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Archive for November, 2014

Happy Thanksgiving! We hope you have a happy and safe holiday.

For this week’s post we are going to respond to the post of blogger Lyman Stone, a grad student at George Washington University’s Elliott School. In his November 21 blogpost titled “North Dakota, Illinois, and Delaware: A Boom State, a Struggler, and a Winner”, he wrote about Delaware’s migration and why the state has had an overall increase in people from 2000-2010 (source: U.S. Census). His top four points and our response:

1. “Many of the people Delaware loses, as I’ve already shown, are richer people. That is to say, Delaware is exporting its richer people (many of them retirees) to states like Arizona, Florida, Virginia, and Texas. Meanwhile, it is inundated with floods of lower-income, somewhat less-educated individuals. Delaware’s in-migration includes very high rates of retiree migration and migration of the young.”

Delaware lost roughly $480 million in net wealth from 2000-2010, predominately from New Castle County (source irs.gov). Some of that wealth went across the border to Chester/Media, PA; many of the top 1% retired to Florida or Arizona, but many people did stay in Delaware and moved to Kent or Sussex Counties where property is even cheaper and cost of living is lower than New Castle County. Delaware’s low property taxes attract retirees mainly from DC, MD, NJ, and NY. Young people move to New Castle County for the corporate jobs. But Lyman is missing this point: Families with school-age children tend not to stay in Delaware. (see here and here). Unless the parents can afford a private school or get to a good charter school, the parents more often than not leave for PA. A graph within the presentations in the links shows a huge drop-off with parents with at least one child aged 5 or older leaving for places like Valley Forge or Media while parents with children 0-4 stay in Delaware. So it’s like “come when you’re young, leave when you have a family, return when you’re ready to retire”.

2. “Once again, like Illinois, Delaware has lots of high-traffic borders and nearby border metro areas, thus we can fruitfully look to policy variables as one part of the explanation. Delaware has income taxes at a similar rate to most of its regional peers (though much higher than Virginia’s) and is in the minority of states in that it still has an estate tax. In that regard, it is peculiar that so many retirees would choose it.

That is, until we recall Delaware’s three most salient tax features: it has no sales tax (thus reducing cost of living), among the lowest property taxes in the nation (reducing cost of living), and funds its infrastructure through tolls and user fees more than any other state (reducing burdens on people who drive less: young and old). Its taxes overwhelmingly fall on businesses, but it attracts businesses by offering highly favorable legal and regulatory conditions.”

Delaware has a gross-receipts tax, a tax on business revenue BEFORE profit and loss is considered. Only Virginia has both a gross receipts and income tax, both of those rates are lower there than Delaware. The result has been that Delaware has had more businesses closing than opening and we are 51st in the country in jobs created by existing firms (Source: deconfirst.com). This means no state or DC is worse than Delaware at getting businesses already here to hire more people. The state is very good at helping start-ups but not good at helping established businesses, especially medium-sized businesses.

Delaware’s Court of Chancery is known for its fairness, and incorporation laws are lax. This is favorable to larger businesses to want to headquarter here, which is why the Wilmington area has so many corporate offices with high-paying administrative jobs. This is a good thing for the state but again, this benefits larger businesses and not small- or medium- sized businesses.

3. The net result of Delaware’s policy choices is that “New Economy Index” produced by the liberal-leaning Progressive Policy Institute ranks the 2nd best in the nation, the conservative-leaning American Legislative Exchange scores 27th in their “Rich States, Poor States” publication, the business-backed Tax Foundation (disclosure: my former employer) ranks 14th-best, and even the libertarian Mercatus Center identifies as 17th “most free” in their Freedom in the 50 States report. A report by 24/7 Wall Street found Delaware to be the 13th best-run state in the nation, and academic measures of state corruption rank Delaware no worse than middle-of-the-pack. In fact, it is a real challenge to find any organization that scores Delaware poorly on any major policy metric or index.

Corruption in Delaware is not as bad as it is in places like Illinois, Rhode Island, California, or Louisiana. But saying it’s “good” is more on an indicator of how corrupt those states are. Delaware’s small size means “everyone knows everyone” attitude impacts the government but the state is not very forthcoming with state pension data or with how education dollars are being spent. That said, we are better than every other Mid-Atlantic state besides Virginia. We posted on the Tax Foundation’s analysis.

4. Likewise, Delaware has one of the lowest average price levels of any state in the region (except Virginia), and that price level is lowest in southern Delaware, where in-migration is highest.

I’ve repeatedly cast Delaware as a state that’s providing opportunities: for the young, for the less educated, and also for regional retirees who may not have the money for a bigger relocation to Texas or Florida (or who may not want to pay property and sales taxes in those states). That’s because Delaware’s migration record is simply the strongest across the most different categorizations of almost any state, especially among states without major oil and gas reserves. I’d love to hear more from people familiar with Delaware on how the state attracts people: beaches with rising popularity? corporate headquarters? retirement communities? strong university recruitment? sprawl from Philadelphia?

To Lyman’s final point, Delaware IS a very attractive place between Philly and Baltimore/DC. We are a train ride or short drive from all three cities and only three hours from New York City. The Beaches draw in tourists and retirees, and there is some Philly sprawl in the Claymont area. But Delaware is beginning to lose our status is a “tax haven”, now that Nevada and North Dakota are competing with us for our corporate business. The state spends way too much money and like most states will suffer from having to choose between Medicaid and public education once the federal government cuts back on its Obamacare obligations by 2019. Our three casinos are losing money and, barring a change in visitor habits ore legislative policy, will go out of business; 6% of our state’s revenue comes from casino taxes. We have a state carbon tax and cap-and-trade system (Regional Greenhouse Gas Initiative) which is costing so much money CRI’s Energy Policy Director Dave Stevenson and our board member John Moore are suing DNREC to prevent a new carbon tax fee from being imposed on residents and businesses.

Delaware’s population is aging at a faster rate than the nation as a whole; right now half the state receives Medicare or Medicaid. By 2030 that number will be closer to 67% at current migration rates. Sussex County is already 25% senior citizens and that number grows ever year. As much as we at CRI love our seniors, someone has to help pay for Medicare/Social Security/ public housing assistance/public transportation, and other quality-of-life benefits seniors need to enjoy their retirement since we know the Feds won’t meet their future obligations.
Because of its strong migration record in a highly competitive area, other states could benefit from studying Delaware’s experience and determining which policies they can adopt for their own states.

Please don’t pass a gross receipts tax or block natural gas pipeline from reaching your states. We have high electricity prices and a mediocre public education system. Don’t be so aggressive and seizing abandoned property, even down to the Amazon gift cards which went unused. End the prevailing wage and establish a Right-to-Work law if your state doesn’t have one yet.

What do you think about Lyman’s blog post or our response?

Please consider eliminating your state’s sales tax and lowering property taxes, and have a court system which is seen as quick, efficient, and fair.

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This article first appeared in The News Journal on November 15, 2014.
The article can be viewed here: http://delonline.us/11cpWNg
The obstacles to a good Delaware public school education have been many, varied and usually school specific but not so with the attempted solutions. The obstacles have included such things as poverty, student and parent indifference, community turmoil, varying teaching and administrative abilities, etc. Proposed resolutions to overcome the obstacles are often preceded by, “One size doesn’t fit all,” followed by a new law, regulation or procedure that applies across the board usually with a new person or office to oversee it.

Every few years we see new people arrive with new ideas. We gather data, cultivate alliances, get input, design plans and essentially begin anew. After the recent Vision Coalition Conference at the University of Delaware, a respected member of the Department of Education and I agreed that the conference was very good, but we had heard everything many times before (funding, salaries, teacher recognition, student needs, parental involvement, testing, etc.). In addition to the merits of any proposed plan, the challenge has been to fully implement that plan. Currently there is an underlying suspicion that history will continue to repeat itself and completion will remain an illusion.

Charter schools are an example of that implementation history. They were to be small laboratories used to experiment with new ideas that, if successful, would be adopted by the traditional schools. If they failed they would be closed. School autonomy was a major component. The original draft of DOE’s charter regulations (1995) said they would be “free of most state and school district rules and regulations” and “reliance on bureaucratic decisions would be a thing of the past.” Have the traditional schools moved toward greater autonomy, or have the charter schools become more traditional?

A bureaucracy (not a bureaucrat) is concerned with compliance. It enforces the letter of the law. It is not anarchy to suggest that a creative mind can work within the spirit of the law. However, that requires thoughtful and skillful decision-making. Merriam-Webster clarifies the problem with its definition of a bureaucracy: “an unwieldy administrative system burdened with excessive complexity and lack of flexibility.” Many years ago the U.S. Department of Education said we had to “replace rules-based governance (think compliance) with performance-based accountability, thereby stimulating the creativity and commitment of teachers, parents, and citizens.”

The impact of a systemic change has been modeled in computers. First introduced in the late 1940s the new technology did small operations quickly using a binary system. The world demand for the new technology was estimated to be only five units. Today computers are ubiquitous, and yet they are still doing the same thing (small operations quickly). What has changed is how they operate. They went from bulky, inefficient, heat-producing vacuum tubes to today’s microchips. That enabled the system to operate much faster, be more efficient, become smaller and do more. Would changing our current education system produce similar results?

Since combinations of obstacles can be found uniquely in various schools, a “cookie-cutter” approach will fail. Individual schools must be given the authority to design customized plans to address the needs of their students. Such schools, according to DOE’s 1995 draft of charter regulations, would “… empower local communities to try new, unique solutions to problems that are facing their own schools.” The separation of powers among the education entities could be stated, “Powers not delegated to districts or the state are reserved to the local school.” In any event, the properly prepared principal (CEO) should have broad administrative authority including the responsibility to hire, fire and manage the budget. Districts and the state should have oversight responsibilities and an appeals function. They should provide opportunities for the professional growth of school personnel so that the new education system will be one of continuous improvement.

Educating students involves a professional relationship between teachers and students (similar to doctors – patients, and attorneys – clients). Running a school is a business function, and the essence of administration is decision-making. The principal’s (CEO’s) role is to provide teachers with the support they need to get the job done and to create a culture of success that permeates all operations with a goal to “max every child.” Building CEOs must be properly prepared before taking over the helm of the school. The time needed to do this will vary by building administrator so this process will have to be phased in.

The state’s business community, the Vision Coalition, DOE, Rodel, etc. have played a significant role in moving things along. They should continue to support education and to provide a vision of what the future expects of our students so that the education professionals in the buildings can better prepare them. Parents should select the “best fit” school for their child using available choice opportunities. Such choices might include alternatives like Education Savings Accounts that have been successful in Arizona and will soon be considered in Delaware.

Just changing the system can improve student performance. Andreas Scheleicher, a member of Rodel’s International Advisory Group, presented information at Rodel’s April Education Event to show the positive effect of local, front-line autonomy. When that autonomy is coupled with distributive leadership (involving teachers in the decision-making process) student gains were increased even more.

Some assumptions: This plan will be phased in over a period of three to five years; it will use mostly current educators; properly prepared principals (CEOs) are important for its success; teachers are critical assets; 19 school districts are too many (Los Angeles has more students than Delaware but only one district).

Education is a multi-billion dollar business whose purpose is to maximize the abilities of all students. That would have a positive economic effect on all residents. Site-based management may not be a panacea for all of Delaware’s education ills, but it is the right course of action at this time. So let’s put on our old Nikes and “just do it.”
Ron Russo
Senior Fellow

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The open period was supposed to start in October and go to Dec 31. That would allow the ins companies to get set for the 2015 year. The previous March deadline was set because they knew few people would sign up right away.
The rates for this year are going to be very high and a lot of employers will drop out. I am expecting a 25-50% rate hike and many people are going to lose their subsidies as the data gets cross checked with the IRS.
Overall the destruction of the health insurance industry is working quite well and there should soon be no other choice but what is offered by the government as in Medicare. Already the exodus of good doctors has started and health related businesses, like the Scooter Store, are going bankrupt and closing. This is going to be a big downturn of 16% of the economy.
Coventry is essentially already out, Aetna remains in a diminished capacity. Blue Cross Blue Shield of Delaware is gone, absorbed by Highmark. The Delaware Health Commission released its plan this week and it disingenuously presumes a constant insurance market which the State can control. The truth is everyone wants a single payer system, everyone also wants to BE that single payer.
And yes, doctors are quickly moving to drop Medicare and Medicaid and some insurance altogether. Many are simply retiring. Some of my close colleagues are retiring by this year’s end and all are younger than me, mostly family practice. Everyone assumes that when control is established  that doctors will just work for less, but to the contrary, they just won’t work. This is the consummate flaw in Ezekiel Emanuel’s thinking. He says that they will have to work as told, but the truth is doctors will not be forced to practice bad medicine and, by and large, they can afford to quit, so they are and will in droves.
On a national and local level, Walmart, Home Depot, Walgreens, and Target have all cut back health insurance for those working less than 30 hours/week. On a local level,  Highmark just had its premium increases cut dramatically by Insurance Commissioner Karen Weldin Stewart, which means that they will not offer some products. They cannot calculate the rates now because the sign up period has been delayed onset until after the election cycle. On good background I believe that Highmark will withdraw risky insurance products in the Delaware market.
On a very anecdotal level, one of my patients who employs 47 people has directed his human resource person to fire 5 people so as to be well beneath the 50 person threshold for ACA. This is just as a precaution, in case they 50 employee mark is hit inadvertently.
The White House Administration has declared a moratorium on data release from CMS and the Federal Exchange Website.  I do not find any reason to be optimistic about the landscape.

Dr. Casscells, Director

Center for Healthcare Policy

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CRI predicted years ago charity care would soon become a thing of the past. That’s because the Affordable Care Act, which just about everyone calls Obamacare, is set up to remove charity care from the equation.

Charity care is free healthcare many doctors provide as a service to the community. There is (or was) no financial incentive; a doctor did it because he or she believes in helping their fellow human beings. This was a way for very poor people and/or those who don’t have health insurance to receive healthcare they could not otherwise afford. Well, no more (in Delaware at least):

State to cut ‘charity care’ for near-poor

Delawareans pinching pennies near the federal poverty level – making from $16,100 for an individual to a maximum of $47,700 for a family of four – will lose health coverage through the state’s Community Healthcare Access Program (CHAP) starting Feb. 1, state officials said late Monday afternoon.

CHAP is a state-run program that offers discounted medical services for those not eligible for Delaware’s Medicaid program. The state earmarked $478,000 in tobacco settlement funds for the program this fiscal year.

CHAP recipients are ineligible for Medicaid either because they are undocumented immigrants or make more than 138 percent of the federal poverty level, Delaware’s cutoff for Medicaid assistance. The federal poverty level is $11,670 a year for an individual.

State officials said they will offer an alternative to CHAP on a case-by-case basis, only for those who can prove they are ineligible for other plans or are exempt from the federal insurance mandate.”

Now some of those who were on this program were individuals not legally authorized to be in the country. However, some were and will no longer receive help, and even for those here illegally, most medical professionals will tell you their desire is to help everyone who needs it, no matter what, because it is their calling.

“This is charity care and charity care more or less will be going away based on the mandate that everyone must have health insurance,” said Rita Langraf, secretary of Delaware’s Department of Health and Social Services, referencing the 2010 Affordable Care Act’s requirement that everyone should have health insurance.

The department is taking that mantra seriously. Landgraf said the state will continue to offer coverage for the undocumented population past Feb. 1, but CHAP recipients who make up to 200 percent of the federal poverty level will need to find new coverage.”

This is another problem. DHSS Secretary Landgraf is saying the state will ensure those not authorized to be here will receive benefits not extended to American citizens. Why? Because ACA mandates that all citizens must have health insurance- note the bolded words.

The main reason charity care is disappearing is because the government will begin reimbursing doctors for care previously provided as charity. This means taxpayer dollars will flow into doctor’s pockets for services they were going to perform anyway. If you were going to do something you always did, say brush your teeth, and the government offered to pay you to do that, would you turn that offer down? Most people would not and thus the government is ensuring a larger budget deficit for a service they don’t need to pay for. The other thing this will do remove the “good samaritan” role of medicine, eliminating volunteerism in favor of “rent-seeking” from the government (seeking public money for private bank accounts).

The health insurance exchanges open on Saturday and we were now only hours away from knowing what the 2015 insurance rates will be. If you haven’t yet received a letter notifying you of your insurance status for 2015, you will get it very soon. On Thursday CRI will publish another article on healthcare breaking down the new rates, discussing what you can expect going forward, and discussing how you can Impact Delaware!

photo:myptsolutions.com

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Unless you’ve been off the planet or are living in a cave with Crocodile Dundee, you know today is Election Day 2014. Hopefully if you are reading this and you are an American citizen, you either a) voted already or b) are going to vote sometime today.

While we at CRI cannot tell you who to vote for, nor would it be in our interest to do so, we can encourage you to vote. The main reason CRI exists is to get people to make the different at the polling place. All of the white papers, articles, editorials, speaking engagements, radio appearances, newspaper quotes, and e-mail newsletters will make not one iota of difference if you don’t vote.

How will Delaware, or any of the other states, change public policy without your voice being heard? Politicians care more about today than any letter to the editor, blogpost, or tweet you could ever send out. Today is when change in our government becomes official. The only way to end the prevailing wage, repeal the ACA, provide Education Savings Accounts to all parents for their children (and grandchildren), pursue policies which reduce electric rates and make energy prices more affordable, eliminate the gross receipts tax, reduce personal income and corporate income taxes, and reduce the power of state agencies to make your life miserable through excessive regulation, is to vote.

We know it can be frustrating- you feel as though your vote is one of too many and it won’t matter. You feel as though no matter who you vote for things in government won’t really change. Maybe you even think elections are rigged (though we at CRI don’t believe this!) so you won’t bother showing up to the polls or casting an absentee ballot.

But if millions if people like you have that attitude, then only the most partisan voters or those with a lot to gain/lose directly will show up. They will reward politicians who cater specifically to the groups most likely to show up at the polls.

Therefore, if you haven’t yet voted, go out and vote this Election Day, and remember,

YOU CAN IMPACT DELAWARE!

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