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Question marks hang over Delmarva economy

From Delaware State News

This chart from Opportunity Insights Economic Tracker (https://tracktherecovery.org) shows the drop in spending in Delaware and its three counties. Sussex County has seen the slowest recovery. The data is drawn from private companies – from credit card processors to payroll firms – to provide a real-time picture of consumer spending.

DOVER — After three-and-a-half months, it is readily evident that the pandemic has hurt local businesses in a big way.

But, according to a Delmarva economy expert from Salisbury University, it is too early to assess their fates.

“There are so many unknowns that are holding question marks over us, in terms of which businesses are going to be harmed in what ways,” said Memo Diriker.

“What we do know is that a certain percentage — a significant percentage of businesses — are going to find it very difficult to be in business this time next year.”

Consumers were starting to spend a little more freely once restrictions eased, but will that curtail greatly again as cases and concerns about COVID-19 rise?

Can businesses pivot to a model that better relates to contactless service?

Can businesses hold on with the help of government stimuli, such as the Paycheck Protection Program?

What if a second wave of the coronavirus arrives with flu season?

“What we’re seeing, really, is that this is the weirdest ‘dominos falling’ scenario,” said Dr. Diriker. “Some of the things will happen almost in slow motion.

“There have been some businesses that were operating at the edge of profitability, or at the edge of sustainability, and those are the ones that are currently most vulnerable — PPP or not.”

Consumer spending

Dr. Diriker is director of the Business, Economic, and Community Outreach Network (BEACON) at the Franklin P. Perdue School of Business at Salisbury University.

One of his immediate gauges of Delmarva’s economy is actual sales.

“The most important thing is consumer spending power,” said Dr. Diriker. “In the state of Maryland, sales tax revenues are dipping compared to the previous year of the same period.

“That’s a warning sign.”

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As COVID-19 cases climb at Delaware beaches, businesses struggle to stay staffed, healthy

From the News Journal

This Fourth of July weekend, beaches in coastal destinations like Miami, Fort Lauderdale and Los Angeles County will be closed in an effort to stop beachgoers from spreading the coronavirus among family, friends and strangers there – and when they return home.

But in Delaware, the beaches will remain open – with a lot of new restrictions in place, including for the businesses beachgoers often frequent.

“Over the last couple weeks we have experienced an uptick, a resurgence of COVID-19 cases in the beach areas specifically,” Gov. John Carney said during a press briefing on Tuesday. “We also have witnessed – across our state, but particularly in the beach communities – complacency with respect to mask wearing and social distancing.”

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State passes pared-down FY ’21 budget that axes readiness funds

From Delaware Business Times

DOVER – The Delaware General Assembly completed its work on the fiscal year 2021 budgets over the past week, delivering something that is smaller than what Gov. John Carney proposed in January due to the impact of the COVID-19 pandemic.

Among the cuts imposed on the annual budgets were several initiatives that aimed to speed up Delaware’s ability to provide space for employers.

The governor proposed a record-setting $4.63 billion operating budget and $893 million capital budget appropriation that was ultimately undone by the financial havoc wrought by the COVID-19 pandemic. In the months since the virus spurred widespread shutdowns of state businesses and limited commerce, Delaware has seen a revenue forecast decline of more than $530 million.

Over the last days in June, state lawmakers approved a $4.54 billion operating budget, about 2.1% larger than the last fiscal year due almost entirely to fixed “door opener” cost increases like pensions, debt service and school enrollment funding. Even though it fell short of Carney’s original proposal, the operating budget is still the largest in the state’s history.

Mike Jackson, director of the state’s Office of Management and Budget, described the FY 2021 budget as one where “no one loses, but no one really wins.”

One reason why the budget was able to largely match the FY 2020 appropriation level was that state officials used half of the Budget Stabilization Fund, which was created under Carney’s tenure to plug smaller budgetary gaps through an annual 2% savings program. Lawmakers were able to use only $63.1 million from that fund to offset losses, while also not touching the state’s long-protected “rainy day” Reserve Fund.

“In a year such as this, to be able to continue to maintain that level of discipline, but also fully funding the state’s ‘rainy day’ fund is a pretty remarkable achievement,” Jackson said at a June 30 press conference where Carney also signed the budget bills.

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Commentary: Delaware government must serve and protect public

From the News Journal

By Richard Gebelein and Robert Marshall

As two former Delaware public servants with a combined 75-plus years of experience in Delaware government, spanning the executive, legislative and judicial branches, we are concerned with the state of our state as it faces the challenges of 2020.

Delaware needs to address the effects of the COVID-19 pandemic and the highest number of unemployed people in our history, as well as structural issues in government and taxation. Decisions made this year will significantly alter how Delawareans live in the coming decades. Those decisions should be made through a process that meets both the letter and the spirit of our sunshine laws.

We come from different political parties, and we have different views on many issues. During our public service careers, we have debated those issues. In many cases, compromise was possible, and we could join to support positive change. When we did this, the process was aired publicly in legislative and administrative hearings. The media covered those public hearings, and the process was open. Investigative reporters sought out dissenting views, reported on them and uncovered improprieties where they existed.

Today, Delaware faces unprecedented challenges, and yet, there is little public discussion of the steps to be taken to address these matters. The “People’s Hall,” aka Legislative Hall in Dover, is closed to the public.

As an example of decisions to come, it appears that the governor and one judge have determined that there must be a reassessment of the value of real property for tax purposes. Any reassessment will have serious tax and property value implications for everyone who owns a home, a business property, etc. This reassessment will mostly impact those middle-class families whose biggest asset is their home. Historically, a rise in real estate taxes may be accompanied by a decrease in the actual value of the property.

Just as in the catastrophic real estate collapse of 2008, middle-class homeowners could be forced from their homes. How to conduct a reassessment, limit the size of tax increases and/or seek alternative funding for schools should be publicly debated to allow for input from the public. Many of these impacted homeowners have been negatively affected by COVID-19 already and may not be able to bear a tax increase, as well.

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Delaware Senate passes bond bill, grant-in-aid after coronavirus forces last-minute cuts

From the News Journal

The Delaware Senate on Thursday unanimously approved hundreds of millions in funding for capital projects and nonprofits across the state for next fiscal year.

The $55 million nonprofit grant-in-aid bill and the $708 million capital bond bill now head to the House, which is scheduled to vote on Tuesday.

The approval comes after the 21-person upper chamber on Tuesday failed to pass both of those bills, which require three-fourths of senators’ approval. Several Republicans refused to vote, saying they wanted more time to review the bills that the General Assembly wants to fully pass by the end of the fiscal year, June 30.

Lawmakers on Wednesday were able to pass their biggest agenda item: a $4.5 billion operating budget for next fiscal year. The state planned for a $4.6 billion budget and an $893 million bond bill — the biggest in the state’s history — at the start of this year, but both suffered cuts after the state’s revenue forecast dropped by $400 million between December and June. Construction costs and building renovations are delayed, and not all state employees are getting pay raises as originally promised.

The whittled-down bond bill includes millions in cuts to clean water initiatives and business incentives for next fiscal year. Some pools of money, such as $20 million to aid private and public colleges, have been cut entirely for next year.

The state meanwhile is relying on a hefty aid package from the federal government to pay for costs related to the coronavirus pandemic, such as testing and benefits to masses of unemployed Delawareans. Lawmakers returned to work via Zoom video conferencing in late May after a two-month hiatus due to the coronavirus pandemic, which shut down Legislative Hall.

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Delaware House passes $4.5 billion budget; other big money bills still being debated

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Corona impact: Delaware’s restaurants third hardest hit in the nation

From Town Square Delaware

Delaware’s restaurant industry has been one of the hardest hit in the nation and is projected to suffer significant losses for the next six months.

According to newly-released national labor data, more restaurant jobs have been lost in Delaware than any other state in the country except New York and Vermont amid the Covid-19 shutdowns.

“Can you even imagine? This is a dire situation for our local restaurants,” said Delaware Restaurant Association President and CEO Carrie Leishman.

The National Restaurant Association data comes from the Bureau of Labor Statistics. Their report says that Delaware lost 66% of its eating and drinking place jobs between February and April, and it ranks Delaware third in the country for losses.

Delaware’s restaurant trade association group also says the financial impact has also been devastating. Between March 15 and June 15, Delaware lost $472 million in annual restaurant sales, according to the Delaware Restaurant Association. And the trend continues as some restaurants remain closed and others are operating well below capacity.

A driving force in Delaware’s economy, restaurants have lost nearly three times more jobs than any other industry due to the pandemic.

“It’s really a sting. It goes to show you the value and impact that restaurant jobs have on the state of Delaware’s economy,” says Leishman. There are about 1,900 restaurants in the state.

This comes at a time when Delaware usually boasts the third-highest (by percentage) increase in summer jobs, according to the DRA, because of the large numbers of beachgoers and seasonal tourism throughout the state.

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Committee approves capital bond bill totaling $708 million, down 18% from this year

From Delaware State News

DOVER — Lawmakers completed drafting the capital bond bill Thursday, setting it up to be voted on by the full General Assembly next week. The committee approved a $708 million spending plan for the fiscal year beginning July 1.

That total represents a decline of about $155 million (18%) from the current fiscal year and $185 million (21%) from the governor’s January proposal, a precipitous decrease that can be clearly backed to the COVID-19 outbreak.

With coronavirus triggering a big economic hit and preventing the legislature from meeting at all for months, lawmakers were pressed to approve spending plans for the operating and capital budgets by their deadline at the end of this month.

The Joint Committee on Capital Improvement, one of two money committees that handles the annual spending bills, did the latter Thursday by passing a modified bill that closes the gap with cuts to various areas. The cuts themselves were identified beforehand by budget officials in consultation with the committee co-chairs and some others.

The bond bill, which still must be passed by both chambers by July 1, includes $364 million for transportation-related items and $344 million for other needs, such as state facilities.

The $893 million sum proposed by the governor would have been the largest bond bill in state history, surpassing the $863 million total allocated in the current fiscal year.

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