spent in some states.

Equally concerning is that an overwhelming number of improper payments are due to eligibility errors, signaling that these are not simply administrative blunders—but rather serious situations of countless enrollees receiving resources for which they are not eligible.

Ohio

Ohio’s Medicaid program is nearing insolvency. The program now costs taxpayers nearly $32 billion per year—almost double what it cost a decade ago and more than four times what it cost in 2000.12131415 These skyrocketing costs have crowded out funds for all other state priorities, as Medicaid now consumes more than half of Ohio’s entire general revenue budget.16

The pandemic has only made these problems worse, with enrollment spiking by more than half a million people since February 2020.17 As a result, Ohio’s Medicaid program has been plagued by major budget shortfalls, leading to further cuts.1819

Coupled with Ohio’s Medicaid enrollment and spending crisis is an equally pernicious improper payment crisis. Ohio’s Medicaid improper payment rate is an astonishing 44 percent, more than twice the national average.20 Virtually all of that improper spending—98 percent of it—was caused by eligibility errors.21 At this pace, Ohio’s Medicaid program is on a clear trajectory towards calamity.

Illinois

Illinois has also struggled with a rapidly growing Medicaid program. The program now costs taxpayers nearly $29 billion per year—more than double what it cost a decade ago and nearly four times what it cost in 2000.22232425 Enrollment has swelled to nearly 3.9 million people—growing by more than 750,000 new enrollees in just one year.26 As a result, Illinois’s Medicaid program now consumes nearly one in every three dollars in the state budget.27

But much of this spending is improper. The state’s official improper payment rate sits at more than 37 percent—far above the national average.28 A whopping 95 percent of these improper payments are due to eligibility errors.29

Missouri

As the Show-Me State gears up to implement ObamaCare’s Medicaid expansion, the state’s Medicaid program is already on fragile footing. Before expansion, Missouri’s Medicaid program cost taxpayers nearly $11 billion—nearly three times what it cost in 2000.30313233 The program already consumed nearly 40 percent of total expenditures—the highest level of any non-expansion state in the country.34 With Missouri implementing ObamaCare expansion effective October 1, 2021, these budget issues are only going to worsen, as expansion could add nearly 600,000 more enrollees to the program.35

Much of this spending growth has been driven by waste, fraud, and abuse. Nearly one in three dollars Missouri spends on Medicaid is improper, with roughly 70 percent of those improper payments driven by eligibility errors.36 As Missouri implements ObamaCare expansion over the coming months and years, it can only look forward to even greater improper payments in the future.

Kansas

By rejecting ObamaCare’s Medicaid expansion, Kansas has seen lower enrollment and spending growth than many states, helping it better weather the COVID-19 pandemic. But even without expansion, the cost of Kansas’s Medicaid program has more than tripled since 2000, reaching nearly $4.4 billion in 2021.373839 Medicaid now consumes nearly one-fifth of the state’s total expenditures.40

But nearly 28 percent of Kansas’s Medicaid spending is improper—with an eye-popping 99 percent of these payments attributable to eligibility errors.41 Democrat Governor Laura Kelly has repeatedly lobbied to expand Medicaid under ObamaCare, which would add at least 262,000 more able- bodied adults to the program and undoubtedly drive this improper payment rate even higher.42

It is no coincidence that the two states with the highest publicly available improper payment rates have expanded Medicaid under ObamaCare. In fact, the national improper payment rate in Medicaid has nearly quadrupled since ObamaCare expansion was first implemented.43

Federal Medicaid spending has grown by more than $200 billion since 2013—an increase of 80 percent.444546 Improper payments make up more than 40 percent of that growth.4748495051 Medicaid expansion not only coincided with the spike in improper payments, but were a key cause of it. The Obama administration paused annual reports auditing Medicaid spending during the rollout years of Medicaid expansion, both delaying and concealing critical information regarding improper payment rates.52

In California, auditors found nearly 450,000 Medicaid expansion enrollees who were ineligible or potentially ineligible.53 In Ohio, federal auditors found that nearly 300,000 of the state’s then-481,000 expansion enrollees were potentially ineligible, undoubtedly explaining why Ohio has one of the highest improper payment rates in the nation.54 Similar audits and reports in other expansion states—such as Colorado, Kentucky, Louisiana, Minnesota, New Jersey, and New York—have reached equally alarming conclusions.55565758596061

But as bad as Medicaid expansion’s effect on improper payment rates is, we still do not know the full scope of this out-of-control crisis.

The True Extent of Improper Payments is Still Hidden.

In 2021, improper Medicaid spending hit a record high.62 But official reports may only scratch at the surface of waste, fraud, and abuse in the Medicaid program, as the true extent of improper payments remains hidden.

In 2020, the U.S. Department of Health and Human Services suspended the annual reports auditing Medicaid spending for 17 states, including large expansion states like California, Massachusetts, and New Jersey.63

Worse yet, Congress imposed federal Medicaid handcuffs on states in 2020 that provided a temporary boost in federal Medicaid funding in exchange for states agreeing not to remove ineligible enrollees from their Medicaid programs.646566 As a result, millions of individuals are now locked into coverage for which they are no longer eligible.6768

Medicaid enrollment has grown by an estimated 18 million people since February 2020.69 State data reveals that more than 90 percent of that growth has been caused by states’ inability to remove ineligible enrollees. This disastrous arrangement has further muddied the waters of determining accurate improper payment estimates.

BOTTOM LINE: Policymakers should work to reduce improper payment rates and improve transparency.

States do not need to wait for the Biden administration to act in order to get improper Medicaid spending under control. State policymakers have a wide variety of tools at their disposal to reduce improper payments and improve transparency.

FIRST, states should remove the Medicaid handcuffs imposed by Congress. By rejecting the temporary extra funding, states can regain control over their Medicaid programs, conduct redeterminations and renewals, and remove ineligible individuals from their programs.

SECOND, states can implement Medicaid program integrity measures, such as cross-checking Medicaid enrollees against death, employment, wage, and residency records. States can also verify Medicaid applications received through the ObamaCare exchange and prohibit individuals from self-attesting to eligibility without verification. In 2021, Arkansas and Texas enacted several of these commonsense program integrity reforms to reduce Medicaid improper payments and preserve Medicaid resources for the most vulnerable.7071

FINALLY, states can require their Medicaid agencies to submit annual reports on improper payment amounts and causes in order to better monitor and address the issue.

It is long past time for policymakers to ensure that Medicaid is preserved for truly needy Americans—not for waste, fraud, and abuse.

APPENDIX: STATES’ MOST RECENT IMPROPER PAYMENT RATES (2019) 

 

Defunct literacy council money goes to Kent, Sussex programs

From: Town Square Live!

Money allotted to a defunct literacy council has been going to to family literacy programs at three Delaware high schools, via the Delaware Department of Education.

The issue of where $278,000 listed in state budgets was going came up in Tuesday’s meeting of the Joint Legislative Oversight and Sunset Committee.

The committee’s staff said that the cash continued to be allotted to the Interagency Council on Adult Literacy, which hasn’t met since June 2015.

The committee asked the staff to pursue what was happening to the money designated for the council, also known as ICAL.

The Sunset Committee reviews state board, councils and commissions to make sure they are needed. If they are, the committee considers how to improve or support them.

“The purpose of the ICAL monies was to fund the two-family literacy programs in the state – Polytech Family Literacy and Sussex Tech Family Literacy,” said Alison May, spokeswoman for the Delaware Department of Education. “Each year these programs have used this money to support these family literacy services.”

The Polytech and Sussex Tech programs are valuable resources for English Language Learner families in Kent and Sussex counties she said.

The results are documented in the Adult Education Annual Reports, which she provided.

The reports say ICAL, and some federal funding is being used for programs that are designed to improve literacy levels of young children by providing instruction to parents. The programs combine adult basic education, parenting education, early childhood development activities for children and interactive literacy programs.

Classes are taught in schools, libraries and public housing authorities.

In 2017, 2018 and 2019, the reports say, Polytech High School and Sussex Tech High School used the literacy money.

In 2020, Polytech, Sussex Tech and Christina High School are listed under the literacy funding, with Polytech and Sussex Tech receiving the ICAL money and Christina receiving federal Dual Generation funding.

In 2021, three family literacy programs are listed. Again, Polytech and Sussex Tech received ICAL money and Christina got federal funding.

Delaware Restaurant Association issues dire plea for help

From: Delaware Live!

The organization that represents restaurants in Delaware said the industry is far from being out of the woods after two years of the COVID pandemic.

The Delaware Restaurant Association’s 2022 ‘State of the Restaurant Industry’ report found that restaurants continue to struggle to keep their doors open amid a surge in coronavirus cases, inflation, a labor shortage, and supply chain delays.

“Alarmingly, Delaware’s restaurant industry remains down 4,300 jobs from pre-pandemic employment levels,” the report says. “Data from BLS.gov shows DE leisure and hospitality jobs at 49,100 in December 2021, down from a high of 53,400 in December 2019.”

According to the National Restaurant Association, the United States lost more than 650,000 restaurant and hospitality industry jobs early in the pandemic and still hasn’t recovered. The group found that to be a loss of 45% more than the next closest industry.

The national association is now asking Congress to replenish the Restaurant Revitalization Fund, a now-depleted $28.6 billion program created by the American Rescue Plan Act that provides emergency assistance for eligible restaurants, bars, and other qualifying businesses impacted by COVID-19.

“It’s dangerous to see restaurants open and think that everything is ok and profits have returned,” said Carrie Leishman, president & CEO of the Delaware Restaurant Association. “Industry subsidies and relief programs in 2020 helped, but the reality for restaurants is that business conditions are more difficult now than a year ago during the height of the pandemic.”

The Delaware association notes in its report that new data collected from Delaware restauranteurs highlights the devastating impact of the omicron variant and the rapid deterioration in business conditions for Delaware restaurants.

According to the survey, 90% of restaurants experienced a decline in customer demand for indoor on-premises dining in recent weeks, as a result of the increase in coronavirus cases due to the omicron variant. 86% of operators report that business conditions are worse now than three months ago and 80% say their restaurant is less profitable now than it was before the pandemic.

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The survey also found that Delaware restaurants took a number of actions in recent weeks as a result of the increase in coronavirus cases due to the omicron variant.

Among those actions, 70% of those surveyed reduced hours of operation, 50% closed on some days when they would normally be open, 30% reduced seating capacity while 7 in 10 employers say their restaurant currently does not have enough employees to support customer demand. Most operators expect their labor challenges to continue throughout 2022.

Data collected from the National Restaurant Association did find that consumer spending in restaurants trended steadily higher during the first half of 2021.

That trend was driven by rising vaccination numbers, the easing of capacity restrictions and healthy household balance sheets.

“However, that positive trajectory stalled during the second half of 2021, with sales dropping back below pre-pandemic levels by December 2021 – the lowest monthly reading since August,” the report says, noting a Morning Consult report that found the percentage of U.S. adults who say they feel comfortable dining out has fallen by 9 points since Oct. 30, 2021.

“To make matters worse, restaurant operators are dealing with a material increase in costs across the board as U.S. inflation hit 7% in December.”

This marks the fastest pace since 1982 — “an increase that is tough to swallow for an industry that typically generates, under good conditions, 3-to-5% profit margins. Coupled with the labor inflation necessary to retain enough workers to keep the doors open, we’re finding ourselves in the middle of a malevolent storm,” the association says.

Restaurant survey data also reveals:

  • 68% of Delaware restaurant operators report lower sales volume in 2021 than in 2019
  • 83% of Delaware restaurant operators say their restaurant costs were higher in December 2021 than December 2020
  • 74% of Delaware restaurant operators report slower customer traffic in 2021 than 2019
  • 96% of national restaurant operators experienced supply delays or shortages of key food or beverage items in 2021
  • More than half of nationwide restaurant operators say it would be a year or more before business conditions return to normal

“More support is vital to meet the current challenges our industry is facing,” Leishman concluded. “Labor and inflationary pressures, as well as a mask mandate that our neighboring states do not require, have added increasing pressure and tensions to our workforce.”

Currently, nine states, including California, Delaware, Hawaii, Illinois, Nevada, New Mexico, New York, Oregon and Washington have mask mandates for indoor public places, regardless of vaccination status.

Nearby Maryland, Pennsylvania and New Jersey do not have such mandates. For most Delawareans, one of those destinations is likely to be within a thirty-minute drive.

The association reiterated in its report that sustained support for restaurants is needed immediately.

“While the bipartisan passage of House Bill 290,” a bill to permanently allow the sale of to-go liquors, “was a small victory for restaurants in Delaware, more support dedicated to sustaining the industry during this critical climb towards recovery is vital.”

The group said that the following list of items are steps the Delaware government can take to alleviate the pressure on the restaurant industry:

  • Immediate reinstatement of targeted relief funds to Delaware restaurants
  • Support an immediate moratorium on restaurant industry gross receipts tax
  • Support regulatory/licensing fees moratorium for two years
  • Introduce flexible labor laws for entry-level teen workers
  • Limit regulatory barriers for re-entry individuals
  • Subsidize mental health and health benefits for front line workers
  • Oppose legislation that negatively impacts restaurants and/or threatens the rebuilding of its workforce
  • Provide a clear timeline on removal of the current Delaware mask mandate
  • Support pro-entrepreneurial/small business and pro-restaurant legislation

“The Delaware restaurant industry recovery is paralyzed and nowhere near complete,” the group said. “As Congress works to provide a further financial lifeline for restaurant operators, the [aforementioned] are actionable items we believe are within the purview of our Delaware state leadership and government officials to help rebuild our industry and workforce.”

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.

Del. Lawmakers Approve Continuation Of Tax Relief For People Left Unemployed During Pandemic

From: WGMD News

Tax relief measures and business-friendly procedures that were implemented in Delaware during the COVID-19 pandemic will carry on in The First State.

The State Senate has passed a bill (HB 285) that would exempt unemployment benefits paid in 2021 from Delaware state income tax. The measure would also maintain favorable tax rates for employers that were implemented in the past couple of years.

“Thankfully, most – but not all – of the hard-working Delawareans who lost their jobs during the pandemic have returned to work, but the financial burden of those lost wages still remains,” State Senator Jack Walsh, D-Stanton said. “Exempting the unemployment benefits they received in 2021 will help return some of that money to their pockets, while helping businesses avoid the added tax burden will hopefully make up for some of the revenue, they lost during the winter surge.”

Also, legislation to allow liquor stores, brew pubs and other establishments to permanently offer curbside service (HB 289) has been given final legislative approval, keeping in place the service options that were important to keeping them in business during the pandemic.

“Since the earliest days of the pandemic, businesses have had to get creative to keep their doors open while protecting their customers’ health,” Representative Debra Heffernan, D-Brandywine Hundred South said. “This bill gives businesses another tool to meet their customers’ needs and allows residents to support their favorite brewery, distillery, or winery even if they don’t feel comfortable dining out.”

Publisher’s View: Now is exactly the time to cut taxes

From: Delaware Business Times Gov. John Carney’s State of the State speech included many examples of ways that the state is building a workforce for the “jobs of the future.”  But he needs to simultaneously focus on the jobs and employers of the present. That may require a willingness to support cuts in personal income taxes, the gross receipts tax on businesses, and even the corporate income tax rate.

Rob Martinelli
President
Today Media Inc.

The numbers he used to describe how “robust” the recovery has been exaggerating the situation for struggling employers and employees. We tend to pick the data points that best make our case, but the governor compared year-end 2021 numbers to those a year prior, during the worst part of the pandemic, rather than highlighting pre-pandemic numbers.

If you look at those numbers, you’ll see that there are roughly 6,500 fewer people employed, fewer people in the workforce and a more accurate look at the change in unemployment rate 3.9% vs. 5.0% this past December, which by the way is an identical gap to the current national average.

And those numbers don’t include the people who have “disappeared,” either because they ran out of unemployment benefits, can’t go back to work because of childcare issues, took earlier retirement, or joined ‘the Great Resignation.” It’s difficult for many businesses to find workers.

Since Delaware has no personal exemption for state income taxes, a person making $30,000 per year, or a $15 an hour minimum wage, will still pay $600 in state income taxes. If you are not going to cut all of the personal income taxes, why not at least eliminate this as an incentive to get people back to work?

When the General Assembly needed to address the challenge of an $800 million budget shortfall a few years ago, it raised the gross-revenue tax on businesses and the realty transfer tax. Now, with a more than $800 million surplus, it is time to have a real discussion about giving some of that money back to businesses and taxpayers as the state uses federal funds to improve infrastructure, strengthen workforce training programs, expand mental health services, and address housing affordability.

Delaware is one of just five states that levies a gross receipts tax (GRT), which is sometimes called a “hidden sales tax.” A GRT is an excise tax on the gross revenues of a company regardless of whether that company has profits or losses. It punishes firms with low profit margins and high production volumes and discourages start-ups that typically post losses in their early years.

Delaware’s GRT began in 1975 and has the distinction of topping all other states with 54 different rates by industry.  Delaware has tried to use the GRT to smooth out revenue effects stemming from the business cycle. In 2006, the state lowered the GRT by 20%. Following the recession, the state raised the GRT by 25% in 2009 and 8% more in 2010. From 2009 to 2019, total Delaware occupational license and GRT receipts climbed 58%.

Beyond the potential impact of the personal income tax cut would have on a state that consistently loses middle- and upper-class Delaware workers to neighboring states (Pennsylvania in particular), a decrease in the gross receipts tax would benefit existing lower-margin businesses and give similar types of companies another reason to consider relocating to the state.

Republican lawmakers have introduced several bills to lower taxes this year, but they have languished without a committee hearing for far longer than the 12 legislative days required under House Rules. That inaction comes despite estimates that passage would enable taxpayers to collectively retain more than $282 million in the upcoming fiscal year that begins July 1 and more than $321 million in the following 2024 fiscal year.

There are lessons we can learn from what’s going on in Washington. In a state where everyone knows everyone – there are many businesses and individuals still struggling from the effects of the pandemic – it’s time for some bipartisan cooperation that will enable each side to get what they want by helping the other side get what they want.

Delaware’s 40-year experiment: pro-growth vs. anti-growth policies

From: Ceasar Rodney Institute

In 1980, the US and Delaware economies were in shambles. Forty years later, at the end of 2020, the US and Delaware economies were again suffering because of the global pandemic. This 40-year period provides a real-life experiment in pro-growth versus anti-growth Delaware-based government policy. The results are clear.

The graph below shows the outcome of Delaware’s pro-growth versus anti-growth policies, including a forecast of what New Castle County could have been if the anti-growth forces had not won in 1998 when employment creation ended in the county.

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Two eras in New Castle County – 1980-2000 and 2000-2020

As the 1970’s economic malaise ended in late 1982, the overall US economy roared to life, job growth in New Castle County riding on the back of the pro-growth policies implemented by former governors Dupont’s and Castle’s administrations also roared, averaging almost 3% per year for the decade of 1983 to 1993. The national recession of 1992 hit hard, causing a brief swoon until further growth promoted by the Carper Administration fueled a somewhat less robust 10-year average 2% per year growth from 1990-2000.

Then, in 1998, something changed, and economic investment in New Castle County quickly stopped. Within two years of the passage of the County’s Unified Development Code, employment growth in New Castle County was flatlined. Since 2000, employment in New Castle County has grown an anemic 0.3% per year through 2020.

The 1998 Unified Development Code passed by the New Castle County Council was an economy killer – dramatically destroying property rights and growth investment in the county. Once the legacy projects were completed, employment growth simply stopped. Anti-growth forces had won, and job opportunities were lost.

Meanwhile, in a County not far away — Sussex on a 40-year tear

Compare New Castle County’s trajectory — pro-growth policies followed by anti-growth policies — with Sussex County’s trajectory where pro-growth policies continued, unabated, for 40 years. In 1980, there were 46,558 jobs in Sussex County. Today, there are 114,297. Over this period, Sussex County employment has grown 145%, more than doubling the anemic 67% of New Castle. If not for the “Great Recession,” Sussex County would show a very consistent ~2.5% year-over-year employment growth rate over the entire 40-year history.

A New Castle County Forecast

No one could say for sure what New Castle County would have looked like if the forces of stagnation had not triumphed in 1998. But, using Sussex County as a guide, one could posit that there would be almost 50,000 more jobs in New Castle, and wages would be much higher due to the demand for employees–an increase in the workforce equates to an overall population increase of 100,000 or more in New Castle County. Population growth is economic growth. (See red dash line on the graph.)

Instead of recognizing New Castle’s errors, Delaware policymakers have begun to imitate New Castle County’s anti-growth agenda on a statewide basis. For example, increasing regulations, taxes, and employment costs on small businesses reduces business investment leading to lower employment growth. The graph shows that pro-growth policies would have solved the wage problem without government coercion as local businesses competed for quality workers for the 50,000 jobs that would have existed in New Castle.

The 2022 legislative session provides the perfect opportunity to return Delaware to the policies of employment growth.

(Source: All data from the U.S. Bureau of Economic Analysis)

As revenues rise, Republicans say taxpayers should get some money back

From: Town Square Live

Republicans in the House of Representatives have introduced six new bills to return surplus state revenue to Delawareans.

With a windfall of cash from federal stimulus bills and the bipartisan infrastructure bill, Republican lawmakers say there’s no better time to give Delawareans some needed relief.

The nonpartisan Delaware Economic and Financial Advisory Council, or DEFAC, has twice increased the state’s revenue projections for both fiscal years 2022 and 2023 since the 2022 fiscal year began.

The council now says the state will collect around $820 million more than previously expected.

In response, Republicans have filed six bills aimed at slashing Delaware’s income tax, gross receipts tax and corporate tax; decreasing the real estate transfer tax; adjusting taxes with cost-of-living increases and giving Delaware’s lowest income earners a tax credit.

While tax cuts and rebates can’t be directly funded by the American Rescue Plan Act, Republicans say the state’s rosy economic forecast means there is room for adjustment elsewhere.

Rep. Rich Collins, R-Millsboro, called it “an embarrassment” that the state government failed to enact tax cuts last year.

“After the bills are paid, and appropriate reserves are set aside, I believe government has a duty to return money to the people from whom it was taken,” Collins said. “That was an obligation the legislature failed to honor last year.”

Income & gross receipts tax cuts

House Bill 191, sponsored by Collins, would make a 10% across-the-board cut to the state’s personal income tax rates, reduce the corporate income tax by nearly 30% and slash the gross receipts tax by 50%.

A gross receipts tax is a tax applied to a company’s gross sales without deductions for a firm’s business expenses, like costs of goods sold and compensation.

The gross receipts tax is paid on both business-to-business transactions and final consumer purchases, leading some to refer to it as Delaware’s “hidden sales tax.”

Collins said in an interview with Delaware/Town Square LIVE News that by reducing that burden, “prices should go down immediately.”

“If you go back to 2007 forward, we have increased income taxes, gross receipt taxes, the realty transfer tax, liquor tax and cigarette tax,” he said. “It’s just been a whole great list of tax increases and we have never given a dime of it back, so I just thought with all this money coming in, we ought to share some of that with our citizens.”

According to the bill’s fiscal impact statement, the proposal would allow taxpayers to collectively retain more than $282 million in the upcoming fiscal year and more than $321 million the following year.

“This is an economic development bill,” Collins said. “In recent years, Delaware has had one of the worst economic growth rates in the nation.”

Allowing people and businesses to keep more of their own money, Collins said, will “jumpstart investment, increase employment and raise starting wages.”

Collins said he expects Democrats to characterize his proposal to cut corporate taxes as an attempt to benefit the super-wealthy at the expense of the poor.

“Where do people get their jobs from,” he asked. “Unless it’s from the government — now in Delaware, the government is the largest employer. But if you work for an employer that’s not the government, their costs are going up and up and they need relief too.”

He said people often incorrectly associate the word “corporate” with the wealthy, when in reality most corporations are small businesses just trying to make ends meet.

Real estate transfer tax

House Bill 172, sponsored by Rep. Lyndon Yearick, R-Dover, would temporarily eliminate the state’s portion of the realty transfer tax for certain first-time home buyers.

The real estate transfer tax is paid at the time of a property’s purchase and is currently set at 4% of the purchase price. Typically, the buyer and seller split the tax and pay 2% each. Of the total, the state collects 62.5% and the municipality or, in unincorporated areas, the county, gets to keep the remainder.

Yearick’s bill would only eliminate the 62.5% of the tax that ordinarily goes to the state.

Buyers of homes that cost $250,000 or less would not pay the state portion of the real estate transfer tax so long as they earn a gross income of less than $45,000 for individuals or $75,000 in combined income for joint purchasers.

The bill will be amended to sunset, or expire, on December 31, 2024.

In an interview with Delaware/Town Square LIVE News, Yearick said he included the sunset clause to try and attract support from Democratic legislators.

That’s worked with at least one member, Rep. Paul Baumbach, a Democrat from Newark. Ten Republicans have also signed on as sponsors and cosponsors.

Yearick said the bill is meant to benefit first-time homebuyers.

“It’s really looking at first-time homebuyers — their first home, not a million-dollar house at the beach, with all due respect,” he said. “But this is especially important with the rising cost of homes. Since 2020, the average sale price for homes went up 15 to 20% whether it was new or used.”

According to a fiscal note completed by the Controller General’s office, the bill would return $1.6 million to beneficiaries annually.

House Bill 71, sponsored by Rep. Mike Ramone, R-Pike Creek, would decrease the realty transfer tax from 4% to 3%.

The tax was previously set at 3% of a property’s purchase price, but in 2017 was effectively raised to 4%.

If implemented in fiscal year 2024, House Bill 71 is projected to collectively save homebuyers $83 million.

The bill cleared the House Revenue & Finance Committee last June and is now pending the consideration of the House Appropriations Committee.

Attempts to reach Ramone for comment were unsuccessful.

House Bill 71 has not attracted any Democratic co-sponsors.

Senior real property tax

House Bill 108, also sponsored by Ramone, would restore the senior real property tax credit to a maximum of $500.

The legislature cut the credit to $400 in 2017 when the state faced a budget deficit.

According to a fiscal note completed last year, the bill would return more than $4.2 million annually to qualifying seniors.

The measure has bipartisan support and has been pending action by the House Administration Committee for nearly a year.

Ramone said in a statement that he’s been fighting for both initiatives for years.

“Given the state’s extraordinary revenue forecasts, there should be no reason to delay implementation of either proposal.”

Low-income tax credit

House Bill 158, also sponsored by Yearick, would establish the Delaware Resident Low Income Tax Credit.

The bill seeks to create a $500 tax credit for low-income Delawareans.

For qualifying spouses filing a joint return, the tax credit would amount to $1,000.  Individuals earning between $18,000 and $30,000 annually would qualify, as would spouses filing jointly with household incomes of between $36,000 and $60,000.

A $110 personal tax credit that is currently available to certain low-income Delawareans would be increased to $500.

Under the proposal, if the value of the credit exceeds an individual’s tax bill, they would receive the remaining value in the form of a tax refund.

According to the fiscal impact statement, Delawareans would collectively be able to keep $77 million of their income each year.

No Democrats have signed on to co-sponsor the bill.

Yearick said his bill is looking to support the working poor.

“They’ve been hit especially hard with rapid inflation,” he said. “Everything, from their purchase at the grocery store to putting gas in the car, to them trying to heat their home and put clothes on their back — it’s all gotten more expensive.”

The bill was modeled after Democratic-led federal bills like the American Rescue Plan Act and expanded child tax credit — with one key difference.

“It’s to encourage work,” Yearick said. “We all know we have individuals that dropped out of the workforce. This would be an incentive to encourage them to come back to work that would actually put more fully-refunded money back into their wallets, whether they adjust their holdings during the year or when they file their taxes.”

“But you have to work,” he continued. “You have to earn it. It’s not based on transfer payments or social security or unemployment compensation. It’s based on W-2s.”

Cost of living adjustments

House Bill 278, also sponsored by Collins, would require personal income tax brackets to be annually adjusted for cost-of-living increases.

This would address a problem referred to in the bill as “bracket creep,” in which employers give employees cost-of-living pay increases that force employees into new tax brackets, effectively negating the impact of the pay increase.

“The people most likely to benefit from this bill are lower-income folks,” Collins said. “Tax brackets in Delaware occur at $2,000, $5,000, $10,000, $15,000, $20,000, $25,000 and then it goes to $60,000. But frankly, a high-income individual is not going to see much benefit because they’re already at the highest bracket if they’re over $60,000.”

He said that if the United States continues to experience inflation at its current rate, wages and cost-of-living expenses would likely keep pace, but the tax brackets would remain the same.

“If you’re a Delaware citizen and your wages go up with inflation, you wouldn’t be able to buy one extra thing with it because everything would cost more,” Collins said. “Yet you’ll be in a higher tax bracket — so this state would be collecting a higher percentage of your income and you’re getting nothing for it whatsoever.”

What’s next

Republicans said in a press release that House Bills 191, 172, 158 and 108 have been “improperly held in committee without a hearing for much longer than the 12 legislative days allowed under House Rules.”

House Bill 71 is expected to pass that 12-day threshold before the General Assembly recesses for budget hearings at the end of January.

Attempts to reach House Democrats for comment were unsuccessful.

Collins believes citizens would be better off deciding how to best use their own money.

“I would prefer that our citizens have their money,” he said. “And I can promise you that if I were in charge, their budget would be my top-line concern.”

Yearick believes Democrats are going to say they can’t offer tax cuts and rebates because they’re fearful about uncertain revenues in the future.

“But you can go back and look at all the one-time money that’s been spent,” Yearick said. “The enhanced bond bill last year, the budget has grown by 4% a year — and how much tax relief is given back to Delawareans? I’ll tell you: zero. Lord knows we have the money to do it.”

States Whose Unemployment Claims Are Increasing the Most

Source: WalletHub

The U.S. is making significant progress in the fight against COVID-19 with the distribution of the vaccine and boosters, but the impact on the job market has lagged behind, with new unemployment claims increasing week-over-week on January 3. There are currently 6.3 million Americans unemployed due to the COVID-19 pandemic in total, and it’s important to look at some key stats for the latest week to get the full picture:

  • There were 230,000 new unemployment claims nationwide, which is a lot fewer than the 6.1 million during the peak of the pandemic (a 96% reduction).
  • While there was an increase in weekly claims nationally, 49 states (including Kansas, Virginia, and New Mexico) had unemployment claims last week that were better than the same week last year.
  • Every state had unemployment claims last week that were higher than before the pandemic except for Georgia, Arkansas, Rhode Island, South Carolina, Pennsylvania, New Hampshire, Alabama, Delaware, New York, Virginia, Maine, Maryland, Connecticut, and Oklahoma.

To identify which states’ workforces are experiencing the biggest increases in unemployment claims due to COVID-19, WalletHub compared the 50 states and the District of Columbia based on changes in unemployment claims for several key benchmark weeks. For the full report click here.

Carney ready to spend money in 2022; GOP wants tax relief

From: Delaware Live!

The state of the state is strong, said Gov. John Carney during his annual address before a joint session of the General Assembly Thursday.

Much of Carney’s speech focused on the fallout of COVID-19, including its impact on the state’s economy and the work that still needs to be done to confront new variants and surges.

He cited the need to support continued workforce development and early childhood education, and to restore the economy with an emphasis on equity.

Republican leaders in the House and Senate responded that more should be done to help Delawareans who have suffered financially as a result of the pandemic.

“We are giving tax breaks for individuals that have been receiving unemployment, which is great for them,” said Senate Minority Whip Brian Pettyjohn, R-Georgetown. “But as we’re seeing prices rise at the grocery stores and at the gas pumps right now, for people that have been working every single day 40, 50, 60 hours a week, whether they’re working overtime or working in their own businesses … because they can’t find workers out there — we need to be giving them help as well.”

At least one moment provided unexpected humor.

“In terms of national and international attention, it certainly doesn’t help to be the home of the president of the United States,” Carney said. “It really doesn’t.”

According to the pre-released copy of the speech, Carney intended to say, “it doesn’t hurt.”

Carney also cited his administration’s advocacy for the Delaware Prosperity Partnership, which through state grants and awards has contributed to the creation of more than 20,000 jobs. That includes fin-tech startup Investor Cash Management, which announced last month that it would move its headquarters from Chicago to Downtown Wilmington.

Senate Minority Leader Gerald Hocker, R-Ocean View, said that as a small business owner, things don’t look so optimistic.

Hocker said his grocery stores, G&E Hocker’s and Hocker’s Super Center, continue to struggle to find workers and the governor’s speech failed to offer any solutions to get people back to work.

“We hear all these new businesses that are coming to Delaware and all the jobs they’re going to bring,” Hocker said, adding that his businesses have been looking to hire new employees but haven’t been able to find anybody to fill the jobs.

“Where are all these workers going to come from? And then [Carney] talked about training and a training fund to train new employees. I’ll train my own.”

Hocker said he pays into a training fund every year but he “can’t hire from that pool” and “being a small business owner, I didn’t hear a whole lot of encouragement from our governor today.”

Carney highlighted future investments made possible by the federal COVID stimulus packages and Biden’s infrastructure bill, including building and upgrading libraries, increasing resources for gun-violence prevention programs in Wilmington and Dover, increasing mental health services and repairing aging roads and bridges.

“We’re also investing in our environment, and we have a new Climate Action Plan to address the effects of climate change. Not just because it’s the right thing to do, but because we know that vibrant outdoor spaces help attract new workers and families.”

Carney hailed the General Assembly’s passage of a bill that put Delaware on the course to a $15 minimum wage and encouraged legislators to pass a bill to mandate companies to provide paid family and medical leave.

Republicans said they were disappointed to hear Carney express support for paid leave.

Pettyjohn said the bill would be “horrible for our businesses,” and said that a current shortage of teachers in schools is just one example.

“You have a lot of husbands and wives that are teachers within our schools and our schools are having very difficult times right now with substitute teachers,” Pettyjohn said. “So in this kind of small trial that we did for state employees, we’re seeing significant issues with that.”

Carney said that the biggest challenge Delaware faces is “building a workforce ready for jobs of the future.”

“Delaware employers have more than 33,000 open positions right now but only 26,000 Delawareans are actively looking for work,” he said. Delaware plans to invest $50 million in federal stimulus funds into workforce training programs, he noted.

He talked about his administration’s goal to expand broadband internet access to every Delawarean, specifically in Kent and Sussex counties.

He pushed his plans to develop the Wilmington Learning Collaborative, which is designed to allow three school districts create a board that would focus only on students in the city.

Republicans complained that Carney didn’t talk more about the ways kids were affected by the pandemic.

“Our children missed important time in their classrooms,” Hocker said. “But I didn’t hear any way that will help those children make up what they missed in education.”

Near the end of his speech, Carney emphasized that Delaware has “made it through the worst of the pandemic better than most states: without painful budget cuts, without tax increases and without layoffs of state employees.”

Republicans said that since the state is doing so well financially, there’s no better time to give money back to the taxpayers.

“I was here as well as my colleagues when we had an $800 million problem and we raised taxes, particularly around the real estate transfer tax,” said House Minority Leader Danny Short, R-Seaford. “Now we’ve got an $820 million surplus — maybe it’s time to give them some of that money back.”

In that spirit, Republicans on Thursday afternoon issued a press release announcing the filing of five new bills aimed at returning surplus state revenue to Delawareans.

In the release, Rep. Rich Collins, R-Millsboro, said it’s embarrassing that the General Assembly “did not enact one meaningful tax cut last year.”

“After the bills are paid, and appropriate reserves are set aside, I believe government has a duty to return money to the people from which it was taken,” Collins said. “That was an obligation the legislature failed to honor last year.”

The proposed bills would slash Delaware’s income tax, gross receipts tax and corporate tax, and temporarily eliminate and then permanently decrease the real estate transfer tax, and give low-income Delawareans a tax credit.

Those objectives are likely to be at odds with Carney’s proposed budget, which he will present next week.

The governor said during his address that his budget will be committed to fiscal responsibility while also focusing on addressing some of Delaware’s biggest needs.

Carney concluded that as a result of his administration’s actions, “unemployment is down, children are back in school, small businesses survived and we are supercharging our economy with federal resources.”

He spoke fondly over the late Ruth Ann Minner, Delaware’s first female governor.

“As I think about the past two years, and how it fits into the long history of our great state, I can’t help but think about the recent passing of Governor Ruth Ann Minner,” Carney said. “Governor Minner did not have an easy time leading up to being governor, or during her two terms wrestling with your predecessors over a laundry list of sticky issues.”

“One thing you could count on with Ruth Ann, though, was when she faced a political issue or policy choice, she always approached it through the lens of how it will affect people’s everyday lives. And another thing you could count on was that when she made a tough call – and she had to make many – she would stand by it.”

Carney concluded his remarks by assuring lawmakers that Delaware will come out of the pandemic “and when we do, we’ll be ready as a state to move forward together.”