by Mark DiMaio

The Chamber’s annual End-of-Session Legislative Brunch was held on June 7 at Dover Downs. The brunch marked the last official event for retiring Chamber President, Rich Heffron.

Attendees heard from Kurt Foreman, President & CEO of the Delaware Prosperity Partnership. Kurt discussed Delaware’s current economic situation as being “a glass half full.” Delaware has experienced moderate employment growth, with the construction sector leading the way and other employment sectors showing modest growth. Housing starts are the strongest they’ve been in several years and Delaware’s housing affordability is more positive than the US market overall. Mr. Foreman shared the Delaware Prosperity Partnership’s four main areas of focus:

• Business Development (Recruitment of new companies)
• Existing Business Engagement
• Innovation Agenda – building on past successes in Delaware
• Talent Support – DPP will begin an initiative in late 2018/early 2019

James DeChene, the Chamber’s Sr. Vice President of Government Affairs, spoke about the “Tale of Two Budgets.” Last year Delaware faced a $400 million-dollar budget shortfall followed by a nearly $400 million-dollar budget surplus this year. The fundamental question here is how we can make the budget process easier, and more efficient and accurate. Boom and bust cycles may be natural, but helping to smooth the highs and lows will help put Delaware on more stable, certain financial footing. The Chamber strongly supports a bipartisan plan put forward by the Governor and State Treasurer to create a true “rainy day” fund to be used in lean budget times and added to in good economic times. This proposed plan requires a constitutional amendment, and requires passing changes to our tax structure and limits on spending. The constitutional amendment needs to be passed this year, as it takes two consecutive legislative sessions to become a part of Delaware Constitution.

Attendees also heard from Senate Pro Tempore David McBride and Speaker of the House Pete Schwartzkopf. Senator McBride highlighted the state’s budget and the fact that it would be completed well before the end of June. However, he wasn’t sure that the Senate would pass the minimum wage bill this year. He gave credit to the State Chamber for its role in the passage of the Coastal Zone Modernization Act last session. Representative Schwartzkopf spoke on the passage of legislation to bring $580 million dollars of private investment to the Port of Wilmington. He also pointed to the state budget’s restoration of the senior drug program, funding for special education and salary increases for teachers.  

This year’s Small Business Guardian awards were presented to Senator Brian Pettyjohn and Representative Harvey Kenton.

by James DeChene

The JFC completed work on a $4.3 billion budget this week, leaving roughly $61 million in additional spending between now and June 30th. Restoration of Grant in Aid funding from last year’s cuts are expected (about $8 million), but there will still be a hefty amount left to distribute, which may be sent to the Capital Improvement Committee for an increase in one-time infrastructure spending this year.
 
Next week, the General Assembly is back in session, and starting the countdown of 13 legislative days left until June 30. They will have their hands full with pending gun legislation, finalizing spending, and working on the remaining bills relevant to the business community including making changes to the WARN Act, Sexual Harassment Training, Minimum Wage, and Biometric Data Privacy. The Chamber hopes the General Assembly will introduce and pass the first leg of a constitutional amendment related to budget smoothing. We will keep you informed on all these issues, and others as they come up.

by James DeChene

Last week Governor Carney and Treasurer Simpler released a bipartisan plan to help address Delaware’s economic boom and bust cycles. Last year’s $400 million budget shortfall highlighted the volatility in our state’s revenues, and this year’s $400 million increase in revenues, while a boon, is an $800 million swing in just one year. For a state with a $4 billion budget, that kind of shift is incredibly significant.

Enter in the budget smoothing idea. Making changes to smooth out these peaks and valleys in our revenue stream has been a Chamber priority since 2015 when DEFAC released its revenue report. This report highlighted how volatile Delaware’s revenues are and provided a blueprint on how to prepare Delaware for the future, putting it on a path toward sustainability. The state has undertaken some of that blueprint by making changes to Delaware’s escheat program and by changing how companies calculate their corporate income tax to a single sales factor. The next part of the process needs to happen now! A constitutional amendment, the first leg of which needs to be passed this year, would help create a true rainy day fund to be used in times of need, and added to in good times. In fact, the Joint Finance Committee itself voted this week to defer $46 million of this year’s revenue to future spending—exactly the way the budget smoothing process would be utilized. 

The benefits to budget smoothing are good for businesses, who won’t be subject to knee jerk reactions to raise money fast to balance a budget through tax and fee increases. It also helps Delaware’s nonprofits who receive Grant-in-Aid funding better plan year to year instead of facing last minute cuts in the down years and hoping for their replacement in the up years.

With revenues projected to be close to $500 million this year above last year’s budget, the time is ripe to make improvements to Delaware’s future. There’s no negative impact to funding, or to this year’s budget, and the case is strong to act now to plan for an uncertain future.

by James DeChene
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In case you missed it, the News Journal, WDDE, and DE State News all had articles on a proposal by Governor Carney and Treasurer Simpler to create a budget smoothing process. Efforts would help avoid budget boom and bust cycles like last year where nonprofits and other agencies saw funding cuts. It helps the business community by providing certainty and avoiding knee jerk funding needs resulting in higher taxes and fees.

Here is a roundup of recent coverage on this issue:

• Governor Carney’s Statement on Budget Smoothing Report
• Panel seeks limits on annual spending growth in Delaware
• Delaware lawmakers propose revamping the budget process
• Report calls for change in state budgeting with spending limit​
• Bipartisan Budget Accord: Framing a Grand Bargain

The General Assembly is currently on Easter Break, and when it returns, it will address several issues important to the business community. Below are a few issues to keep an eye on.

In regards to the budget:

• The most recent DEFAC report shows an increase of $101 million over this fiscal year and next over previous predictions.
  
• The increases are primarily composed of increases to PIT (federal tax law having impact), and fewer abandoned property returns (based on higher level of scrutiny of applicants). Note that money is already earmarked for expenses, but the timing is pushed out. These are not things on which to base a budget.
  
• IRS guidelines on repatriation of overseas profits and how states will divvy up those taxes remain to be written. The hope is that Delaware will receive some of that money, but caution that it will most likely be one-time money.

  
Labor Relations:  

• Sexual Harassment — rewriting who is covered, including independent contractors.  This legislation would require all employees receive DEDOL created literature related to sexual harassment to be kept in their employee file; and employers with over 50 employees to provide two hours of sexual harassment training.
  
• Predictive scheduling — Industries like food, hospitality, retail would be required to set two-week schedules, with penalties for changing schedules without two weeks' notice to the employee and if employees arrive 30 minutes before/after their scheduled block. Employees would have to be paid if sent home early. Employers could have a pool of employees who can be called in emergency, but the employees would be able to decline. 

by James DeChene

This week’s legislative work was cut short a day to due weather. Bills that were to be heard in committee will be heard in the coming weeks. Of note, on Tuesday the Senate defeated SB10, which, as amended, would have raised the minimum wage by $1.00 over two years. It is expected that after work is completed providing casinos tax relief, the minimum wage bill will be reintroduced and voted on. Stay tuned.
 
In other news, DEFAC met earlier in the week and added $101 million in additional revenues for FY2018 and projected 2019. It is rumored that in the next meetings that number could grow even larger. This means a new round of budget fights this year—only this time on how to spend this windfall.

It is worth noting, however, that the two primary increases came from personal income tax (PIT), and fewer claims on abandoned property. The abandoned property money is already earmarked for returns, no matter the pace, and is not what you base a budget around. As PIT has increased from the federal GOP tax plan, corporate taxes (CIT) have declined.  One bright side is that Delaware may be due a onetime windfall as companies bring back money parked overseas to take advantage of the lowered US corporate tax rate. The IRS is still working to publish guidelines on how this tax money will reach the states.  More to come.

by Mark DiMaio

Last year we asked Chamber members to participate in a survey for input about obstacles to their business growth. We received nearly 100 individual responses to our question about specific suggestions on what Delaware should do to improve its economy.  Listed below are four areas that respondents mentioned most often, along with ways the Chamber is working to advance Delaware’s economic health.  

Improve schools and infrastructure

• The Chamber is a member of the Education Equity Delaware Coalition whose goal is to increase public awareness of education funding equity issues and solutions, and to focus on long-term systemic change on behalf of Delaware’s students, particularly those with the greatest needs. Rod Ward, president and chief executive officer of Corporation Service Company (CSC), is the Chamber’s coalition representative. 
• The Chamber supports the efforts of the task force created by HCR 39. This task force will make recommendations regarding the impact of consolidating school districts in the state. Visit www.dscc.com/takeaction and search HCR 39 in the Find Legislation field to learn more. Jordon Rosen of Belfint, Lyons and Shuman serves as the Chamber representative on a subcommittee looking at the financial impact of school district consolidation. 
• We are actively engaged, along with many of our members, with the Pathways to Prosperity program. Delaware Pathways programs are a set of curriculum focused on a specific industry-based “pathway,” paired with opportunities to gain workplace experience while still in high school, graduate with a head start on a college degree, or gain qualifications needed to go to work immediately. Consider attending the 2018 Delaware Pathways Conference on March 21.

Balance the state budget with new revenue sources and cut government spending

• We will continue to advocate for structural changes to Delaware’s budget. Delaware needs fiscal policies that foster business growth and advance the state’s long-term economic future.
• We support HB 160 that aims to establish metrics for grant-in-aid funding to nonprofits. Visit www.dscc.com/takeaction and search HB 160 in the Find Legislation field to learn more.

            
Encourage entrepreneurship and a diverse economy - strong business climate to attract new business

• The Chamber supported passage of HB 226 to create the new Delaware Prosperity Partnership, a public-private partnership to aid in the stimulation of Delaware's economic growth.
• We support HB 170: Angel Investor Job Creation and Innovation Act for Small Technology Companies. This legislation creates an incentive for qualified angel investors to invest capital in qualified Delaware small technology companies. Visit www.dscc.com/takeaction and search HB 170 in the Find Legislation field to learn more.
• Please join us on Thursday, March 22, for an important panel conversation about economic development in Delaware: “Building Delaware’s New Frontier."  

Streamline land use and permitting process – less regulation overall

• The Chamber is providing feedback to the GEAR taskforce, established by Governor Carney to review Delaware regulations and areas that could and should see reductions and streamlining.
• The Chamber will also continue to contribute, where appropriate, ideas of areas where permitting could be lessened or streamlined in agencies such as DELDOT and DNREC.
• The State Chamber is working with DNREC to update Delaware’s Coastal Zone regulations, following the passage of HB 190 (Coastal Zone Modernization Act). We believe this will make Delaware more competitive and attractive for redevelopment, bringing with it more jobs and a boost to the local economy.

by Mark DiMaio

In 2017, we invited Chamber members to participate in a survey to gauge their view of Delaware's economic health, and provide input on policy priorities. Listed below are the top four, along with ways the Chamber is addressing them.
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1. Economic Development
The Chamber is dedicated to promoting an economic climate that strengthens the competitiveness of Delaware businesses and benefits citizens of the state.

• The State Chamber is working with DNREC to update Delaware’s Coastal Zone regulations, following the passage of HB 190 (Coastal Zone Modernization Act). We believe this will make Delaware more competitive and attractive for redevelopment, bringing with it more jobs and a boost to the local economy.
• The Chamber supported passage of HB 226 to create the new Delaware Prosperity Partnership, a public-private partnership to aid in the stimulation of Delaware's economic growth.
• Please join us for an important panel conversation about economic development in Delaware: “Building Delaware’s New Frontier."
• We support HB 170 “Angel Investor Job Creation and Innovation Act for Small Technology Companies” – This legislation creates an incentive for qualified angel investors to invest capital in qualified Delaware small technology companies.

2. Cost of Health Care
The Chamber recognizes the growing problem surrounding health care costs.

• We will continue to follow plans to create a health care benchmark, and what that means for providers, insurance companies and patients.
• Next month, Dr. Janice Nevin, MD., MPH, President and CEO of Christiana Care Health System, will provide an important update the DSCC Board of Governors on the future of health care.
• Join us and the Greater Philadelphia Business Coalition on Health on May 21, for the Delaware Employer Summit - details to follow.

3. Government Spending
We will continue to advocate for structural changes to Delaware’s budget. Delaware needs fiscal policies that foster business growth and advance the state’s long-term economic future.

• We support HB 160 that aims to establish metrics for grant-in-aid funding to nonprofits. 
• The Chamber will support efforts to create and maintain sustainable revenue within the State's budget.  

4. Education Reform (K-12)
Improving education outcomes is a key factor in developing a skilled workforce and attracting new business to Delaware.  

• The Chamber supports the efforts of the task force created by HCR 39. This task force will make recommendations regarding the impact of consolidating school districts in the state.
• ​The Chamber supports Governor Carney and the Delaware Department of Education efforts to develop a Memoranda of Understanding (MOUs) between the Delaware Department of Education and the Christina School District, thus creating partnerships that will advance the academic growth and success of students in Priority Schools. 
• We are actively engaged, along with many of our members, with the Pathways to Prosperity program.

by James DeChene

The December labor report was recently released and shows that in 2016 Delaware had a net increase of 350 new jobs over the course of the year, and 2017 is looking to be the same, though there may even be a slight net loss for the year.  The January report will reflect what truly happened in 2017, but odds are it won’t be pretty.  Surrounding states have seen higher growth than Delaware:  Maryland at 2%, Pennsylvania and New Jersey at over 1% -  while we are shrinking, they are growing.

This week, members of the Joint Finance Committee started their budget process. Over the next five weeks, members will review agency budgets and various funding requests, including Grant in Aid, and will work to craft a spending plan using the Governor’s recommended budget as a starting point. While forecasted revenues show a 6% increase over last year’s, next year’s growth number is back under 2%. The challenge will be for legislators to be spendthrifts during a time of increased revenues, and planning for the out-years where spending obligations will continue to outgrow revenue. Not an easy task in an election year.  More info to come as it develops.