Election Day approaches, and longtime political activist and pundit James Soles would like Delaware’s gubernatorial candidates to put money where their mouths are.
The men who would be governor have spent hundreds of hours and millions of dollars touting their plans for everything from alternative energy to prison health care. What they don’t say, Soles points out, is where the money needed to pay for those nifty ideas will come from.
“We need to ask them, What are their revenue enhancements?” Soles says. “It would be a good exercise for the two candidates to take the budget crisis and tell us what they would have done if we didn’t get that $63 million at the last minute. Give us some hard facts.”
State lawmakers spent the final months of last session cutting programs and services while deciding which taxes to increase, not only to balance the state’s fiscal 2009 budget, but also to deal with a $136 million hole in the ’08 operating budget.
A surprise 11th-hour windfall of $63 million (a corporate tax payment) helped ease some pain, but many legislators emerged from the session saying the budget process was the most difficult they had faced in years.
With the national and state economies continuing to slump, the new governor, lawmakers and budget writers may find themselves back in the same leaky boat.
“It’s like an analogy of a family,” says House Majority Leader Richard Cathcart. “They either have to cut the budget or go out and find a part-time job.”
Where will the money come from? What programs and services will get the ax? Those will be the $3 billion questions when our 73rd governor is sworn in January 20.
The swearing likely won’t end there, though, as the state’s new executive officer and legislature consider everything from revenue enhancements to jobs, education, crime, the environment and (insert your pet issue here).
The economy, however, may wind up getting the most attention. Pete Ross, who served as state budget director under governors Tom Carper and Ruth Ann Minner, says tight budgets require tough decisions. For example, he says a new facility to replace the aging Delaware Psychiatric Center would cost $100 million. “That’s two or three elementary school buildings. How do you choose between the two?”
“The candidates have a long list of things they want to do, but we know they’re not going to live long enough to do them,” Soles says. “It comes down to priorities. In a sea of suggestions, what becomes most important?”
Page 2: Economic Development and Jobs
Economic Development and Jobs
Last year, Delaware uncharacteristically experienced the slowest growing economy in the United States. In fact, the First State’s economy shrunk by 1.6 percent, according to the U.S. Bureau of Economic Analysis, thanks to a decline in the finance, insurance and construction industries.
Another sign of the times: The state’s unemployment rate—which usually holds steady in the low 3-percent range, far below the rest of the country—skyrocketed to 4.4 percent by summer’s end.
Conventional wisdom links jobs with the economy. More jobs mean more people are spending money and paying taxes, which boosts the economy and helps government pay for services.
Delaware’s employment outlook is far from rosy. The Chrysler plant in Newark is expected to shut down next year, taking more than 2,000 jobs off the rolls. Many fear the GM plant in Newport may not be far behind. Throw in recent mergers and consolidations in the banking industry. The trend has been the deletion of jobs.
“The state is going through a paradigm shift,” says Sherman Miller, a college professor and political commentator who ran for lieutenant governor in 1996. “At one time we were predominately blue-collar jobs with GM and Chrysler. Then we went to white collar with the banking industry. The banking industry is teetering on collapse. Let’s be honest. What is the next wave of jobs going to bring to Delaware? How are you going to employ these folks for the next four to eight years?”
How to Make it Right
“For any governor, job one is to nurture a strong economy and keep the job engine running,” says U.S. Senator Tom Carper. “A major role of the government is to create an environment of job creation and retention. The governor in this state can be not only the architect, but also the designer and the nurturer of that environment.”
Carper says the state must preserve its strengths while recruiting new business. Those strengths include agricultural and manufacturing jobs, legal services and the Port of Wilmington. He says biotechnology and health care should be expanded.
“UD expressed an interest in acquiring the Chrysler property and creating an incubator for business and employers for technology that grows out of UD,” Carper says. “Fox Chase Cancer Center (in Philadelphia) has expressed an interest in expanding into Delaware. There’s an opportunity for a partnership involving Christiana Care, UD and Fox Chase. Delaware could be a center for preventing and curing cancer.”
Because the demise of the Chrysler plant seems to be imminent, Carper says, the next governor needs to focus on keeping GM here. “For every job at GM, five are created in the community,” Carper says.
Frank Calio, former director of the Sussex County Economic Development Office, puts the onus on the Delaware Economic Development Office to create or attract quality jobs.
“There will have to be a real aggressive effort by DEDO, including expanding their staff,” he says. “The state is going to have to give some incentives.”
The Financial Center Development Act of 1981 made the state’s laws friendlier toward banks by, among other mechanisms, eliminating consumer rate restrictions. Thus began a long, successful ride with MBNA and other top credit card issuers. With its relatively low corporate tax rates and the business-friendly reputation of its Court of Chancery attracting dozens of Fortune 500 businesses, Delaware was dubbed the corporate capital of the world.
Some experts fear that nickname won’t be accurate much longer, especially with discussions of creating national corporations and the potential for other states to follow Delaware’s model.
“We’re losing our competitive edge in legal circles because other states have found out they can copy our laws,” says Chipman L. Flowers Jr., a corporate law attorney and politico. “If (national corporations are formed), Delaware could be in jeopardy—the legal and business side. We have to be on the forefront of sea changes. We’ve been reactionary, but we need to be proactive.”
James Wolfe, president and CEO of the Delaware State Chamber of Commerce, says Delaware needs to become even friendlier to business. The chamber is pushing to drive the state’s entrepreneurial environment, but Wolfe says state government must first clear the way for that to happen.
“We have 200 angel capital folks ready to put money into small business, but businesses are reluctant to come here,” Wolfe says. “We’re continually in the top 10 in cost of doing business because of wages, energy and health care.
“Workers comp was hurting us, but it looks like we fixed that. Now we need to get health-care costs down, for businesses especially. And we have to find ways to bring down the costs of energy.”
Though most agree that new businesses are the solution to providing jobs, no one claims to know what the next big thing will be. Former Governor Pete du Pont, who was instrumental in creating the Financial Center Development Act, says the future could be in high-tech.
“The Financial Center Development Act spoke to a whole industry,” du Pont says. “I don’t know what that would be today. A technology industry? Internet industries? We have to find what it is companies worry about in other states and fix it here.”
Some believe there is no one-shot solution, says Tom Noyes, who has worked in city government, served on numerous political campaigns and maintains the blog TommyWonk. “There may not be a home run out there for the next governor. It may be several things.”
Page 3: Fiscal Policy
Demand for services is greater than ever and revenue is down.
“If the national economy stays where it is now, I don’t want to speculate, but Delaware’s revenue is based on personal income tax and lottery revenues. There’s a real chance they’re going to deal with revenue issues in January,” says lobbyist Robert Byrd, chair of the Delaware Economic and Financial Advisory Council, the group that provides revenue estimates to the state.
“If revenues continue to decline, we face some of the same challenges as last year, but hopefully not as dramatic,” says Cathcart, a member of the legislature’s “Big Head Committee,” which helps formulate the state budget. “The challenge is when you cut that deep, it impacts social services, jobs and education. We tried to make sure we didn’t cut social programs and lay off any current state employees. We eliminated some jobs that were vacant. How far do you go without doing a personal income tax increase?”
Ross, the state’s longest serving state budget director, recalls a similar situation when Governor Ruth Ann Minner was forced to impose a hiring freeze on state jobs in 2002.
“Compared to when Minner came into office, my impression is this is more difficult and a bigger challenge,” Ross says. “It looks like the challenge is going to be around longer. That’s why you have to keep an eye on what the long-term economy is going to be. It looks like it’s going to be not a two-year problem, but a multi-year problem.”
How to Make It Right
Most agree the state must find new revenue sources and spend wisely. According to the Tax Foundation, Delaware ranks third in the United States in state spending per household at more than $20,000 each year.
“The first thing the next governor must do is take a hard look at the budget,” Noyes says. “He’s going to have to look at that before he does anything else. If the budget’s not working, there’s not much else.”
“You have to either cut the budget or raise revenues,” Byrd says. “Raising taxes is a possibility. I think it’s difficult to cut the budget. Eliminating programs is not a pleasant thing to do.”
Cathcart says the new governor and the legislature will need to work closely to find other revenue sources. He says budget cutting could “possibly mean reorganizing state government” by looking at staffing of various departments, consolidating services, looking at whether services are duplicated and eliminating positions. The Big Heads may need some Big Aspirin.
“Coming back, we may have to bite the bullet and start laying employees off,” Cathcart says, “or consider a tax increase and look deeper into the corporate side and personal income taxes.”
The state chamber, for one, does not see taxing businesses as fiscally responsible.
“The problem the chamber has is the first place the government looks is raising taxes,” Wolfe says. “That’s not the way to do it. You can’t tax the place to death and be prosperous. Spend prudently and get rid of waste. The next governor needs to do a total review of all government services to see if they’re all viable or should they go by the wayside.”
One potential revenue source that took a spin through the process last session was sports betting. The measure was passed 28-10 by the House before bogging down in the Senate Finance Committee.
“Sports betting could get a much more receptive hearing this time,” says John Flaherty, a veteran Delaware lobbyist and watchdog. “It’s like when Castle vetoed slots, then Carper came in the next year and didn’t do anything, so it passed.”
Another option could be the addition of table games to the slots casinos or taxing the oil industry, Cathcart says.
Some observers feel fiscal responsibility on the part of government is considering the big picture.
“Government is always so reactive,” says Dana Garrett, a political observer who produces the blog Delaware Watch. “We react to emergencies. When there’s a budget crisis, we do things to patch up the problem. We need to look several years down the road and prepare so there is not a crisis.”
Ross says balancing demand is key. “Everybody says cut, but they never tell you what to cut,” he says. “It takes a strong governor to be able to say, ‘I understand that makes sense, but we can’t afford it.’”
Page 4: Education
“Despite great efforts like Vision 2015 and other projects, something is going wrong with education,” says Flowers. “Charters are increasing, as are the number of children going to private schools. The money is going with them. At the same time, who is getting left behind? If you don’t have a sophisticated workforce, businesses won’t look at Delaware as a good stop.”
Delaware spent $1.3 billion on education last year, about a third of its operating budget. That figure doesn’t include money in the capital fund for school construction.
Critics of the public education system say we’re not getting the bang for our buck. According to the National Center for Education Statistics, Delaware ranks eighth in the United States in student spending but ranks 27th in reading and mathematics performance.
“Delaware is in the middle of the pack in the United States for performance of schools,” says the state chamber’s Wolfe, one of many business leaders behind the Vision 2015 reform movement. “You may look at that and say, ‘Not bad.’ But if you look at the world, the U.S. is in the middle of the pack. Delaware’s economic success is based on education. Doing the same-old same-old is not going to work anymore.”
In other words, the standards-based reform that the state has been tweaking for years isn’t doing the trick. Simultaneously, the state has been forced to keep pace with the No Child Left Behind Act of 2001.
According to the U.S. Department of Education, 135 of Delaware’s 229 public schools are making adequate progress, which is 0.3 percent higher than the rest of the country. Yet only 30 percent of Delaware eighth grade students meet national standards in reading and mathematics.
The Delaware Student Testing Program, which the state uses to gauge student performance and hold students, teachers and schools accountable—under fire since Day 1—appears to be endangered.
In a move to save $1.5 million, the legislature last session pulled some teeth from the DSTP, including funding for summer school, improvement programs and re-testing for the remaining two years of the contract. Gubernatorial candidates have vowed to trash the program, and many legislators are with them.
Other issues, none new, include recruitment and retention of quality teachers, teacher pay, closing the achievement gap, increasing early childhood education, dealing with non-English speaking students, the battle between charter schools and public schools, and Vision 2015.
The person who has helped steer the state Department of Education through all of this for the past eight years, Secretary of Education Valerie Woodruff, will retire at the beginning of the year. This comes as Congress considers reauthorization of the Elementary and Secondary Education Act, of which No Child Left Behind is a part. The revised act would likely include tweaks.
“When that happens, the new administration will have a whole new view of the world of what that means for Delaware,” Woodruff says. “If it’s what many of us have worked for, it will be better. If it doesn’t get done in a logical manner, it could be more of a challenge than the system we’ve been dealing with the last several years.”
How to Make It Right
“We can be proud of what we’ve done, but we can’t be satisfied with it,” Woodruff says. “We’re closing the achievement gap on (the National Assessment of Educational Progress). We can’t say we’re OK. What more can we do to strengthen that? How do we ensure that students who need more get it? That goes back to overall funding for education.”
Therein lies the rub. Some say Vision 2015—with a goal of creating a world-class school system—will do the trick. But to date, the legislature has put no funding specifically toward the movement. The vision has remained focused so far thanks to funding from the business community.
That’s why it’s time for reassessment of property values, says Woodruff. That would level the playing field between wealthy school districts and smaller, less well-to-do districts such as Woodbridge.
“We have to set the baseline and level the opportunities across the state for districts to be comparable,” she says. “What do we need in terms of dollars and cents? It’s just not fair to the children of Woodbridge or a similar district.”
Many observers, such as Carper, would like to see the state follow the Leadership for Education Achievement in Delaware study that was commissioned to help save money that could be put toward Vision 2015 initiatives. The LEAD Committee came up with 16 ways for the state to save up to $158 million dollars a year.
Soles, who once worked on a program that sought to improve Philadelphia’s public schools, subscribes to one of the tenets of Vision 2015: more power to principals.
“We found that the quality of the principal and the principal’s relationship with the community is key,” Soles says. “In one district, a principal can’t pick an assistant principal. Give the principal more authority. They are the key to the school.”
Soles would also like to see school board members held more accountable, especially in light of the budget crisis at Christina School District a few years ago. School board members in Delaware currently serve five years. Soles would like to see them run for election, staggered, every two years.
“I’m not talking about new programs, not new money, but holding school boards more responsible,” Soles says. “We are spending a lot of money per student, so much in many instances that you can send that student to private or parochial school.”
Woodruff says teachers should be compensated according to experience and incentives rather than length of service.
Critics of the charter school movement say it is taking students and funding from public schools. Woodruff’s concern is deciding when to take action on charter schools that are struggling. The legislature last session passed a resolution placing a moratorium on new charter applications, in part, so these issues can be sorted out.
Du Pont sees the charter movement as a win-win. “The Bill and Melinda Gates Foundation says Delaware’s high school graduation rate is around 60 percent,” du Pont says. “That needs to be strengthened and we need to give people more opportunity in choosing schools they want, Moms and dads have a lot of feeling for what their kids should learn. Charter schools provide competition. Public schools are having to meet that competition.”
Page 5: Growth and Sprawl
Growth and Sprawl
Growth brings revenue. Uncontrolled growth brings revenue—with traffic jams, crowded classrooms and less open space.
The problem in Delaware, say those against unbridled development, is that land-use is managed by the counties, but the state (meaning taxpayers) has to pay for infrastructure. Counties are accused of catering to the construction industry by allowing development outside of established growth zones where sewer, water and other infrastructure already exist.
“The developers get their way because there’s money to be made,” says Alan Muller, of the environmental watchdog group Green Delaware. “The key is the counties make the land-use decisions, but they don’t pay for the consequences. They don’t build schools and roads.”
Last summer the Appoquinimink School District, which serves the Middletown-Odessa-Townend areas, grew by nearly 600 students. That’s equal to the population of an entire school. Most of those students likely came with their families from other states to enjoy the low property taxes, central location, large homes and yards, and the celebrated public school system in Southern New Castle County.
The district has been forced to pass referendum after referendum to build schools to keep pace with the growth. While most folks won’t be happy with the added traffic congestion and other problems new residents help create, local governments are thrilled to have the additional tax revenue.
A growing retirement population and those purchasing second homes along the coast create similar issues in Sussex County. Calio, former head of the economic development office in Sussex, says growth is necessary, but agrees it should be controlled.
“If you address it from the view of government, government continues to grow,” Calio says. “You can’t sit still. In Sussex County, we had no tax increase because the economy grew by 3 percent or more each year. That fueled what was needed to pay for the cost of government.”
Most would like a happy medium. “In Delaware, the development bill has come due,” says Garrett. “We’ve squeezed every inch out of the northern part of the county. Now we’re doing that in Southern New Castle County. It’s almost a tenet of faith that we need to grow. It would be great to hit upon sustainable development rather than rapid development.”
Noyes puts it succinctly: “If we keep going, we’re going to sprawl on out to our neighboring states.”
How to Make It Right
Some say we should hold counties more accountable for willy-nilly approval of development outside established growth zones. Others want to close the state.
“The people who approve development should have to pay for the consequences, short and long term,” Muller says. “Establish connections between authority and responsibility. That has been traditionally dealt with by giving the state a veto or quasi-veto. Let the counties be in charge of land use, but let them pay for roads, schools and make sure each subdivision has access to light rail.”
Better yet, Muller says, shut it down for a while. “All three counties did their comprehensive land use plans in the past couple years,” he says. “New Castle County said 80,000 more people are coming in the next however many years. Where are we going to put them and how are we going to provide jobs? I said, ‘Why should we assume this? If we don’t build it, they won’t come.’ That didn’t go over real well.”
John Hughes, secretary of DNREC, would like to see the state put more money into preserving open space.
“We used to have a generously funded land protection program,” Hughes says. “We had $10 million a year for property acquisition. Now $10 million won’t buy an oceanfront lot. It won’t buy squat these days. I’d like to see the land preservation fund change from fixed dollars to a transfer tax percentage. When the property value goes up, the tax goes up.”
Page 6: The Environment
Some of the top polluters in the United States are spewing right along here in Delaware. The Valero oil refinery in Delaware City and the NRG Energy power plant on Indian River have taken measures through the years to clean up their acts, but the very nature of what they do results in the release of toxins into the air, land and water.
Studies have identified eight areas where residents are diagnosed with cancer at a higher-than-normal rate—including a large one near the NRG plant—but the report stops short of identifying causes.
Hughes has been credited as making great strides in working with polluters, but critics say he and the state have not taken a tough enough stance.
“I think Delawareans’ concerns over toxics and air quality are a major issue for anyone to contend with,” Hughes says. “We may have decreased local emissions by 90 percent, but the air coming into Delaware is noncompliant (with EPA requirements). If we stopped polluting our own air now, we’d still get stuff from the Midwest.”
Environmentalists and members of the green movement look at the approval of Bluewater Wind’s plans to generate electricity from turbines off Delaware’s coast as a step in the right direction, but only a baby step in the search for clean, sustainable energy.
Making the inland bays more swimmable and fishable is another perennial environmental dilemma that activists feel requires more attention than an annual white-sneaker dip by the governor.
Another longstanding attention-getter is the potential deepening of the Delaware River channel to allow larger ships to reach ports in Pennsylvania and New Jersey. Opponents say the dredging would not help Delaware and are concerned with potential toxins in the spoils and where those spoils would be placed.
Activists continue to push other issues, such as getting power plants and refineries to use cooling towers rather than current methods they say kill millions of fish in the inland bays and Delaware River. There’s also the matter of cleaning up after existing and extinct chemical companies, including DuPont’s infamous dioxin pile along the Delaware in Edgemoor.
“We still have lots of stuff to clean up,” Noyes says. “We still have some really dirty industrial installations in Delaware. We have to make progress cleaning up not just what they emit in the air and water, but what they leave behind.”
How to Make It Right
Hughes says compliance with the federal Clean Water Act is a start.
“We know every one of the 41 watersheds in Delaware is impaired in one way or another,” he says. “After nine years of trying to develop a pollution control strategy for the inland bays, we don’t have one. It’s under heavy pressure right now. One is the opposition by the Positive Growth Alliance, which doesn’t want any strategies whatsoever, in my opinion. But this is federal law. It will be done, but I don’t know when. We could complete it in this administration, but it could be litigated.”
Of course, environmentalists would love to see refineries and coal-fired power plants shuttered. Because they realize that won’t happen, they want the corporations to spend the money needed to make them operate as efficiently and cleanly as possible until alternative energy sources are developed.
“NRG is a big plant down here on the Gold Coast, where we’re selling the environment,” Hughes says. “It might be good jobs and environment in the other two counties, but in lower Delaware, people are here for the beaches and the inland bays. That plant has got to clean up and it will, but it won’t happen over night. It’s expensive and they provide a necessary commodity.”
Hughes would like to see DNREC become more active in the green movement. “It’s time to move strictly regulatory bodies, most especially DNREC, to value-added, incentive-based environmentalism,” he says, noting the agency’s Super Green program that is being studied in Sussex County.
The voluntary program encourages developers to apply environmentally friendly practices to such features as stormwater and wildlife management, forest and stream restoration, and recreation.
Muller is anxious to see who the next governor chooses to lead DNREC and other state agencies.
“The government has been damaged in Delaware by Minner’s way of appointing hacks and cronies,” Muller says. “At DNREC, the new governor needs to appoint someone to get a grip on things, shifting priorities and policies.
“Global warming is real,” Muller says. “Delaware is a low-lying state. We should be a leader in advocating action—shutting down coal and building wind and solar—not to please environmentalists like me, but to keep Delaware from disappearing.”