by James DeChene
Legislators in Dover started their work week Tuesday with the news that revenue projections from DEFAC had once again fallen, with Monday’s report showing a $21.6 million projected shortfall. As a result, money allocated to Grant in Aid and to the Bond Bill was reduced approximately 40% from what Governor Markell had proposed in his recommended budget. The operating budget was finalized by the Joint Finance Committee this week, and now the final Bond and Grant in Aid meetings can start their wrap up into next week.
Also this week:
The House passed HB 396, nicknamed “The Rocket Docket”, which would allow developers of certain projects pay a fee to expedite their review processes through the counties. It now awaits action in the Senate.
Debate in the Senate stalled on HB 308, a bill that would modify worker’s comp exclusivity in work related, employee auto accidents. That bill will resume debate next Tuesday.
The State Chamber testified against a bill mandating contractors, and their subs, have apprentice training programs in place prior to bidding on all state funded projects. Currently the state does not provide approved apprentice training programs for nearly half of the 26 recognized trades, leaving questions as to how any contractor could bid work for those jobs. The legislation also boxes out established, qualified companies due to their size if they do not have the operating budget to constantly take on apprentices. The bill was released from House Labor Committee and awaits action in the House.
Next week will be the last of the 148th General Assembly. Stay tuned for updates on final budget language, last minute movement on bills and the end of session wrap up.
State Senator Karen Peterson announced her retirement this week, to be effective immediately after the end of the 148th General Assembly, July 1st. With a candidate filing deadline of July 12th, those wishing to run face a tight time frame to announce, file and mount an effective campaign.
This week several bills of interest to the business community were acted on. HB 327, the Crowdsourcing Bill, passed the Senate and now awaits Governor Markell’s signature. The bill would allow for Delawareans to invest in startup companies, and these companies can raise up to $1 million. State Chamber supported legislation (HB 418) to correct a funding calculation issue for the Workforce Investment Board training fund was released from the House Labor Committee. It will go to a House floor vote soon. Legislation involving hospitals and care givers was released from the House Health Committee still containing a Chamber opposed amendment stripping liability protections for hospitals where upon discharge the lay caregiver of the discharged patient makes a mistake in care resulting in patient injury. With 6 days remaining this legislative session, and one more DEFAC meeting left to firm up the budget, expect much more legislation to be worked.
Louis L. Redding City/County Building
800 N. French Street
Wilmington, DE 19801-3537
phone: (302) 576-2140
fax: (302) 571-4071
We are pleased to invite you to attend the City to Work Job Fair. Please mark your calendar now to join us on Wednesday, September 7, 2016, for this opportunity to recruit leading candidates in all fields. The job fair will be held at the Louis L. Redding City/County Building from 10am-5pm.
The purpose of this event is to connect you, the employer, with potential employees – our residents. Our residents are an educated, talented and skilled workforce. City to Work is our way of connecting Wilmington residents to employable opportunities while also reducing the cost of businesses to advertise vacant positions. The City of Wilmington hosts a FREE job platform to leverage social recruiting for locally based companies. Please visit Wilmington.TweetMyJobs.com to register your business and post your job openings at no cost.
We look forward to seeing you at the upcoming job fair. You will be provided table space and chairs for your business display (if needed). Let us know if you have any other needs including access to electrical outlets or signage upon confirming your attendance. Please confirm your attendance to Edythe Pridgen at email@example.com by Friday, August 19, 2016.
City to Work Job Fair
Wednesday, September 7, 2016
Louis L. Redding City/County Building
800 North French Street
Wilmington, Delaware 19801
Councilman Darius J. Brown
Third Disctrict, Wilmington City Council
On April 11, 2016, White House officials in Washington launched the Fair Chance Business Pledge, which represents a call-to-action for all members of the private sector to improve their communities by eliminating barriers for those with a criminal record and creating a pathway for a second chance.
Click here to read the Fair Chance Business Pledge.
by James DeChene
Legislators returned to Dover this week working to finalize the remaining bits of business, including the budget, prior to adjourning at the end of the month. Congratulations are in order for Representative Debbie Hudson (R-Fairthorne) and Senator Brian Bushweller (D-Dover) for winning this year’s Small Business Guardian award presented at the State Chamber’s End of Legislative Session Brunch.
Of note this week, was an economic development bill (HB 396) that would streamline the permitting process for any industrial or office project (but not residential or commercial) that did not require a rezoning and would be greater than a certain size (75,000 square feet or would create at least 60 permanent jobs). A special expedited review process would be made available for a fee that would guarantee review and comments from the County within 2 weeks from the initial plan submission, and review and comments within 2 weeks from final plan submission.
There would still need to be a Planning Board hearing, and review by State agencies through PLUS (Preliminary Land Use Service), and this new, expedited process would signal a real commitment by the counties to work with major new employers and demonstrate that the State is serious about economic development and putting an end to what is perceived as an interminable review process that does not compare favorably with surrounding jurisdictions.
The State Chamber testified in support of the bill, which seeks to replicate successes Middletown has seen with companies like Amazon and Johnson Controls, which now goes the House floor for a vote.
by James DeChene
The Mercatus Center at George Mason University released their Ranking the States by Fiscal Condition 2016 report, which compares the 50 states and Puerto Rico, and Delaware was ranked 38th (last year Delaware was ranked 30th). The study ranks a state’s fiscal health based on short- and long-term debt and other key fiscal obligations, such as unfunded pensions and healthcare benefits. Delaware’s fiscal solvency was based on information in five separate categories: cash solvency, budget solvency, long-run solvency, service-level solvency and trust fund solvency.
Unfortunately, Delaware was considered a “big mover.” According to the study:
To be considered a “big mover,” a state must have shifted position by more than five spots between the 2015 and 2016 editions (which use the latest available data, from fiscal years 2013 and 2014, respectively). A change in ranking of five or fewer places is not considered a significant change in the underlying metrics. For the most part, states’ overall fiscal performance remained relatively constant. Only Delaware and Iowa dropped significantly in the overall ranking of fiscal condition.
On a short-term basis, Delaware has between 1.90 and 3.23 times the cash needed to cover short-term liabilities. Revenues cover 98 percent of expenses, producing an operating deficit of $195 per capita. On a long-run basis, Delaware has a negative net asset ratio of −0.03, and long-term liabilities account for 51 percent of total assets. Debt totals $3.02 billion. On a guaranteed-to-be-paid basis, unfunded pension liabilities are $8.03 billion, and other postemployment benefits (OPEB) add a further $5.66 billion in unfunded obligations.
This study dovetails with what the State Chamber, and others, have been warning of for the last few years. While our short-term obligations are currently covered, Delaware’s long-term fiscal health is seriously compromised. Study after study shows that without significant structural changes to the budget, how revenue is collected, and how that money is spent, Delaware faces a crisis situation in the near term.
by James DeChene
When members of the General Assembly return from break on June 7th, they will be facing a $70 million budget shortfall between current revenues and the governor’s proposed budget. The Joint Finance Committee will meet this week and next to continue to iron out what funding will look like this year. It is important to note that the funding wish list in front of JFC totals roughly $160 million, meaning there is almost a quarter billion dollar gap between what legislators have requested above the governor’s recommended budget and what they can afford.
The even more troubling, yet under-publicized, piece of DEFAC’s May meeting forecast is for the negligible economic growth, less than 1% each year, over the next three years. This may be the textbook definition of a flat economy, and is troubling for its long term impact on future budgets. The problem with a flat revenue projection is the state still faces dramatic increases to its costs, most notably in health care expenses, without seeing commensurate growth in available revenues. Close to double digit increases are expected each year for the foreseeable future in that space alone, not to mention potential 30% increases in state funded construction projects if HB 283 is passed this year.
The members of JFC have a tough task in front of them, made more difficult by an election year. The last few years have seen last minute funding battles for programs totaling less than one half of one percent of the overall budget, and this year will most likely be no different. Difficult choices will need to be made not only this year, but also by the next governor and general assembly, on how to jump start Delaware’s economy. The State Chamber, the Delaware Public Policy Institute, The Delaware Business Roundtable and others have ideas we will bring forward for discussion and debate. Building off of the Delaware Public Policy Institute’s study on public employee compensation (found here), expect more focus on areas for successful economic growth and development. We understand there are no easy answers, but we also know that employers across the state have faced similar choices and have had to make their own difficult decisions to adapt and survive.
by James DeChene
Last week was the 2nd Annual Small Business in Dover day hosted by the State Chamber’s Small Business Alliance. Over 50 employers came to Legislative Hall, first to attend a Small Business Caucus meeting, and then to meet with legislators prior to the start of the day’s legislative session.
Attendees heard from Small Business Caucus co-chairs Representatives Daniel Short (R-Seaford) and Quinn Johnson (D-Middletown) about upcoming legislation impacting the business community. In addition they heard from other attending legislators including Ruth Briggs-King (R-Georgetown), Rich Collins (R-Millsboro), Paul Baumbach (D-Newark), Bryon Short (D-Highland Woods), Jeff Spiegelman (R-Clayton), Mike Ramone (R-Middle Run Valley) about the best ways to interact with their legislators. Feedback included favoring personal outreach through either telephone calls or email, and Representatives urged the business community to be vocal about the issues important to them adding that it is important to contact legislators representing both your business and residential addresses. The most important voice in the legislature is yours.
After the Small Business Caucus meeting business representatives had the opportunity to meet with their legislators to make that personal contact and to share stories about their companies. Afterwards attendees were able to watch both the House and Senate go about their legislative business of the day.
If you missed Small Business Day, join us on June 7th for our Small Business Conference & End-of-Session Legislative Brunch. Attended by members of the General Assembly, this is another opportunity to showcase your business and tell the story of how pending legislation will impact your business. For more details visit our website.
By James DeChene
As reported this week in the News Journal, Delaware received unfortunate news from FERC regarding the Artificial Island cost allocation proceedings. The agency has decided not to intervene in the cost allocation debate on whether Delaware rate payers should shoulder roughly 90% of the cost burden of constructing a power line across the Delaware River. Back in December, in response to the claims raised by the Delaware and Maryland Public Service Commissions (Docket EL15-95-000), regarding the cost allocation made by PJM as to who would pay for a new transmission line to be constructed between New Jersey and the Delmarva Peninsula, FERC determined that the cost allocation for Artificial Island filed by the PJM transmission owners may not be just and reasonable. FERC therefore accepted the cost allocations but delayed implementation for 5 months (subject to refund if FERC denies the cost allocation) and established a technical conference with PJM to determine whether there is a certain category of reliability projects for which the solution-based DFAX may not be appropriate and whether another cost allocation method could be established for such projects.
With that 5 month deadline came with it FERC’s response, along with news that the project will now exceed $400 million dollars, an increase of $135 million over last cost estimates. The ruling will be appealed, and the potential for a court case challenging the cost allocation remains prominent.
More details to follow as we know them.
By James DeChene
This week the Delaware Public Policy Institute released a study comparing the compensation packages between state employees and their private sector counterparts, excluding teachers and public safety officers as their compensation and benefit plans may differ from the rest of other state employees. The study found that on average, state employees receive 12.4% less in their paycheck, but that their compensation benefits package, including health care and pension, averages 53-102% over those working in the private sector.
The purpose of the study was not to make a statement as to the role state workers play, their effectiveness or to their necessity. Rather, the intent of the study was to provide budget and policy makers critical information they need to ensure Delaware’s long term fiscal health. It is conventional wisdom that state workers make a little less, but enjoy robust benefits compared to the private sector. The actual numbers surrounding how much is spent on benefits come as a surprise, however. Driven by increases in health care coverage costs and guaranteed pension funding, a large percentage of overall compensation resides in areas requiring reform.
We hope this study is helpful for budget and policy makers to get a true and impartial sense of how the numbers look for over 52% of the budget—personnel costs. Both the Expenditure Review Committee and the Delaware Business Roundtable drew attention to these cost drivers. The State Chamber of Commerce has supported the Markell administration concept of transitioning to Health Savings Accounts for new state employees and to have state employees contribute an increased amount to their health care coverage.
The issues regarding long term financial liabilities the state faces with regards to state employee compensation are not going away, and they will continue to increase each year. This week DEFAC released their economic forecast and state revenues are not expected to increase more than 1% over the next three years. With a flat economy and escalating health care and pension costs, this issue will reach a critical mass sooner rather than later. We urge policy makers to make the difficult decisions now while they are hard versus waiting until they become impossible.
By James DeChene
This week saw the General Assembly return from their Easter break.
Of note to the business community, HB 308 was heard in, and released from, the House Administration Committee on Wednesday. The bill was written in response to a Superior Court decision involving a worker’s compensation claim made by a state employee, who also attempted to collect on the state’s underinsured motorist policy to help cover medical expenses. The court found that the employee was only entitled to collect worker’s compensation and granted the State a motion of summary judgement. However the judge asked for legislative clarification regarding the instances where other insurance policies could be utilized (such as uninsured/underinsured, short-term and long-term disability). The issue at hand is that the legislation is written broadly enough that it potentially impacts private sector insurance rates. The State Chamber testified at the hearing, raising questions as to impact on other insurance rate increases as a result of workers compensation insurance no longer being exclusive. The bill now heads to the House floor after the JFC/Bond Bill hearings break for a full vote.
Until next week…
James DeChene is the Chamber's Senior Vice President of Government Affairs.