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In reality, education reform is about economics. If done properly, it will attract/retain businesses, provide jobs, generate tax revenues, increase property values, reduce crime rates, and reduce the single largest item in the state’s budget. This was the direction taken in 1995 by Gov. Carper, State Superintendent Mike Ferguson, and a business consortium (DuPont, Bell Atlantic, Delmarva Power, Hercules, Zeneca, and Christiana Care) when they advocated for change in Delaware’s public education system.

To be clear, we must first distinguish between teaching and education. Teaching is a profession consisting mainly of teachers with special knowledge and training who exercise personal judgment in carrying out their responsibilities with students in the individual school buildings. The broader concept of education, however, is a business.

The 1995 concept of Delaware education reform was implemented in a pilot program at a school that proved to be very successful. In a study conducted by Dr. Gary Miron of the Evaluation Center at Western Michigan University at the request of the Delaware Department of Education and the State Board of Education, he observed that students at the new school were, “…outperforming their counterparts at similarly matched traditional public schools…”  The school achieved national recognition and generated a substantial operating surplus.

The essence of this bold plan was to shift operational decision-making authority from a school board and district into the individual school building. Control was now local and exercised by a principal working with teachers, answerable to parents with oversight and support provided by a board. Andreas Schleicher, a member of Rodel’s International Advisory Group, presented data at a Rodel Foundation Education Event to show that, when a school is given that type of autonomy, student performance is improved.

The significant reduction of district and board responsibilities should lead to a reduction of the number of school districts from 19 to 5 (1 in Sussex, 1 in Kent, 2 in New Castle, and 1 VoTech District.) New York City and Los Angeles each have only one school district.

Governor Carney’s first executive order creates a working group to consider a public-private partnership between Delaware’s Economic Development Office and the business community. Perhaps an education component should be added to the mix to reflect the previous business/education initiative. Recently the governor created a board to study government efficiency. Since education makes up about one-third of the state’s budget, if you have read this far in the article, you know this author’s position on education efficiency.

A reduced deficit, an improved economy, and higher student performance, now that’s a bold solution everyone can support.

Ronald R. Russo is a Senior Fellow at the Caesar Rodney Institute, and the Founding President of the Charter School of Wilmington.

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whitehouse.gov

Just like former President Jimmy Carter, President Obama is doing his best to gift the White House to the Republicans through misguided economic and foreign policies. Nothing from his State of the Union speech signals substantive change for the country.

An economy can grow through either increased productivity or increased government spending fueled by borrowed money. Since 2007, productivity in the U.S. has been growing at half of its historical rate. That means the modest economic gains we’ve experienced were fueled largely by an unprecedented increase in Federal government borrowing and by the printing of money by the Federal Reserve. And the piper will have to be paid in 2016.

Since 2007, the Federal government debt has increased 110% to almost $19 trillion. The debt outstanding has soared from 63% of GDP to 105%. Annually, the Federal government is currently spending around $1 trillion more than it takes in. The U.S. now ranks 11th highest in government debt to output among all the nations in the world.

The fiscal gap, the difference between the present value of all the Federal government’s projected financial obligations and its future tax receipts, now totals $230 trillion…or $721,000 per citizen. The fiscal gap includes such unfunded future obligations as Social Security, Medicare, and the food stamp program (now the Supplementary Nutrition Assistance Program). The fiscal gap is twelve times the national debt and to close the gap we would have to have either a 60% increase in Federal taxes or a permanent 40% cut in transfer payments.
Major nations are now dis-investing in U.S. government debt. So how has the debt spending been sustained? The U.S. treasury securities held by the Federal Reserve have gone from $800 billion in 2007 to $2.5 trillion today. The Federal Reserve has been printing money faster than a third-world dictator.

Where is the economy today?

Inflation adjusted median household and family income is down at least 8% from 2007, and more for blacks and Latinos. The individual poverty rate has climbed by 20% and household income inequality is growing nearly 40% faster since 2007 then in the preceding 7 years.

Transfer payments such as Social Security, Medicaid, food stamps and other welfare benefits are the fastest growing component of personal income. Half of the gain in personal consumption expenditures since 2007 has been funded by deficit-financed transfer payments.
The growth rates in both real per capita personal income and real GDP have fallen more than one-third since 2007.

The stock market has peaked and cracks are appearing. The margin debt is at an all-time high despite a rock-bottom volume of trading. The Schilling PE ratio is nearly 70% above normal and rising interest rates will stop companies from buying back their stock to inflate its value.
Labor force participation is falling and the number of discouraged workers rising. Real hourly wages have been flat since 2007. Home ownership has dropped to its lowest rate since 1965 and rising mortgage rates will do little to change this.

Rising interest rates, falling exports due to a strong dollar, weakening markets for Federal debt, deflating of commodity markets, and a stock market decline add up to a shaky U.S. economy going into the November elections.

The President offers no substantive answers to these challenges.
Dr. John E. Stapleford
Director,   CEPA

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Every year, the General Assembly finds a way to balance the budget, as they are required to do by our state constitution, or at least use accounting gimmicks to move spending around so future liabilities aren’t held against the current FY budget.

This year, the state’s “in a pickle”, so to speak, or maybe something to do with scrapple would fit better. There is a budget deficit in the neighborhood of $70 million, which increased after legislators caved to state employee demands not to pay additional expenses for their healthcare policies due to a wage freeze for most state employees, a freeze which has lasted for years. Not only did they not make this move at the request of Governor Markell, but they added $21 million to the deficit with money we don’t have to keep their constituents happy.

Meanwhile, the state wants money to pay for infrastructure spending, cleaning up the waterways, investing in startups/businesses to grow the economy, paying for increased Medicaid and public education expenses, services for the increasing number of senior citizens retiring into Delaware, and so on. As spending goes up, the state is collecting less from casino revenue and  personal and corporate income taxes than in previous years. You can see where we’re going to run into problems, and we’ve predicted for some time that the next governor of Delaware is going to have a serious fiscal mess to fix.

So what do our elected officials have in mind to balance the budget? Some new ideas include: raising state income taxes on top earners from 6.7% to 7.6%, increase Delaware’s per-gallon gas tax, motor vehicle fees, and taxes levied on wholesale fuel deliveries to fund new road and bridge improvements, increasing the gross receipts tax, reduce corporate income taxes, eliminating the estate tax, and actually cutting personal income taxes across the board.

“There’s not going to be a split of these issues that will give us the transportation money and we’ll figure this out later,” Lavelle told the News Journal. “I didn’t fall off the banana truck yesterday. I’ve been fooled more than once down there and it ain’t going to happen again.”

Did you see what was missing among these ideas? Ways to cut state spending. This is how our state does “the water dance,” similar to how many indigenous tribes around the world pray for rain; they do a symbolic dance and hope the sky will open up and rain will just fall and provide much-needed water to grass and crops so they will grow and life can continue. Replace the actual dancing with accounting “dancing” (tricks), and the rainfall with moneyfall, and otherwise the concept is the same.

Now some of this has already been done; we know the state Department of Education is about to take a big hit, as Legislators have become increasingly opposed to the Governor’s education plan, which includes Secretary Murphy. Race To The Top funds are phasing out and school district referendums continue to alternate between passing and failing, which means some districts have found themselves cutting back on spending and hiring while freezing wages for some district employees.

Yet when we see the final budget, which must be passed by June 30, where else will the state consider making cuts? Senator Lavelle went on record suggesting that tax increase were off the table unless the prevailing wage law is reformed or repealed. Will Delaware Democrats be willing to stand up to their union supporters and change the prevailing wage law?

Another way the state could make cuts is to get us out of RGGI, which is a regional cap and trade scheme. RGGI does not do anything for the environment, but it does increase our electric bills by an average of $50/year per household, and thousands more per year for most industrial businesses, who have most of the remaining few manufacturing jobs Delaware still has. Will the GA make an effort to pull us out of RGGI?

Delaware has plenty of room where cuts could be made, the only determination will be whether they make them or not. In the meantime, please visit caesarrodney.org

for the latest news and information you can use to learn about our state’s fiscal situation and click on the “Impact Delaware” link to learn more about how you can make a positive impact on Delaware.

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A few weeks ago President John Stapleford (yea, that has a nice ring to it) published an article praising Governor Markell for making the decision to ask state employees to contribute a little more to their healthcare plans. He wrote:

“State employee and retiree health care costs have been rising exponentially and are not sustainable. The claims have jumped 20% over the past three fiscal years and the latest Pew Trusts analysis estimates that the State of Delaware has unfunded long term health care liabilities of $5.6 billion.

Data from the U.S. Bureau of Labor Statistics shows what the Governor proposes is not onerous. The State pays for almost 91% of the employee’s health care premium. Nationwide, state and local governments pay 87% and the average in the private sector is just 79%.

According to the BLS, the average pay for workers in service-providing industries in Delaware was $51,647 in 2013 while the average pay for Delaware state government employees that year was $53,450. The 2013 BLS occupational wage survey for Delaware shows an average wage of $39,130 for full time workers in protective service occupations while 2013 State of Delaware payroll data shows annual pay for full time workers in the Department of Corrections to be over $46,800.”

After publishing this article, we heard back from state employees, upset by our article. Some unfriended us on Facebook. Others unsubscribed from our e-mail blasts. I even received on particularly upset letter with a five-dollar bill saying the following:

“As a State of Delaware employee, I work hard for my paycheck. I do not have a flashy job and am not in a position where I will ever receive accolades for my wondrous feats. When I retire, no one of acclaim will come to speak at my send-off party, if I’m lucky enough to have my friends pay to have one. I am grateful to have the ability to contribute to a retirement plan that will help supplement the meager social security check that I will receive when I am eligible under the rules of the Federal Social Security Administration….I am a fan of your organization, but would love to see some positive support for the hardworking State Employee.”

This particular letter is upset over our Transparent Delaware website, where we wrote:

“Caesar Rodney requested the State Pension Data as part of our Freedom of Information Act (FOIA) effort and received this response from the State Office of Management and Budget.

“The release of pensioner information is addressed in Delaware Code.  Specifically, 29 Del. C §8308 (d) states as follows:
‘(d) All records maintained by the Board or the Office of Pensions and Investments relating to the pensions or pension eligibility of persons receiving pensions from the State or other post-employment benefits and who are not presently employed by or serving as officers of the State or its political subdivisions shall be confidential.’

Accordingly, your request for state pensioner information as contained in your December 16, 2011 request cannot be fulfilled.”

Many other states now release State Pension information for public use.

Caesar Rodney would have to go to court to secure the release of the Pension data even though the release of that data is forgone because it is taxpayers’ money. ”

We have a large number of supporters who are current and retired state employees, so let’s set the facts straight and respond to our letter writer.

No one at CRI hates state employees. Nor do we assume they are collectively a lazy, undeserving bunch. Delaware needs some number of competent, hardworking state employees, and this letter writer is correct that most of them receive middle class wages and not the six figures much of the leadership gets.

But what this letter writer misses, and what many state employees miss, is that they are receiving their salaries from taxpayers in the private sector. Regardless of where it comes from, if the government provides it, the private sector paid for it in some way. If government were completely honest about spending, we would not need to threat a lawsuit. But we as taxpayers have a right to know what they are giving to others, and while this letter writer may believe his or her pension is too meager to be noticed, the collective pension total of all state employees is very high- just how high, we don’t know.

AS for the complaints that Markell was wrong to ask state employees to contribute more to their healthcare plans, they are not being asked to pay more than anyone in the private sector, nor do we want it taken away in its entirety. But for many people, it’s difficult to see past their own personal lives. Most of those who voted in our poll to say taxpayers should pay more because state employees haven’t received COLA raises since Markell took office are missing the point that their private sector counterparts aren’t doing much better.

The reality is, Delaware spends too much money. Unfunded liabilities are a problem and private sector tax collection from individuals and businesses has declined the last two years, not even counting the casino troubles. This is a big reason why most of the referendums to raise property taxes to pay for the public schools were voted down- it isn’t because people hate teachers or don’t want to see the local public school succeed. In fact, all of us at CRI join the majority who want to see public schools do well because when all schools succeed, all children have the opportunity to succeed to. This success can and should include traditional public schools.

But people are tired of paying money into a system with mediocre to poor results. They are tired of being excluded from the policy-making process, all while told they need to cough up more or else they’ll prove they don’t like teachers, et. al. Why should taxpayers continue giving money to a system which has failed?

If state employees feel disrespected, they should understand the current system is the problem. The way we do business is simply unsustainable and unless changes are made, we really will collapse, and this is not a blog for conspiracy theories or nihilistic predictions. CRI is a government accountability organization, and as long as our state government officials are not held accountable for their actions, then CRI will continue to support policies which reduce the burden on the private sector and hold the government accountable for how they spend our money.

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The official posture of the De. State Government is that Delaware has a state-sponsored health insurance exchange, Chooseheathde.com. The Supreme Court and the federal Department of Health and Human Services (DHHS) say otherwise, that Delaware has a federal exchange. Why does this matter?

It matters to the 90% of the people who purchased their health insurance through the DE exchange and received a tax subsidy. It also matters to the other 5 million people in the US who did the same. If the Supreme Court decides FOR the plain language of the Affordable Care Act in the King v. Burwell case, which will be heard in March, and upholds the ACA, which is likely, then those aforementioned people lose their subsidy, and likely their insurance, and may have to refund the IRS in their next tax filing for 2014 and 2015. They would be retroactively declared in default of their policy and therefore responsible for their health care costs directly.

The case is very likely to be ruled in favor of the legislation as written, that on January 28th the House Committee on Energy and Commerce requested the contingency plan in writing for the expected ruling from the Supreme Court. The same question put to the office of the Insurance Commissioner and the state Department of Health and Social Services referred me to the Federal DHHS and Sylvia Burwell for answers. Whereas the federal government has a contingency plan should the Supreme Court rule in favor of the plaintiffs in King v. Burwell, Delaware does not have one.

The only possible interpretation of this is that Delaware does not have a state-sponsored exchange and therefore is financially vulnerable to the outcome of the Supreme Court case. The state government should be aggressively making contingency plans for this outcome which will affect not only the thousands of Delawareans who are relying on tax subsidies to cover the cost of insurance plans purchased through the state exchange, but also for our state’s budget, should the cost of health insurance be dumped onto Dover from Washington D.C.

Chris Casscells, M.D.

Director, Center for Healthcare Policy

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Just recently CRI began a campaign to keep Transparent Delaware, our government payroll and vendor contract data website, open to the public by asking people to donate towards our goal of $5,000.

https://www.indiegogo.com/projects/help-keep-government-spending-data-open-to-all/x/9753455

Our campaign pitch:

“We operate the website Transparent Delaware, which provides the public with open data on state payroll spending and state vendor payments. Want to know who the highest paid state employees are, by division or year? We have that. Want to see why an employee who was given a $60,000 base salary received $164,000 is overtime and “other” pay? We have that too.

We would like to obtain state pension data but we have been blocked multiple times in our efforts to find out how much the state spend on employee pensions. While we recognize that state workers are human beings too the fact is, it’s our money and we should know how it’s being spent. With extremely few exceptions government spending data should ALWAYS be open to the public.

What we need from you: It costs us about $5,000 a year to keep Transparent Delaware open to the public. All money collected for this campaign go to paying our web developer and host to keep the site up, or else we’ll have to shut it down :(. The exception is if you reach a donation threshold, we will send a small gift of thanks.

Even if we do not meet the $5,000, the more money we receive towards this goal, the more we can pay our web developer to keep the site open. They are great people but they have bills to pay too!”

As many before us have stated, “freedom isn’t free.” Now generally people who use this line are nearly always speaking about military service and the need for people to make some kind of meaningful sacrifice to keep our freedoms alive. But this axiom should apply as well to keeping information about our government available to the public.

We have to pay our web host and site developer, and while they may be awesome people they have bills to pay too. Understandably many people are used to internet content being free or “freemium” and the more successful web pages can place ads on the site to make money, but we are a non-profit and we cannot, and will not, rent our website space over to advertisers. Thus, we need the generous support of people like you to help us reach our goal and keep Delaware state payroll and vendor data available to the public.

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Legislative Hall in Dover, Delaware

This article originally appeared at the Watchdog.org website on January 20, 2015. Read the original at http://watchdog.org/193657/legislative-priorities-2015-delaware-way/

Last week was the first week the state Legislature was in session, but they will soon adjourn for budget and finance hearings before getting back to lawmaking in mid-March. Five new representatives and one new senator took their oaths of office for the first time, but this Legislature looks almost identical to the last one: the Democrats control the governor’s mansion, the House of Representatives 25-16, down from 27-14 last year, and the Senate 12-9, down from 13-8.

Notably absent from the last General Assembly were bills to make Delaware’s economy more free as the state—well-known as the “Switzerland of America” for its easy incorporation process and fair Court of Chancery—faces competition from Nevada and North Dakota for corporate business and from the Sun Belt for jobs. This year the Caesar Rodney Institute hopes to see legislation to address the following issues:

1. Education Savings Accounts: Delaware has “school choice”-IF your idea of school choice is to allow a child to transfer from one public school district to another (provided that district has room).While that’s better than nothing, that’s not really school choice.

CRI supported a bill last year called the “Parent Empowerment Education Savings Account Act” (PEESAA) which would have introduced Education Savings Accounts as an option for low-income and special-needs students who are the most likely to need additional services not being offered by the traditional public schools. This bill was tabled in the House Education Committee but we hope ESA’s and other bills encouraging school choice are brought up this year.

2. Prevailing Wage (PW): Delaware has an insanely wide range of wages a that business who wants a public construction contract has to pay its employees to get the contract.

Every January the state Department of Labor mails out its PW survey to union-friendly contractors and conveniently “forgets” to remind non-union-friendly construction companies to ask for, and return, the survey. This results in wage variance like $14.51 per hour for a bricklayer in Sussex County, but $48.08 per hour for the same job in Kent and New Castle Counties. Not to be outdone, boilermakers get $71.87 an hour in New Castle County, but “only” $30.73 in Kent County.

These high rates prevent many construction projects from being started and make those which are done more expensive for taxpayers. If the PW won’t be eliminated, we hope the state will instead use the U.S. Occupational Employment Statistics survey. This would reduce rates by almost 40 percent on average and free up nearly $63 million of spending from the State’s FY15 capital budget, including almost $18 million for more school capital improvements.

3. Make Delaware the next right-to-work state: Delaware is not a right-to-work (RTW) state and, between that and our inconsistent-as-applied PW law, many businesses outside the state choose not to move here. Incorporating and buying office space in Wilmington for some high-paying executive jobs is one thing. But Moody’s Analytics in late 2013 said Delaware was the only state at immediate risk of falling back into a recession and a lot of this is due to more businesses closing than opening in Delaware. Pass legislation to end forced unionization and support pro-job growth policies instead.

4. Tax and regulatory reform: Only five states have a Gross Receipts Tax, which is a tax on revenue generated before profit and loss is factored in. Three of those states have no further taxes on corporate earnings and the only other state (Virginia) that does has lower tax rates. Between this tax, high personal and corporate income taxes, franchise taxes, and overall over-regulation by state agencies, Delaware is increasingly threatening its “Incorporation Golden Goose” as Nevada and North Dakota work to take business from the state. This needs to be addressed.

5. Work to lower energy prices: Delaware has electric rates 25 percent higher than the states we compete with for jobs like nearby Virginia. We import close to one-third of our electricity from out of state, the highest rate in the nation. Some of this is due to our geography, but a lot of it is due to the state’s failure to build a network of natural gas pipelines from the Marcellus Shale to Delaware.

Coupled with the state’s participation in the Regional Greenhouse Gas Initiative (RGGI) carbon tax scheme and taxpayer subsidizing of “green” companies like Bluewater Wind (gone), Fisker Automotive (didn’t build cars in Delaware), and Bloom Energy (still has not brought the promised 900 high-paying full-time jobs), Delaware cannot grow its economy if energy prices are high. We want the Legislature to pass natural gas pipeline extension and end participation in RGGI and subsidies for “green” companies.

What issues do you think the state Legislature should focus on this year?

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