by James DeChene, Armitage DeChene & Associates
This week Governor Carney released his 2021 Recommended Budget. Some items were already covered in his State of the State, including a $50 million investment in clean water, and $50 million to build a new school in Wilmington and upgrade existing city schools.
The Governor also reiterated his commitment to holding budget growth with an eye on the future by keeping growth below the DEFAC benchmark (under 4% for this year). While our economy is currently strong, the budget continues to set aside money for the future ($161 million in total—just under $40 million this year) and using one-time money for one-time projects. The bond bill appropriation is the highest ever, with over $892 million allocated to capital improvements.
Other items include:
• $180+ million in school construction/deferred maintenance around the state
• $20 million to the strategic fund
• $10 million transportation infrastructure fund, which the Chamber supported enabling this legislation
• $10 million to graduation lab space for innovators at UD/Experimental Station to move into as they grow from start-ups to needing lab space
• $10 million site readiness, which is based on Chamber-backed “Ready in 6” permitting reform provisions
Also this week were a pair of bills sponsored by Rep. Baumbach, and he’s batting .500 as far as State Chamber support goes. The first, HS1 for HB80 modifies his Earned Income Tax Credit legislation the Chamber has supported in the past as a way to provide low-wage earners a refundable tax credit. This approach has proven to put money in the pockets of workers, without the associated job losses of a minimum wage increase. The bill has been released from committee and now awaits a House vote. The Governor has indicated he is inclined to sign the bill if passed.
The other bill, HB288, would enter Delaware into a multi-state compact wherein Delaware would be precluded from offering incentives to attract businesses to Delaware currently located in a compact state. This puts Delaware at a direct disadvantage with surrounding states, and municipalities such as NYC that will continue to be able to utilize incentives to attract businesses to their locations.
The General Assembly will be off for the next 5 weeks as the Joint Finance Committee and Bond Committee meet to start marking up the 2021 budget.
by James DeChene, Armitage DeChene & Associates
The big news this week for State Chamber members was Governor Carney and House Majority Leader Longhurst announcing a $50 million investment in water infrastructure projects in Delaware. From storm water, waste water, drinking water and flood abatement, these issues will see over $100 million in funding, once matching funds are added. The State Chamber has pushed for a Water Infrastructure bill like this for a number of years. This level of funding will cover the next 5-10 years, instead of having to go back for money year after year. With longevity like this, projects can be bid on/completed in a thoughtful way. This also creates the ability to lump projects together to see more value for money being spent and more efficient, larger outcomes. The State Chamber sees this as how infrastructure money should be used and a great use of one-time money by the Carney Administration. Moreover, this bill not only addresses drinking water in areas like Ellendale and Blades but also flooding downstate and stormwater remediation upstate.
The Governor also announced $50 million to build a new school and upgrade current schools in Wilmington. During his State of the State address he outlined how the money would be spent. The school would replace Bancroft School and includes funding for major renovations to Stubbs Early Education Center and Bayard School, the two other Christina facilities in Wilmington.
The Governor also announced plans to create a One Stop website for citizens where they can buy park passes, register to vote and more, much like the recently created One Stop site for businesses. He is also creating a Site Readiness Fund to help quickly convert properties to meet the needs of prospective employers and expanding the EDGE grant program to support small business.
Other items of note include a proposed renewable portfolio standard of using 40% renewable energy by 2035, and planting a million new trees across the state.
A reminder that next week will see the budget proposed by the Governor, a starting point for the General Assembly. The Joint Finance Committee will be meeting later this year to write their budget and it remains to be seen what of the Administration’s proposals will make the cut.
More on the proposed budget and what it contains next week.
Let’s retrain Delaware’s most vulnerable workers
by Michael J. Quaranta
Exasperated, I yelled out, “I’m calling an electrician!” because my frustration level reached a boiling point. While I can handle simple electrical tasks, I’m not interested in hurting myself or causing a real problem by taking on a project beyond my “happy homeowner” skill-level.
I’m a baby boomer. As I observe many in my generation entering their retirement years, I’ve noticed critical job shortages developing, and getting an electrician to my home was a real chore. This shortage is likely the result of a generation regularly extolling the benefits of a college degree. Personally, I am living proof that a university education has its advantages. However, our years of zealous promotion of four-year degrees came at the expense of the building trades and other very important professions.
For years, people advocated for a higher minimum wage for workers in entry-level or low-skilled jobs. They argue that those low wages are not enough to sustain a family, and in 2020, they’re not wrong. However, these jobs and their minimum wages were never intended to do that; these were entry-level, part-time positions that were a supplement to your other income or a way to develop a work history as a new entrant in the job market. Changes in our economy and worldwide competition have impacted the workforce and created a labor market where some people are simply stuck in low-skill and low-paying jobs.
The solution cannot be to artificially raise the minimum wage to $15 per hour. Doing so will increase labor costs and accelerate the time in which businesses turn to automation and technology and permanently eliminate low-skill jobs. We worry that youth unemployment will rise because older, more experienced workers will compete for similar, higher starting pay, resulting in our youth losing out on valuable opportunities to gain work experience.
Wage escalation is another real concern. A long-term employee, presently making that same $15 per hour as a new hire, will demand a wage boost because their tenure, experience, reliability and performance is sure to have a value higher than a new employee. This escalation of wage increases will force many businesses to make hard, personnel decisions they might not otherwise have to make.
Some businesses may sell goods or services in a very competitive marketplace where charging more for what they sell, to cover increased labor costs, is not an option. Even if it were an option and prices go up for everybody, the very people who benefit by a higher, minimum wage will also be charged more for goods and services. Unfortunately, higher prices would negate any economic lift that may have come from higher wages.
The real solution is to train people for higher wage, in-demand jobs where growing vacancies exist. These jobs typically pay wages and benefits higher than what’s proposed and possess long-term career opportunities with even greater rewards. We need skilled tradesmen and women, health care workers to assist a growing and aging state population, and information technology specialists to manage the tech at our hospitals, banks and on manufacturing floors.
There is a significant population in Delaware of underemployed workers that require additional skills training in order to improve their career trajectory. In conversations with businesses and training providers, we believe a model exists for high-quality training with positive results.
The State Chamber is proposing a multi-million-dollar investment by the State that would cover training costs for several hundred trainees per year and provide for living expenses while someone is in school. This support removes the barrier most underemployed believe is standing between where they are and where they hope to be.
Specifically, an eight-hour day, five-day week approach allows for a compressed schedule to ensure graduates make a transition quickly and efficiently. We worry that without focusing on this problem now, thousands of Delawareans will go from underemployed to unemployable in a matter of 7 to 10 years.
This is a classic ‘win-win’ proposition. As taxpayers, the increase in Personal Income Tax (PIT) people pay as they earn higher wages, returns more of our investment over time. The diminished need for social services, and hopefully the avoidance of the kind of trouble frequently associated with unemployment or underemployment, benefits us all.
When the next recession hits, some economists believe it will last longer than typical and could impact Delawareans without marketable skills for years. Knowing this, we need to take concrete steps to train as many underemployed people as quickly as we can or risk that they become unemployable. Doing so will make a lasting change in their lives and be of benefit to us all.
by James DeChene
This week saw the return of the General Assembly into the second leg of the 150th General Assembly. As a reminder, all bills that were active last year, remain so, meaning bills like raising the minimum wage and legalizing recreational marijuana are still alive and kicking.
Speaking of which, this week also saw a rally at Leg Hall by members of SEIU, a service employees union, calling for raising Delaware’s minimum wage to $15 per hour. As you may recall, the State Chamber has engaged on this issue highlighting the need for investments in skills training for low-skilled workers to retrain them into careers with growth potential. It has been, and remains, the policy of the State Chamber that arbitrary increases to the minimum wage place pressures on those businesses that can’t afford to raise wages, and ultimately hurt those workers by forcing companies to reduce hours or reduce personnel. The State Chamber looks forward to working with members of the General Assembly and the Administration to secure training funding to help change the lives of Delawareans for the better. More on that to come.
Next week the Governor will give his State of the State speech, with his recommended budget to come the week after.