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2015 will soon be upon us and for those who are passionate defenders of freedom and liberty our work just goes on when the clock strikes midnight. Here is CRI in review and our goals for 2015:

  • Dave Stevenson’s lawsuit against DNREC and former DNREC Secretary Collin O’Mara is still ongoing. Dave and the other three plaintiffs, including CRI Director John Moore, won standing to continue their lawsuit. We will refrain from making a prediction on a court ruling less we jinx the lawsuit but we are optimistic the Plaintiffs will win. This is because in order to get standing the Plaintiffs had to prove they had a valid reason to sue in the first place, such as being aggrieved by the Defendants actions. Winning means stopping DNREC from changing the rules on how many carbon permits can be sold at carbon auctions, saving Delaware taxpayers over $100 million a year in increases in utility bills.
  • We testified in favor of HB353, the Parent Empowerment Education Savings Account Act (PEESAA). Jim Hosley, our former CEE Director, spoke in favor as did a dozen Wilmington parents and grandparents (and one student!) and the leaders of Tall Oak Classical Academy. The bill was tabled in the House Education Committee, a move we are unfortunately not surprised by. However, we hope 2015 will be a better year as more and more people realize the need to improve Delaware’s education system, and the only effective way to make the changes our students need to be prepared for the future is to provide parents with school choice options to do what’s best for the child. CRI will always maintain the belief that parents and/or legal guardians can make a better choice about their children’s education than politicians and bureaucrats in the state Department of Education.
  • We brought in Dr. Bartley Danielsen, business and economics professor from North Carolina State University to keynote our Sixth Annual Dinner. Dr. Danielsen has proposed a theory tying in environmental benefits to school choice. The basic theory is, parents moved to the suburbs to flee poorly performing public schools which left a lot of people uneducated and unable to find respectable work, and many turned to crime as a result. His theory is if inner city schools were to improve their quality, many families would move back to the cities from the suburbs and the result would be a reduction in traffic and environmental pollution from people driving from the suburbs to the cities. View is presentation here and here

In addition to these challenges, we still have issues Delaware must resolve in order to improve our economy:

  • End to the prevailing wage which makes public construction costs so expensive many end up getting no work at all. See: Rockwood Museum.
  • A Right to Work law for Delaware. Union leaders are pushing the “scab” theory that somehow union members will drop out and reap all the benefits the union “works” to get. We have responded by noting that a) manufacturing businesses have responded by moving factories elsewhere, depriving Delawareans of job opportunities. See: loss of auto industry, Valero plant, Evraz Steel plant, Georgia Pacific plant. b) as a moral issue, should union bosses have the right to take someone’s money just because someone works at a particular location? What if the union bosses don’t serve their member’s needs, such as organizing or donating to political causes or candidates the members don’t support?

We wrote: “While in the short run unionization may force wages up for those involved, in the long run closed shops reduce capital spending and induce the out-migration of jobs and workers.”

Read HERE and HERE and HERE

  • tax reform. Delaware is one of just five states with a gross receipts tax (tax on sales, even before factoring in profit/loss and expenses). Three of the other four don’t have an income tax and the only state with both like Delaware is Virginia who has lower tax rates. Coupled with high corporate and personal income taxes while Nevada and North Dakota compete with us for corporate business, and without reforms we will see money and jobs leave the state at even higher numbers.

Merry Christmas, Happy Hanukkah, Happy Holidays, and a Happy New Year to all. Let’s be thankful for a good 2014 and hope for better things in 2015.

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Earlier this week Business Insider UK published an article titled, “Conservatives will hate this: Proof That Government Spending Cuts Hurt Economic Growth”. From the article:

“… austerity subtracted about 0.76 percentage points off the real growth rate of the economy between the middle of 2010 and the middle of 2011. If real government spending had remained constant at mid-2010 levels and everything else stayed constant, (yes we know these are big assumptions) the US economy would now be about 1.2 per cent larger.

There’s a secondary conclusion, too: War is good (economically), it turns out.”

They provided a graph (created by Matt Klein of the Financial Times) with data from the U.S. Bureau of Economic Analysis (BEA) “proving” that Keynesianism works. Without public spending, the author argued, our economy can’t grow.

US govt spending growth contribution detail

Enter the Foundation for Economic Freedom, whose founder Leonard Reed once published the famous short story “I, Pencil.” You absolutely should read this, by the way. An economist named Robert Murphy points out the fallacy in the calculations made for the graph above:

“Edwards (the author of the Business Times UK article) seems to think that the above chart shows at least a correlation between government spending and economic growth. After all, he wrote that the BEA chart “seems to show that government has a pretty straightforward effect on GDP.” But… the chart does nothing of the kind.

Look carefully at the legend. The various colored rectangles are different components of government spending. Specifically, the rectangles indicate how the change in each component — positive or negative — relates to the change in overall GDP. The black line is not GDP growth, but is instead the sum of the various components of government spending… if we take the BEA’s word for how much each component of government spending contributed to GDP growth in each quarter, then we can stack those numbers on top of each other and even add them up! Contrary to Edwards, the FT chart doesn’t “show” anything at all, except that the BEA each quarter announces how much various components of government spending contributed to, or subtracted from, GDP growth.

After this discussion, we can see why pretty charts from the FT showcasing government spending’s “contribution to GDP growth” quarter by quarter don’t really mean anything. It’s the same for the ex post “empirical” analyses that concluded that the Obama stimulus package “saved or created” such-and-such million jobs. The underlying models that generate these estimates assume a Keynesian world, and thus cannot test whether the Keynesian model is correct.”

Even though the government prints and issues money, it’s the private sector (both businesses and consumers) who determine the value of a good or service. The government can only run on money taken from the private sector; printing into eternity is Quantitative Easing, which causes inflation if too much is printed. So they tax or borrow it from the people. If government spending really did save economies, both Delaware and America would have people making record amounts of money instead of seeing wages stagnate. The Federal Reserve would not have to continue holding interest rates low in order to convince people to buy things like homes or cars or take out student loans.

Check out CRI’s analysis here and here.

The bottom line is, Keynesianism does not work in the real world, despite efforts by its supporters to say it does. The less the government spends, the less the government needs. Even The News Journal noted that in a recent editorial.

As we approach 2015, here’s to more free markets and less government spending at all levels.

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At the Hispanic CREO (Council for Reform and Education Options- CREO is Spanish for ‘I believe’) conference December 11-12 the topic of how to approach the issue of school choice was discussed. Here are our top three takeaways and fantastic photos of Miami:

  • First session had speakers representing four different Hispanic Chambers of Commerce: South Florida, Albuquerque, Illinois, and California. The big takeaway is that Hispanics have got to stop the in-fighting and work together to solve problems. This lesson applies to all groups though Hispanics were the #1 focus of the conference (see the name).
  • Myles Mendoza is the Executive Director of Ed Choice Illinois, and a member of the Democrat Party. He discussed the challenges Democrats who support school choice have since the issue has become so highly (and unfortunately) politicized. One method he had: focus on the “low-hanging” fruit. Find people of all backgrounds who are willing to accept the truth about Delaware’s public education system and explain to them the merits of supporting school choice. Police officers might find it easier to support it if they realized just how much better schools would improve the local community, like Wilmington or Dover. Then find others who see the benefits of better schools and who realize this isn’t a partisan issue.
  • The business community MUST become more involved. Too many business owner’s don’t see the benefits of how better schools benefit them because they have never been approached on this issue, or have been approached from a partisan point of view. SUPPORTING QUALITY EDUCATION ALL CHILDREN IS NOT PARTISAN! One way is to ask local businesses to invest in their community’s education. They can either a) get apprentices/interns out of high school to work for them or b) they will benefit when educated people turn into consumers with money to spend at those businesses.

If you have other ideas, please share!

Now, the photos:

Biscayne Bay, from the Marriott where the conference was.

Downtown Miami

The post-dinner dessert.

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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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 green·wash·ing

noun \ˈgrēn-ˌw-shiŋ, –ˌwä-\

the practice of promoting environmentally friendly programs to deflect attention from an organization’s environmentally unfriendly or less savory activities; a superficial or insincere display of concern for the environment that is shown by an organization (dictionary.com definition)

For those of you who have followed CRI’s activities for the last two-plus years, you will recall how we have publicly opposed the state’s cronyist deal with Bloom Energy to hand a private “green” company $529 million in guaranteed state taxpayer revenue over a period of 21 years EVEN IF THE COMPANY GOES OUT OF BUSINESS OR RENEGES ON ITS OBLIGATIONS OR IF ITS TECHNOLOGY BECOMES OBSOLETE.

On Monday, October 20, 2014 NBC Bay Area ran a six-minute long investigation into Bloom Energy and whether the company was misleading the public about its technology. The video is below.

<script type=”text/javascript” charset=”UTF-8″ src=”http://www.nbcbayarea.com/portableplayer/?cmsID=279873632&videoID=rX70SdgdBmnB&origin=nbcbayarea.com&sec=investigations&subsec=&width=600&height=360″></script&gt;

From the article:

“The NBC Bay Area Investigative Unit analyzed performance data provided to the state of Delaware for Bloom boxes that power 22,000 homes in the state. Delaware is home to the largest installation of Bloom fuel cells in the nation, where the technology has been in operation for more than two years.

According to the most recent data available, Bloom boxes have achieved the 773 emission rate just three months out of a 24 month period. The average emission rate is 823.

The company declined numerous requests to discuss their carbon emission rate in an on-camera interview, but in a conference call Bloom representatives said the 773 figure is achieved when the boxes are brand new, noting that CO2 emissions increase as the boxes age.

“If the thing emits more carbon dioxide than they say it does then this is greenwashing,” Leveen said.”

The bottom line: The only thing “green” about Bloom Energy is the taxpayer money flowing from hardworking Delawareans, and even those who are not working, into the pockets of multibillionare business cronies and their allies.

If you agree please visit us a www.caesarrodney.org and donate today!

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As CRI continues efforts to expand and bring the efforts for economic and personal freedom to all Delawareans we recognize the thoughts from our former Director of the Center for Education Excellence, Jim Hosley.

In question are two articles which appeared in the News Journal this week: One on the news about the ‘priority schools’ announcement from the state and one on Moyer Academy’s closing at the end of the 2014-2015 school year. Here are Jim’s observations and thoughts:

  • Agree the six Wilmington schools are not performing.  Where has the Markell Administration been? These schools have had the same level of under-performance since the start of his administration. People on the street in neighborhoods have been saying the system isn’t working and they’ve lost six years with Markell’s deaf ear.
  • What has Markell been doing: launched a major statewide program that has not improved results statewide; created a foreign language program with specific attention to Chinese to make DE a world education leader (in fact he allocated over $2 million dollars to that program – great help for these 6 schools!); secured $119 million for Race to the Top (RTTT) and $49 million for early education but nothing for problem schools; dropped funding for start up funds for more charter schools; and teachers complain there is no consistency and more stress in classroom precipitated by programs imposed from above the school level.
  • Markell is in fact pointing the finger at teachers. No doubt there are problem teachers as in any business and schools need to be able to hire and fire in order to find and retain the right teachers – a system-wide problem. However when there is system-wide failure there is a systemic problem. A problem in a state with a large DOE that has grown under his administration.
  • The Administration continues to look to spending when in fact the question isn’t how much but where education monies are spent. It is time to look at all spending outside the classroom, focus on reducing those that do not prepare students, and re-direct savings to appropriate spending including targeted programs to overcome social issues that contribute to an environment that does not encourage learning and participation.
  • Why should the state establish salary objectives for education leaders? Because they are buying support and they like spending. I have no trouble with paying more but in the context of our current spending then the solution is to understand effectiveness and redirect reductions to contributors. DOE has to be a focus and review because it has been in charge, is bloated and is ineffective. Question: Why do we need a DOE department that employs about 150 more people by population than the average state?
  • It was nice to see the sense of urgency . . . but using as justification that 2000 more students will more likely go to jail than get a job is simply a nice touch given everyone already knows the issue. Urgency should have been from day one of the Markell administration. A tenure that has contributed to the problem with cumulative results of than more than 12,000 students  have already failed to street and drugs — where has the Administration’s urgency been.

What we need.

  • All schools serve the public good so any solution must be local and include using public, private, faith-based, blended school and homeschool opportunities.
  • Parents equipped with ESA’s do not have to wait for another elaborate scheme that will probably results in same failed results of other governments plans; and don’t have to wait for a Vision 2025! They can send their children to schools that deliver today (and they have capacity to accommodate more and given monies available will quickly grow more public and private because the monopoly is not in charge) the math skills, reading skills, functional literacy, and solid work habits to allow their children to grow up and find a good job. We do see this in all charter schools in Wilmington yet the DOE closed one and is closing another that serve the most underserved. How about closing underperforming traditional public schools.
  • Parents able to decide the effectiveness of schools and teachers by directing the funds set aside in savings accounts will make all schools more accountable. In many ways private schools are more responsive, more accountable and more open to direct participation. Choice provides a chance to  improve public schools that will have to focus effectiveness and budgets on what parents value, that will overcome hierarchical organizations that impose rules and regulations, and that increase more in-school and at-home participation that has been limited by the need to comply with elaborate state, federal and union rules and behaviors.

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