In the early 1980s, the titans of Delaware industry would occasionally show up in Legislative Hall, prompting legislators to head upstairs and knock on Bob Perkins’ door.
Their questions were always the same, says Perkins, then chief of staff for Gov. Pete du Pont. “They’d say, ‘Bob, what’s he here for? I want to be on the right side of that issue.’”
How the times have changed. There is no Irving Shapiro at DuPont, which is but a shadow of its former self. There is no Al Giacco at Hercules, which isn’t here anymore. There is no Barney Taylor at Wilmington Trust, also a fading memory. And Charlie Cawley was then the new kid on the block at MBNA, an upstart bank housed not in Wilmington but in an old supermarket in Ogletown. Cawley is gone, and so is the bank that launched the credit-card industry that powered Delaware’s economic resurgence.
But Perkins is still around. After taking early retirement from AstraZeneca, another high-profile Delaware brand that isn’t quite what it used to be, he has resurfaced as executive director of the Delaware Business Roundtable, a panel of heavyweight CEOs founded during the du Pont administration that is now intent on re-establishing its influence within the halls of government.
Pete du Pont helped create the Roundtable in 1980, right after Shapiro wrote a scathing op-ed piece in the Wall Street Journal saying he wouldn’t encourage other CEOs to move their businesses to Delaware because the state’s income tax was too high. About the same time, Giacco was making threatening noises about moving Hercules to Pennsylvania—or Texas. “Rather than get angry, Pete decided he wanted the business community’s voice,” Perkins recalls.
At the time, the group consisted of fewer than a dozen corporate chiefs. Today’s Roundtable has close to 50 CEOs, and their companies collectively employ more than 75,000 people. But none of those businesses dominate the state’s economy as DuPont and MBNA did two or three decades ago. “So it takes a larger collection of leaders to create the same level of influence,” Perkins says.
Over the years, the Roundtable continued to work behind the scenes, focusing on pro-business and economic development issues, including business innovation and education reform, but its profile diminished as mergers and downsizings reshaped the state’s corporate landscape. “The individuals on the Roundtable had primary responsibility for their own companies. Their first obligation was to their shareholders, their employees and their customers.”
In 2011-2012, as the nation and the state emerged from the recession, “We all said we don’t want that to happen again, and we started to look around at what we could do to help the state prepare for the future,” says Mark Turner, CEO of WSFS and chairman of the Roundtable.
“In the du Pont and [Mike] Castle administrations (1977-1993), it was a group that would stand up and people would pay attention to,” says state Senate Minority Leader Greg Lavelle. Though the Roundtable never disappeared, in more recent years, he says, “It was there, but it wasn’t there.”
The revitalized Roundtable’s first move was to commission a study that looked at state finances. The report, issued in August 2015, caused a stir with its projection that, under current revenue and spending patterns, the state would face an annual operating deficit of more than $600 million by fiscal 2025. The causes of the looming gap: inelastic revenues, rapid increases in health-related state costs and below-average economic growth.
“The state has done a masterful job of balancing budgets, but if you look at the trend lines, they’re not good,” Turner says. “They’re built on shaky things like escheat (forfeited and abandoned property) and gambling revenues.” On top of that, he notes, Delaware’s golden egg, its corporate preeminence, is coming under attack as other states challenge its laws in federal courts or enact similar legislation of their own.
“Without some very major revisions in the way the state handles its finances, it is going to be in trouble,” Perkins says. “The budget is up 4.7 percent this year. That’s three times the rate of inflation.”
The finance report identified several areas where state expenditures were inconsistent with those of neighboring states or national averages, including spending on corrections, public welfare and social programs, education and personnel costs. The report suggested the state consider policy changes to better control spending in these areas and to encourage greater economic growth and job creation in order to increase revenues.
“I know a number of people pooh-poohed it, but if they continue to push it, and continue to engage us in the discussion, it is a good thing,” Lavelle says.
One of the skeptics was state Rep. Paul Baumbach, D-Newark. “It offered good insight, good perspective,” he says, “but it was just one stakeholder’s perspective.”
The Roundtable delivered its latest salvo in July, with the release of its Delaware Growth Agenda, a 45-page study structured around a vision for economic development and three strategic goals: pursuing a new approach to economic development, building an entrepreneurship and innovation ecosystem, and enhancing Delaware’s business climate.
The Roundtable had timed the release of the study to trigger discussion during recent election campaigns, but the relatively low-key nature of the races for state offices kept the conversation at a low level. Nonetheless, John Carney, the Democratic candidate for governor, incorporated components of the study into his economic development proposals.
“I think some of the ideas are good,” Lavelle says. “I might not agree with all of them, but that’s OK.”
“There’s a lot of mom and apple pie here, things no one would quibble with, but there are not a lot of details yet,” Baumbach says.
He cautions, however, that the growth agenda is “very one-sided” and lacks explanations for how its goals might be paid for, other than through the economic growth it is presumably designed to trigger. “Growth is a nice phrase, but give us some specifics other than lowering our tax rates,” he says.
According to Rodman Ward III, president and CEO of the Corporation Service Company and chairman of the board of directors of the Speakman Company, the growth agenda is built on the recognition of three macro trends: globalization, technological innovation and the move from a manufacturing economy to a service-based economy. The state has to recognize these trends and adjust accordingly, he says, and so do businesses and the state’s residents, who make up the workforce for the businesses that will thrive in the future.
The study’s suggestion that the state takes a different approach to economic development has begun to spur discussion. The report offers models used in Arizona, Florida, North Carolina and Missouri as alternatives to the Delaware Economic Development Office (DEDO). What these models have in common is that each is a public-private partnership in which business groups contribute to the agency’s budget and business leaders serve on the agency’s board of directors.
“I think that’s the secret sauce,” Perkins says, “having leaders in government and business sitting down together making decisions about where to make investments.”
In Perkins’ view, the state would be better off if economic development decisions were not made primarily by the governor and the General Assembly, but rather in collaboration with “a collection of people who understand what’s going on in the business world and where the jobs will come from.”
While suggesting that a public-private partnership model would be an improvement over what Delaware has now, Roundtable leaders were careful not to criticize DEDO itself.
Gov. Jack Markell, who asserts that “we’ve been working on a growth agenda throughout our administration,” acknowledges that it may be “worth looking at” a public-private partnership but cautions that “the devil is probably in the details.”
Lavelle echoes Markell’s stance, saying the idea is “worth pursuing” but its merits can’t be determined until advocates “put some meat on the bones” of their proposal.
Baumbach too is willing to consider the concept. “Could we be doing better with [DEDO’s] Strategic Fund? Yes. More partnerships would be wonderful too,” he says.
But Baumbach would be concerned if involvement by the private sector results in a reduction of the level of transparency now required of DEDO as a state agency. “I’m opposed to any loss of transparency and answerability,” he says.
Carney’s economic development plan includes a plank on building Delaware’s innovation economy, which includes a pledge to “develop stronger partnerships between government, private businesses and Delaware’s chambers of commerce.” He would examine how public-private partnerships “might fulfill and enhance the mission of DEDO.”
Progress toward achieving some of the objectives in the Growth Agenda is already underway, especially in the development of an entrepreneurship and innovation ecosystem. As examples, Perkins, Turner and Ward point to the nascent tech corridor growing on Wilmington’s Market Street, from the marketing and graphic design businesses flowering in the city’s LOMA district up through co-working spaces like Start It Up Delaware, The Mill and 1313 Innovation, plus ZIP Code Wilmington, the school that is helping place computer coders in jobs in the state’s booming financial technology community.
Turner envisions a regional innovation hub in New Castle County that might resemble research centers in Boston, Silicon Valley or North Carolina. “Why couldn’t we build a Brandywine Creative Triangle, a Brandywine Research Triangle?” he asks, suggesting a linkage from the DuPont Experimental Station to downtown Wilmington, to Christiana Hospital and perhaps out to UD’s STAR campus in Newark. “The spaces are there, the history is there,” he says. “And it would be creative from the technology, art and economic standpoints.”
The section on the growth agenda’s third major goal—enhancing Delaware’s business climate—attempts to address longstanding issues, including improving the state’s infrastructure and its school systems, expediting development and permitting processes at the local and county levels, improving parks and recreational spaces and making sure the state’s corporate tax structure remains competitive.
Paul Herdman, president and CEO of the Rodel Foundation, an education reform group with strong corporate ties, is pleased that the growth agenda proclaims support for the Student Success 2025 report published by the public-private Vision Coalition of Delaware, on whose board he serves. While the agenda generally endorses a series of education reforms, he notes that it did not discuss reforming the state’s archaic school funding system, an issue that business leaders have been pushing periodically for at least 10 years.
“We need to come up with a more equitable approach to funding,” Herdman says. “Part of it is that we know change is hard. There is concern that we know what the current system does, but we don’t know what a different system would look like.”
The issue, Turner says, “is not necessarily cost alone. Maybe other states are getting a return on investment that we’re not.”
“Other states have been able to move to weighted funding,” which boosts spending in schools with high concentrations of students living in poverty and failing to meet academic targets, Ward says. “The question we have to be asking is why Delaware is one of a handful of states that haven’t changed their formula. We have to change to stay competitive.”
The Roundtable has not laid out the next steps for pursuing its growth agenda, but Turner and Perkins are dedicated to pushing it forward—building new partnerships and strengthening ties with government leaders. Business organizations—the Roundtable, the state, chambers of commerce and the Committee of 100—“are all together in these efforts to make the economy a major focus in the next legislative session,” Perkins says.
Perkins points to a change in key leadership positions throughout the state—a new governor and lieutenant governor in Dover, a new New Castle County executive and a new mayor of Wilmington—as an opportunity to press a fresh agenda with a new set of leaders.
Convincing lawmakers to get on “the right side” of the Roundtable’s issues will require a lot more politicking than it did years ago, he says.
“Instead of bringing one CEO to Legislative Hall, it sounds like I’ll need five,” he says. “Instead of one meeting with a group of legislators, maybe I’ll need a half-dozen.”
For the full text of the Delaware Growth Agenda and the report on Delaware’s Structural Budget Problem, click here.