by James DeChene
This week saw the confirmation of former DEDO director Cerron Cade to fill the vacant Secretary of Labor position. The Chamber looks forward to working with Secretary Cade in this new position on issues important to the business community.
Also this week, HB106 was released from committee, which would add two additional personal income tax brackets at $125,000, with a rate of 7.10%, and an additional bracket of $250,000, with a rate of 7.85%. The State Chamber spoke against the bill, noting that it would add volatility to Delaware’s revenue collection at a time when efforts are being made to make Delaware less reliant on volatile sources of revenue. This reliance has an increasing deleterious impact on the State’s long-term sustainability.
Governor Carney released his recommended budget, an increase of 3.49% over last year, which calls for increased spending on education, public safety and making investments in economic development and workforce development. It also includes an increase in the bond bill, along with $100 million in cash as one-time money for projects. Door openers, including class room growth, employee pensions, child care and transportation, were about $60 million in increases.
It also includes:
$12.5 MM — strategic fund
$2 MM — Prosperity Partnership
$9.6 MM — research collaboration
$19.5 MM — high education capital construction
$391.1 MM -- DELDOT road systems
$6 MM — clean water/drinking water
The Chamber will be monitoring ongoing budget discussions and will update you with pertinent info.
The General Assembly returns next Tuesday with a full plate. Work will commence stemming from taskforces that met over the summer and fall, which include school district redistricting and changes in funding models, and the legalization of recreational marijuana. Thrown into the mix will be legislation to raise money to invest in clean water infrastructure, incentivize angel investors to provide capital to small startups in Delaware, and the fight on minimum wage legislation will no doubt continue. These bills, and ones to come, will be the focus of the Chamber this legislative session, along with continuing to implement legislation passed last year—namely the Delaware Prosperity Partnership and the regulations surrounding modernizing the Coastal Zone Act.
In addition, the Chamber will be involved in ongoing budget discussions as the Administration and General Assembly continue to search for ways to address Delaware’s long term economic growth and sustainability. What will be interesting to see this year, is how the Federal tax plan will impact Delaware. Much of what was contained at the Federal level was proposed at the end of last year’s session to help fill a $350 million budget gap, including increasing the standard deduction, reducing itemized deductions, and modifying personal income tax bracket levels. If the projections the state Department of Finance provided last year hold true, that could mean big money for Delaware coffers, and reduce the chances for last minute budget battles this year.
All this, and more, to come. Stay tuned.
by James DeChene
June 7th was the Chamber’s End of Session Legislative Brunch held at Dover Downs. Over 200 attendees heard from Ed Ratledge, Director of the Center for Applied Demography and Survey Research at University of Delaware, and Bob Perkins, Executive Director of the Delaware Business Roundtable, on issues impacting Delaware, the state budget going forward, and how best to foster economic development growth. Among the highlights were items previously mentioned in this space:
Attendees also heard from Senate President Pro Tempore David McBride and Speaker of the House Pete Schwartzkopf, who highlighted the state’s budget issues, their respective positions on economic development legislation, including modernizing the Coastal Zone Act, and the reorganization of the Delaware Economic Development Office. They also stressed the need for increased revenues to fund health care and education, the state’s two fastest growing expenses, which together account for over half of the budget. Their remarks adumbrated the potential for further revenue increases beyond the Governor’s proposed 50-50 split of new revenue and expense reductions.
The House Natural Resources Committee voted 9-1 to release HB 190, a bill to modernize the Coastal Zone Act. It will face a floor vote next week. The hearing featured passionate testimony from both supporters and opponents, with supporters focusing on the need for the redevelopment of industrial sites currently a blight on Delaware’s landscape. Chamber President Rich Heffron suited up (literally and figuratively) to deliver the Chamber’s position of support. More updates to come next week as the bill continues to see action.
By James DeChene
This week JFC met and voted to cut about $33 million from state spending, including eliminating the State Board of Education. Future meetings, and the process, have been put on hold until legislators pass a series of revenue packages equal to approximately $190 million. To date, the House has passed a measure to raise the Corporate Franchise Tax by $115 million, where it now faces action in the Senate. As has been discussed a, 50-50 split between new revenues and spending cuts concatenate to form the mechanism to balance the budget.
Next week the General Assembly returns for June, with 13 legislative days left until the end of session on June 30. There are a number of hearings next week important to the business community, including HB190, which would update the Coastal Zone Act, a State Chamber of Commerce legislative priority. Also in committee will be a bill related to escheat that provides a number of technical corrections to SB13, an escheat bill passed earlier in the year.
by James DeChene
This week the Sussex and Kent County Advisory Committees met. In Sussex, attendees heard from DELDOT Secretary Cohan, who gave an overview of pending infrastructure projects across the state, particularly across Sussex. Updates included hearing the latest timeline for the 301 project, plans to improve Rt. 24 and Rt.9, and how the Lewes Transportation Improvement District is working to improve beach travel.
At the Kent County meeting, along with an overview of pending legislation in Dover, members enjoyed a gemütlich conversation on the recent Kent County Economic Development strategy session to help make Dover, and the surrounding areas, an economic development powerhouse for Delaware.
JFC continues to meet to formulate the state’s budget. So far, cuts have been made to the senior citizen property tax credit, along with a few other programs. Meetings continue into next week, and then the General Assembly goes back into session on June 6th for its sprint to the finish for this year.
Don’t forget our upcoming End of Session brunch on June 7th. It’s a great way for members to develop a healthy gemeinschaft with their elected officials and other Chamber members.
By James DeChene
This weekend the News Journal reported on a lawsuit brought by Belgian scientists whose stock in their company was escheated ultimately to Delaware resulting in a $12 million dollar loss for each. This is the latest in a series of lawsuits brought against the State of Delaware involving how abandoned property is collected and treated, and follows in a long line of cautions the State Chamber has relayed to the Department of Finance and the Secretary of State’s office.
At issue here is how property, in this case stocks, are classified as abandoned. If an account holder does not make contact with their financial institution every three years, the assets can be considered abandoned and reported to the State for collection. Again, in this case, it appears that the account holders were holding onto the stock long-term, and would have automatically benefited from their company’s merger with Merck, which would have borne a significant financial boon to the pair. Instead, the State paid them the market value of the stock at the time of escheat, which was significantly less than the future value they would have seen. The lawsuit brought against the State claims that the escheating of funds such as these is unconstitutional under both state and federal law.
As of now, abandoned property represents approximately $550 million, or 14% of Delaware’s operating budget. Its continued existence faces an uncertain future in light of the mounting litigation against the State of Delaware, with no ready alternative poised to take its place should the program be deemed unconstitutional.
By James DeChene
The State House of Representatives today took the first official step in reaching a proposed $100 million total infrastructure deal. Tasked by Governor Markell to find $50 million, the first bill in a package of legislation was heard in, and released from, the House Revenue and Finance Committee.
Why is this important? Delaware’s infrastructure is suffering from a lack of investment over the years due to a number of factors, including a tough economy, cars and trucks getting better fuel mileage (less gas tax paid at the pump), and the number of projects outstripping overall funding (DELDOT faces a $800 million shortfall over the next 5 years as projects continue to pile up).
The money in the state Highway Trust fund goes to more than just roads. All projects undertaken by DELDOT are funded through the HTF, including rail, bridge, road and drainage pipe work, among others.
HB 140 raises $23 million in new revenue by raising .5% the fee paid on the sale of automobiles, along with a range of DMV fee increases. The bill will be heard on the floor tomorrow, where it will be voted on by the House. The next steps, if passed, are to go through the Senate committee and floor vote, where it will be signed by the Governor.
2 remaining pieces are awaiting action, including the transfer of DELDOT operating expenses out of the Highway Trust Fund and into the General Fund, as well as some sort of tax on gasoline, either at the wholesaler level, or at the pump.
by James DeChene
The General Assembly is currently enjoying a two week break for Easter, and is due back in Dover on April 21st. On the hearing docket that week is a bill dealing with “Chemical Concerns and Flame Retardants” that has raised concerns from the Chemical industry, and there are hearings scheduled for both the Senate Banking and Business Committee and House Economic Development/Banking/Insurance/Commerce Committee, but no agenda has been set. Budget issues are still being sorted out, and other business related legislative activity expected this spring includes a proposal to change the corporate structure of businesses related to fee-shifting, a second bill dealing with escheat, along with another slate of education related bills. April and May will prove to be busy, all gearing up for June madness. More to come.
James DeChene is the Chamber's Senior Vice President of Government Affairs.