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.
by Michael J. Quaranta
This past year was one that started with a great deal of uncertainty as the Delaware General Assembly began work in January 2019 with one of the largest membership changes it had experienced in decades. No one quite knew what to expect from these newly elected officials or how they would vote on issues critical to the business community. As winter ended and the weeks rolled on towards the end of the legislative session, it became clear the General Assembly made pragmatic choices and the business community fared reasonably well. Our Developing Delaware event in October 2018 yielded an important work product which is now known as “Delaware in 6.” With strong interest in this effort by Governor Carney, the State Chamber in partnership with Association of Chambers of Commerce and others, we drew attention to the amount of time it takes for permitting applications to be completed. The firm, KPMG is finishing a study about permitting approvals in Delaware. This will help guide policymakers in making necessary changes if we are to compress the time it takes to finish the permitting process and compete with surrounding states and localities.
Fast forward to the 2019 Developing Delaware conference just a few months ago, and this event focused on workforce development. We need to find ways to retrain under-employed Delawareans. The five days a week, eight hours a day programs to aid these people and prospective employers, already exist. However, help is needed to keep people afloat while going through these retraining classes. If we move people from
low-skill, low-wage jobs to employment with a future and wages that pay more than $15 per hour, we can change people and their families. How great would it be for a ten-year-old to see her mom or dad
go back to school for twenty weeks? How great would it be to change the orbit a family is presently on, and give them hope and the potential for a much-improved standard of living? Employers need workers with
basic skill sets. We believe that connecting these dots is a win-win for employers and potential employees. Yes, a challenging set of details exist before making this a reality, but a “hand up” is sustaining and better
than a “handout.” And, if retrained Delawareans are upskilled and earn better wages, the taxpayer has his money returned in the form of higher income taxes, and the absence of transfer payments to people due to
their previously low-income status.
We have historically low unemployment now, and we need to retrain
everyone willing to enter programs that will give employers and employees a brighter future. These and other priorities will be our focus in 2020. Onward!
This week was back to school for most Delaware students, though if you’re like me you had one that started pre-Labor Day. The Sussex County native in me still chafes at such an early start, but you play the hand you’re dealt. In the fall, the Chamber is part of two school-related events that members can take advantage of.
First is Delaware Principal for a Day. The week of October 21 puts business leaders in schools all around the state shadowing the principal of a local school for a day. It’s an excellent opportunity for schools to highlight successful programs, to provide real life examples of the breadth and scope of students and how their educational needs are being met, and it allows for schools to hear what skills businesses are looking for in the employees of the future. If you’d like to participate, or to learn more about the program, contact Kelly Basile.
The other school-related event in October is Manufacturing Week. The State Chamber is also the National Association of Manufacturers state affiliate, and NAM celebrates Manufacturing Day the first Friday in October. We extend that to a full week here in Delaware. Delaware manufacturers are encouraged to bring students from local middle and high schools into their facilities for tours to learn more about manufacturing as a career. In addition, the Governor signs a proclamation designating manufacturing week and the Congressional delegation has conducted tours in the past. For more info on Manufacturing Week, you can contact Cheryl Corn.
By James DeChene
There is a fascinating article in the Wall Street Journal Thursday edition that sheds more light on Amazon’s ultimate decision to abandon New York from the corporate headquarters competition to instead build in northern Virginia. Delaware, along with every state and metro area competing for development, can learn a thing or two on how companies react to how they are perceived when making expansion decisions.
The crux of the article focuses on Amazon’s “burn book," a Microsoft Word file of all the public statements made by elected officials and other leaders who stood in opposition to the project. Ultimately used as evidence to back up the decision to give up on New York, it highlights the importance that words, public perception, and overall feedback is weighed when making important decisions. In Delaware we pride ourselves on our size, our intimacy, and the ability to gather all the necessary players in the room quickly and easily to successfully woo companies here.
That still leaves the other side of the coin to be dealt with, the court of public opinion. When companies are excoriated to “pay their fair share” (whatever that means), are accused of not being good corporate citizens for not blindly acquiescing to the latest trend that hits a company’s bottom line, and made to feel like nothing more than an ATM machine dispensing directly into state coffers, that’s where problems rise.
In the next year I expect a number of debates happening in this court of public opinion where these claims will be thrown about. From finding ways to deal with the cost of healthcare and how employee coverage is paid for, to new forays into labor law that will ultimately cost companies time, effort and resources to adjust to, to continued calls for increases in gross receipts taxes, licensing fees and other revenue generators, the perception of the business community will increasingly be under scrutiny.
Delaware’s size is certainly an important asset in attracting companies here, and without annexing land on the Delmarva Peninsula, its size will stay the same. What needs changing is how businesses are viewed and recognizing their positive impacts on Delaware’s economy and long term success, and taking measures to make sure they remain successful and grow. Without that, we may as well put up “I Love NY” signs at our borders.
by James DeChene
The announcement of a 500K plus downward revision to the number of jobs created since 2018 coincides with this month’s Delaware labor report showing that Delaware, while not being revised downward, saw most of its recent job creation over the last 12 months happen in 2018. What is unknown as of now is whether or not this is a sign of a weakening economy. Bear in mind that nationally there are over 7 million more jobs than employees to fill them, and wage gains are among the highest in the last 20 years. (I’ve written about the wage increases catching up for low skill workers in the last few years, surpassing where they were pre-Great Recession). Consumer confidence remains high, and all eyes are on whether the ongoing trade war with China will erode that confidence, and if so, how fast.
Locally I hear employers remain confident about overall economic conditions. Concerns when raised revolve around available access to talent (join us on October 8th for our Developing Delaware event to learn more), and more specifically finding younger workers for positions to replacing their soon-to-be-retired older colleagues.
A recent article in SFGate focused on how Maine’s aging population is putting a strain on the healthcare industry—from retirement homes to home health aides, there aren’t enough people to staff these jobs forcing closures and cuts to services, even if they are state mandated.
Maine now classifies as “super aged” meaning over one-fifth of its population is over the age of 65. By 2026, 15 other states, including Delaware, are expected to follow suit.
Let that sink in.
While Delaware touts itself as a retirement destination, and it certainly is (Hello, Sussex County) the flip side is the strain placed on care workers as more and more individuals require assistance and care. The cost to provide these services isn’t expected to decline any time soon, and as last year’s minimum wage debate highlighted, the cost to the state to increase reimbursements for direct support professionals ranges into the millions per year.
Delaware should be following closely the situation in Maine and the other 13 states, as we collectively advance to “super aged” status. We need to be looking at creative ways to lower costs for businesses so they can apply those savings to the inevitable cost of labor increases. For example, Maine allows businesses to pool together to purchase insurance under associated health plans, an idea the State Chamber and others has begun to flesh out.
It will take creative and innovative thinking to help solve these and other problems facing Delaware, and it will take the cooperative efforts of the general assembly, business, health care and other communities coming together to be successful.
This week Governor Carney signed into law a number of bills important to businesses throughout Delaware.
SB95 creates a contractor registry for commercial and residential contractors as a way to combat improper use of 1099 labor. In addition, it allows for contractors to sub out portions of their work to other contractors, bringing Delaware in line with surrounding states.
House Bill 130, the Plastic Bag Ban bill was signed and goes into effect January 1, 2020. The bill bans most plastic bags for retailers over 7,000 square feet or that have three locations, each being at least 3,000 square feet. But it does allow the continued use of bags to enclose raw meats and vegetables, along with restaurant carry out bags and containers.
SB61, the Transportation Infrastructure Investment Fund bill, was also signed. This DSCC-backed bill creates a fund to help offset infrastructure requirements on commercial development projects.
Also this week was a Senate pre-file of legislation impacting Delaware’s renewable portfolio standards. Important because of how it mandates the ratio of renewable energy Delaware power companies must offer, the legislation increases to the use of renewables to 40% by 2035, of which 7% must come from solar. The DSCC is currently reviewing the language to provide feedback.