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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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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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2013 is already upon us, and three days in things are headed downhill. Congress just passed a bill to respond to the so-called “fiscal cliff” by increasing EVERYONE’S taxes at least a little bit, and a lot if you have a high income (note: if your money comes from investments and assets, such as Warren Buffett, your taxes will be unchanged). More battles will come up on the debt ceiling, automatic defense cuts, and future budget deals (if any come), and no doubt the partisanship will continue.

Delaware has its own problems to deal with: unfunded pension liabilities, out of control Medicaid spending, bad deals with Fisker and Bloom Energy, education performances moving sideways and not up, and taxes such as the gross receipts taxes which harm business growth. These are just a sample of the issues facing the state. While CRI would like to resolve every major issue within the state, that is not very likely.

Therefore CRI will spend 2013 focusing on three elements: improving education standards, discouraging corporate subsidies, and preventing the state from passing any legislation which pushes single-payer healthcare by abolishing private healthcare insurance.

Education reform will be CRI’s top priority in 2013. There is general consensus that the education system as currently structured is not serving the students well, particularly those in areas like Wilmington and Dover, where parents usually do not have the  financial means to send their children off to private schools, and who cannot be guaranteed a slot in the charter schools due to bureaucratic processes. CRI is calling for legislative actions to allow the money to “follow the student”, where parents have options such as Education Savings Accounts (ESA) that give parents the financial opportunity to choose where they want to educate their child. We hope to inform and engage the public and the legislators into some serious action this year that will give students a big victory for their future.

Our second goal is to reduce, if not eliminate, subsidies for preferred businesses and special interest friends of the government. Bloom Energy and Fisker Automotive are two prime examples of the government handing over “subsidies” for “investment” in these companies, meaning hundreds of millions in tax dollars to give to these companies, money we will in reality never receive payback for. There is no industry in Delaware receiving taxpayer money that can be said to be worth the corporate welfare. Our aim is to educate the public and legislators, and push Delaware to either reduce/eliminate current government subsidies to preferred parties, or else to agree to prohibit future government subsidies via “corporate welfare”.

Our third goal will be to discourage the Legislature from passing any bill which bans private health insurance in favor of “single payer” government. While CRI acknowledges the issues in containing healthcare costs, such as Tort reform, allowing insurance to be purchased across state lines, and using means-tested methods to determine who qualifies for Medicare or Medicaid as opposed to just handing it out to anyone who asks, there is no way the government can raise all the taxes needed to pay for this without destroying job opportunities or sending them out of state. Plus, the government will not be able to manage the insurance aspects of healthcare policy without setting up a massive, inefficient bureaucracy, just like they do with everything else.

What do you think? Are there any goals CRI should work for that are no mentioned above?

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Are elected officials entitled to automatic pay increases?

That is the basic question discussed in a recent Baltimore Sun article which details the forthcoming debate over recommended pay increases for elected officials in Maryland.

The story notes, “Not surprisingly, the prospect of approving raises in the midst of a recession has [Governor] O’Mally and some lawmakers running away from a politically treacherous move. O’Malley, a Democrat insists he and the lieutenant governor would not accept any extra pay and that he hopes other state officials do the same.”

A similar conversation has been had in Delaware…and it needs to occur again.

Delaware lawmakers receive their respective pay increases as a result of the Compensation Commission, a body that recommends such increases for a multitude of government officials. The last time the Commission recommended pay increases, the House and Senate passed different bills to get rid of the Commission entirely. HB 539 passed the House but never received action in the Senate. HB 48,  which would have made the recommendations of the Commission advisory, passed the House but died in Committee in the Senate. SB 387, which would require legislative salaries to be voted on separately from the budget and would have removed the General Assembly’s salaries from the Commission’s recommendations, also died in the Senate.

The General Assembly passed various resolutions rejecting the Commission’s recommendations during the same period, essentially applying window dressing to the issue. They looked good by rejecting the pay increase, but did not enact any substantive change to the standing policy.

In light of the recent pay cuts for state employees and the ongoing budget crunch, should these raises continue to be automatic?

HB 55, which is awaiting action in the House, indicates that some legislators think the answer is no. The bill would make the Commission’s recommendations advisory, making any salary increases non-binding and would tie increases in pay for the Governor, the General Assembly and other positions to any raises granted to general state employees. The bill enjoys some bipartisan support and should be given a fair debate when the General Assembly returns next session.

The question that remains is whether it is better to continue to have the General Assembly removed from the process of granting their own pay increases – a laudable policy, that provides separation on a politically tricky issue.  Or, is it preferable to add a degree of accountability by forcing lawmakers to vote on their own pay increases.

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There is currently a bill being considered in the Delaware legislature that would prevent members of the General Assembly from having state employment during their time in office.  The bill contains an exemption for people who were already employed by the State of Delaware when they were elected. This is bipartisan legislation and is sponsored by three Democrats and two Republicans.

The Caesar Rodney Institute strongly supports this bill because it will help prevent legislators from using the power of their office to gain state employment and it will also help prevent conflicts of interest.

Delaware’s current dual employment laws allow legislators to be employed by the state provided they are not paid multiple times for the same hours of the work day.

If passed, the bill would create more restrictions than Delaware currently has on dual employment and would hopefully reduce the amount of corruption in the Delaware legislature which would be beneficial for all Delawareans regardless of party affiliation.

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Delaware is at risk of forever losing its voice in presidential elections.

On June 24th of this year, the Delaware House of Representatives passed House Bill 198 – a bill that essentially reduces Delaware’s minimal voice in national elections to a mere echo of the voice envisioned by our Founding Fathers.

Twenty-three legislators voted to join an interstate compact to subvert Delaware’s influence in the Electoral College, forcing Delaware to cast its vote for whichever presidential candidate might win the overall popular vote, nationwide. Delaware has but three electoral votes among a total of 538, a miniscule one half of one percent of all of the electoral votes. Under this compact, Delaware’s voice is further reduced to a fraction more than one quarter of one percent.

HB 198 is a fundamentally flawed and constitutionally suspect piece of legislation. If our Senate acts to pass HB 198 and this well-intentioned but-conceived measure actually goes into effect with its counterparts in other states, it will serve as the cornerstone for the destruction of the checks and balances our Founders wove into the fabric of the Republic; and ultimately become the loose thread that could unravel the fabric of Republic once and for all.

You may remember the Mel Gibson line from the movie The Patriot where Gibson’s character asks the rhetorical question (and we paraphrase) “Why trade the tyranny of one tyrant 3,000 miles away for that of 3,000 tyrants one mile away?” The Founding Fathers understood the danger of a “tyranny of the majority.” To avoid such “tyrannies,” the Founders  created the Electoral College to balance the interests of the cities against those of the rural areas of America; the interests of the small states against those of the large states, and those of the agrarian South against those of the growing industrial north.

If this compact were to come to fruition, presidential campaigns would rapidly shift from numerous battleground states to a few large population centers. While some voters may now feel disadvantaged by the Electoral College, even more will be disenfranchised by the “national popular vote compact.” In brief, this misguided plan, of which HB 198 is an integral part, calls for entry into a contract with other states wherein Delaware will be forced to cast our electoral votes for someone who may not win a majority within our state. In the end, the rights of Delaware’s voters and millions of others similarly situated in other “compact states” will be greatly diminished.

Let us not forget that in forming the Republic, the power and sovereignty of the federal government was originally derived from a grant of power and authority from each of the individual states. The creation of the Electoral College is as much testimony to that fact as are the Ninth and Tenth Amendments to the United States Constitution.

Reasonable minds can disagree on whether the current system is indeed “broken.” If, in fact, reforms are needed, alternatives can be found to improve the system – without adopting a scheme that infringes upon states’ rights and silences the voice of untold millions of Americans. Indeed, other methods which are more pragmatic and less likely to infringe upon the Founders’ delicate balance of power must surely exist, if only we would search for them.

The checks and balances of big state versus small state; north versus south; east versus west; rural versus urban, are all the results and benefits of the Electoral College. HB 198 and its counterparts in the other states will most certainly result in our country being controlled by America’s 20 or so largest cities to the detriment of the rest of the country. And if this happens, Delaware’s voice will have been effectively silenced and you can bet your bottom dollar that our Republic and the traditional concept of the American dream are doomed.

Originally posted at CaesarRodney.org

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There are times when elected officials do the right thing because it is the right thing to do. There are other times when legislators do the right thing because they hope to insulate themselves from political fallout. And still, there are times when politicians to things for political expediency even when said action is unconstitutional.

The third classification is exactly what the Delaware General Assembly did this past June 30th when they passed they fiscal year 2010 operating budget. Twenty-seven state representatives and 16 state senators, 69% of the General Assembly, voted for an unconstitutional measure included in the state budget simply to protect themselves come next year’s election. As the legislature debated a proposed 2.5% pay cut for state employees, they included the same 2.5% cut for themselves, knowing full well that such an action is unconstitutional. During discussion of the bill on the floor of the House, staff attorneys and legislators acknowledged that such a move is not legal. They approved the bill all the same so that they could present the appearance of “standing with the state workers” whose salaries they planned to slash.

The members of the legislature – who refuse to acknowledge the true motive behind this move – should be called to task for such a blatantly political and transparent action. Come January, 2010, if these legislators are genuine about their desire to cut their own pay, they should begin the legal process of fixing the legislative pay system by voting for House Bill 55 which will change the current system of increasing legislative pay by making the recommendations of the compensation commission non-binding. Further, this bill will add a level of accountability to legislators who currently are insulated from political implications of giving themselves pay increases under the current system.

Such a move will remove the significant level of disingenuous motive behind the vote on the budget and will represent a positive step in the right direction on how increases in legislator pay are approved.

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