Archive for the ‘Government Spending’ Category


State support for higher education is slipping with one large exception at the University of Delaware. One department, actually one individual, at the university is slated for a 38% increase according to the latest draft of the state budget.  This is in contrast to the state contribution for university operating expenses falling from about 21% in 2000 to about 12%, according to the University’s 2015 Investment Office Annual Report.

The currently proposed 2017 Fiscal Year proposed budget consists of fifty-nine pages of tables of budget numbers by department, and two hundred and twenty-six pages of “epilogue” language.  The epilogue pages are similar to footnotes and most of it is innocuous and a pretty boring read.  It can also be a place where bad policy goes to hide.

This may be the case with Section 285, page 199, which reads:

Section 285. Section 1 of this Act makes an appropriation to Higher Education, University of Delaware  (90-01-01) for the College of Arts and Sciences. Of this amount, $290,000 shall be allocated to the Center for Energy and Environmental Policy for research supervised by Dr. John Byrne as principal investigator

Yes, while other departments struggle as costs rise faster than state contributions, Dr. Byrne is expecting $290,000 to use as he sees fit, not even with direction for what he is researching.  The transfer effectively raises the earth sciences budget 38%.  Dr. Byrne and the University of Delaware have not responded to requests for comment.  A similar transfer was authorized in the last three year’s budgets but was designated more generally to the Center for Energy and Environmental Policy run by Dr. Byrne.

Unlike specific legislative bills there is no acknowledged sponsor of epilogue language.  However, Dr. Byrne and State Senator Harris McDowell (D – Wilmington North) have worked together for over a decade.  Senator McDowell is Co-Chairman of the Joint Finance Committee that writes the budget, and of the Senate Energy Committee.  Dr. Byrne and Senator McDowell jointly chaired the Sustainable Energy Utility (SEU) and its Oversight Committee over the last decade.  Dr. Byrne would be expected to consult with Senator McDowell in his role with the Center for Energy and Environmental Policy.  The obvious question is Dr. Byrne getting special treatment in the state budget because of his relationship with Senator McDowell.  Senator McDowell has not responded to requests for comment.

Senator Greg Lavelle (R – Sharpley) commented, “Based on the fact Dr. Byrne’s name is specifically mentioned in the epilogue language is a unique event, and we will be asking questions”.  He went on to say. “It would make one think that authority for use of the funds rests with Dr. Byrne and not the Center for Energy & Environmental Policy”, or the University.

David T. Stevenson, Policy Director

Center for Economic Policy


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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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The Wall Street Journal ran an article yesterday based on a longer study by the Brooking Institute on the trend of the average age of businesses in America aging:

“Why it’s worrying that U.S. Companies are Getting Older”

“Older firms are increasingly controlling the largest market share in different sectors of the economy, according to a paper by the Brooking Institution’s Robert E. Litan and Ennsyte Economics’s Ian Hathaway. By 2011, the portion of U.S. businesses aged at least 16 years reached 34%, compared to 23% in 1992. Moreover, those mature companies went from employing only 60% of private-sector workers in 1992 to employing nearly three quarters of the private-sector labor force in 2011.

The report attributes this trend to declining entrepreneurship, among other reasons. The rate of new business creation in the U.S. has been constantly shrinking in the past three decades. “The decline in new firm formation rates had occurred in every U.S. state and nearly every metropolitan area, in each broad industry group, and in all firm size classes,” the authors explain.

Moreover, it has become more difficult for younger companies to survive and compete with the bigger ones. Business failures are more frequent and likely among start-ups, which may account for the fall in business creation after the 1990s. The economy has grown more advantageous for incumbent firms and less helpful for fledgling ones.

The authors argue that younger companies are crucial to attaining a healthier economy as they have had the largest contribution to past “disruptive and thus highly productivity enhancing innovations” across different sectors ranging from airplanes and automobiles to computers and internet search.

“If we want a vibrant, rapidly growing economy in the future, we must find ways to encourage and make room for the start-ups of the future that will commercialize similarly influential innovations,” said the authors.”

 The first chart shows that more businesses close than open, which includes start-ups which fail. Nearly 90 percent of all businesses fail within 10 years. The second chart shows a specific breakdown by industry.




This is not difficult to understand: new business face the inherent challenges of promoting a brand of a product or service in the face of well-established, existing brands. Why try something new when the old version works for you? Then you add in the high tax rates, high energy costs regulation compliance costs, all sorts of entry fees (examples include taxi medallions and occupational licenses), and new laws pushed by the old businesses, mainly larger firms, which drive out the smaller competitors who cannot keep up with the ever-increases taxes and regulations, and the result is that fewer and fewer people even consider starting up a new business, and those who do are more likely to keep the size small enough to handle the taxes and compliance requirements  manage rather than spend energy trying to grown the business or make it more profitable. This is a significant reason why most of the new start-ups are companies which do not need a lot of energy use or space, such as a tech start-up where one only needs a computer with the right programming and internet access and which can be done from an apartment or coffee shop. The problem is that not everyone knows how to, or is capable of, learning to code and managing a computer-based business. On the downside there are fewer start-ups in other sectors of the economy like construction and manufacturing which can offer good-paying jobs needed for many working Americans. Start-ups provide people with job opportunities and can create new ideas which make civilization’s progress better for more and more people. Just imagine a world with no light bulbs, automobiles, or commercial internet access, for example.

The short- and medium-term implications is that this is a disaster decades in the making. Fewer competitors in a particular sector means less choice, which inevitably leads to higher prices and a lower quality product or service because the incentive to be better disappears if either a) you do not have competition or b) if you can simply lobby the government’s elected and unelected officials to devise ways to limit or defeat the competition’s ability to challenge the “established” brands. The resulting weakness in economic growth then fuels the “need” for stimulus dollars, tax credits, and subsidies to keep certain businesses competitive, rather than allow the private marketplace to decide what is valuable and what is not. But even in this way we are only taking money from those who produce and redistributing the wealth to those who are well-connected or who are in the business those in charge of the money deem “sustainable business.”

This is what cronyism does to the economy: it will enrich the well-connected and wealthy while making prosperity harder and harder for an increasingly few people. We are past the debate as to whether cronyism harms economic growth; the question is if and when the majority of people will recognize the problem and stand with organizations like CRI in opposing cronyism and the devaluing of the dollar.

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The President is scheduled to personally present new regulations requiring carbon dioxide emissions be reduced at existing power plants, and you need to see the facts below. The President couldn’t pass a national carbon tax. Enough legislators understood taking unilateral action to lower carbon dioxide emissions would not solve anything but would make the United States less competitive in global markets. The Environmental Protection Agency (EPA) can write standards but the states must write the implementation rules.

“We have to act now as 97% of scientists agree we already face catastrophic extreme weather from manmade greenhouse gas” – The source of the 97% is vague and depends on repeating it enough that you begin to believe it. Most scientists agree man is increasing carbon dioxide levels and this will probably cause some increase in temperatures. Most do not agree there is a link with extreme weather events or we face a near term crisis. In fact, US satellite data show temperatures have not increased in seventeen years, a period that saw greenhouse gas increase 34%. The US Energy Information Agency reports US emissions have been reduced 9% since 2007 while the rest of the world is up 10%.

“The Environmental Protection Agency (EPA) has made a thorough review” – The Administrator of the EPA has the authority to determine what science is used to calculate standards and how rules will be developed and applied so the books are cooked against using coal for electric generation.

“These Standards will cost only $10 billion for implementation but will save us a $100 billion so it’s a good deal” – Our review of recent regulations indicates the EPA will most likely exaggerate indirect benefits based on fewer premature deaths from fine particle air pollution. Using less coal incidentally reduces fine particle emission. The problem with that is Air Quality Standards are already set to a level that will not cause harm in even sensitive groups such as asthmatics and those standards are being met by a wide margin. The EPA will ignore the Air Quality Standards and assume fewer deaths from any level of fine particle reduction. Plants need carbon dioxide to grow so higher levels means tens of billions of dollars of increased crop production which should offset most of the exaggerated benefits associated with carbon dioxide reduction.

“These standards are fair” – Red states with a high concentration of coal fired plants providing power to the rest of the country will bear most of the cost. Energy importing blue states with expensive requirements for wind and solar power, and existing carbon taxes will be rewarded.

“This plan is flexible and won’t require a carbon tax” – The options will probably include switching fuels from coal to natural gas or wind and solar, requiring energy efficiency improvements, using carbon sequestration, or using a carbon tax and trade program. Electric grid reliability is already in danger during cold snaps as natural gas for home heating is given preference over electric generation. Until more pipelines are built we should avoid further fuel switching. Sequestration is unproven and expensive. Proponents will likely argue carbon taxes are the easiest solution to implement, and the revenue could be used for efficiency programs. In reality, most states will be forced into carbon tax and trade programs, the President’s real intent. Unfortunately, we have six years experience with a nine state Regional Greenhouse Gas Initiative (RGGI) to prove the carbon tax and trade model doesn’t work. Our review showed RGGI had no success in either reducing carbon dioxide emissions, or in increasing energy efficiency, and will cost electric customers $3.3 billion extra between now and 2020 (RGGI, Inc estimate). Coal fired power plants closed because of other EPA regulations, and coal plants switched fuels because of lower cost natural gas, not because of RGGI. Most of the energy efficiency projects funded by RGGI had no post project audits to confirm the energy savings were real, and there was no accounting for “free riders” or the “rebound effect”. Free riders accept grants but would have done projects anyway. Rebounders might install an energy efficient heating unit but then keep their homes warmer.

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Governor Markell released his budget for FY2015 and it includes new taxes, including a 10 cent per gallon increase in the gas tax. He also wants to increase taxes on businesses and move money from the Transportation Trust Fund to help offset the deficit.

Where are we going with this?

Much of this increase in spending is unnecessary and there are ways to pay for the spending without new taxes. For example, Delaware could save $90 million a year in the infrastructure category if they simply change their prevailing wage methodology from the state’s prevailing wage survey to the US Bureau of Labor & Statistics (BLS) survey. This is because Delaware’s survey is much more union-friendly and has caused public works projects to see an explosion in spending. The BLS survey includes more businesses and while still union-friendly is much less so than the state’s.

Delaware has $29 million sitting in bank accounts, unspent money collected from the Regional Greenhouse Gas Initiative. This is money polluting businesses pay to the state in order to “offset” their emission of CO2. The idea was that money would be spent on low-income weatherization projects (like installing energy-efficient windows or dishwashers in homes), but in reality most of the money spent was on administrative costs, with very little going to these projects (which had their own problems).

Delaware also makes the cost of business difficult, with electric prices 25% higher than the national average, the state with the worst gross receipts and corporate income tax rate together, and a personal income tax rate which make Delaware uncompetitive with Florida or Texas for jobs; in place the state has to essentially pay companies like ILC and Kraft Foods to keep jobs here. What we need is a natural gas pipeline to lower energy costs, a repeal or at least reduction in the tax rates mentioned above, and more support for existing firms. Delaware was last in the nation in terms of job expansion by existing in-state firms.

Let us hope that the General Assembly decides to move Delaware in a pro job-growth direction and away from punishing the middle class and small businesses of Delaware with onerous taxes and fees which are only encouraging the state to spend more.

*Note:This article will be updated when further details about the FY2015 budget are revealed.

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please enjoy another guest blog post from Lindsay Leveen, from greenexplored.com
No doubt Bloom Energy knows the way to San Jose.  They do not need Dionne Warwick to show them the way.  They were pleased to announce on their website on October 29, 2012 that they placed two boxes at the San Jose Pavilion where the Sharks play NHL hockey.
Bloom provided the Sharks spokesman the data in the press release that they will save 4.8 million pounds of CO2 emissions over a ten year period with the two boxes at the Pavilion.    I contacted the Sharks Spokesman (Jim Sparaco) by email and told him that if the PG&E data on the grid emissions only being 393 pounds of CO2 per megawatt hour are correct and the data in the Bloom permit filing in Delaware are correct and if the boxes have an uptime of 95% then the Pavilion will in fact be adding 16.3 million more pounds of CO2 over the ten year period than the case where they continued to simply buy electricity off of the grid from PG&E.
The Sharks Spokesman replied to my email that he had contacted Bloom to ask about the discrepancy between the data Bloom provided him for his press release and the PG&E and Bloom Delaware data.  I am happy that the spokesman takes his job seriously and does not want to be the cause of greenwashing.
Today I sent an email to the spokesman as well as the Mayor of San Jose, Chuck Reed, and helped inform the Mayor of the possible greenwashing at the state-of-the-art arena.    You see the mayor was quoted in the press release as follows:  “Congratulations to HP Pavilion for being the first arena in the nation to implement Bloom Energy’s cutting-edge fuel cell technology.”  Yeah Mr. Mayor this cutting-edge technology may well be an illusion.
The City of San Jose owns the arena and they are therefore directly responsible for the emissions of CO2 and VOCs as well as the toxic and hazardous solid wastes that accumulate in the Bloom Boxes.  I am sure that the Mayor just like the spokesman was given misleading information by Bloom.
We now have evidence that Bloom gave the operators of the San Jose Pavilion the data on their emissions.  Bloom can either respond to the spokesman and the mayor that PG&E is fibbing about the grid emissions and / or that Bloom provided Delaware with incorrect information in a permit application submitted under penalty of perjury.  Or they can tell the city of San Jose that the boxes will not save 4.8 million pounds of CO2 emissions over the 10 years.
No matter what Bloom tells the Spokesman or the Mayor their data somewhere are not correct.  Won’t it be nice if they misled Delaware rather than San Jose?  That is a crime under penalty of perjury.  If they misled San Jose rather than Delaware that is a crime against me and my neighbors as we all pay money into the SGIP to lower carbon emissions.  We all breathe the crisp air in the San Francisco Bay Area.
Interestingly the population of Delaware (917,012) is similar to the population of the city of San Jose (982,765).  It looks like Bloom likes boondoggling in places with approximately one million people.  My congressman pretends to represent the 707,530 people living in the 2nd Congressional district of California.  While Mr. Huffman is a champion boondoggler, Bloom has him beat by an extra 275,235 people in San Jose and 209,482 extra people in the First State.
Now the zinger!!! The  Secretary of the Delaware  Department of Natural Resources and Environmental Control (DNREC) is Collin O’Mara.    Quoting from the DNREC web site “Prior to joining Governor Markell, Secretary O’Mara served as the Clean Tech Strategist for the City of San Jose, and was the primary architect of the city of San Jose’s Green Vision, built upon the belief that environmental sustainability and smart economic development are inextricably linked and entirely compatible. “
Wow there is a link between the San Jose Boondoggle and The Delaware Boondoggle.  It is Mr. O’Mara!!!  Honestly the whole thing reads like a novel called “Carbon Dioxide Into The Wind”.  Our hero is Green not Rhett and the leading high maintenance person is O’Mara not O’Hara.  But the key line from this book is “frankly my dear Scollin, I do give a damn!”

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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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Say you’re a Delmarva Power customer-chances are, you are-and you’re annoyed energy costs are going up-which they are-then you will be pleased to know you are going to be paying a tad bit extra for the privilege of utilities.

The News Journal is reporting that Delmarva Power customers should expect a 67-cent surcharge on their utility bills.  It will be 61 cents in July, according to the article. The goal is to collect nearly $446,000 in July and $505,000 in August to fund the building of a Bloom Energy generating station in Newark this year, and then they will collect more money for a station in New Castle next year.

William Nelson, an analyst with the Bloomberg New Energy Finance, says Bloom’s contract with Delmarva and the state already has Delmarva customers paying about a third more than they otherwise would to satisfy Delmarva’s renewable purchase requirements.

We have written extensively at CRI about Bloom’s Fuel Cell technology. We have warned Delawareans and politicians in Dover that the Solid Oxide Fuel Cell technology Bloom is pushing on the state is A) more expensive than they are claiming, and B) Not as green as they claim it is. You can read a blog post from Lindsay Leveen on this Bloom problem here:


Leveen is no fool when it comes to environmental policy. He has an M.S. in Chemical Engineering from Iowa State University, and he has testified in front of the US Senate as an expert on fuel cells before.  His bio is here: http://bit.ly/L0wBKP.

We at CRI want to make it clear we are not opposed to renewable energy, as some of our detractors claim. In fact, we are unequivocally for clean, affordable technology that reduces dependance on foreign energy and can keep our environment clean to boot. We are opposed to government subsidies of this technology in place of the private sector’s research and development, especially when we can prove this Fuel Cell technology IS NOT EFFICIENT, and is also more expensive.

The fact that Bloom’s technology is not going to work as they claim is of no concern to them, and apparently it is of no concern to the state government. Rather, they rely on “feeling good” about “caring” for the environment, and in their world, the ends justify the means. Simply put, as long as their intentions are righteous and for all that is good, whether or not the fuel cells will actually cause more pollution (884 pounds of Co2 per fuel cell per megawatt hour), or will raise the price of energy on poor and middle-class Delawareans is of no concern to them. Bear in mind the biggest advocates for this technology without a public hearing of its efficiency,cleanliness and/or value to the state are often upper-middle class and upper-class folks whose good intentions are more important than the actual truth of the matter. If they have to pay a little extra in taxes for “clean” air, so be it. If you can’t afford it? Well, they just want what’s best for everybody.

Read the original article: http://www.delawareonline.com/apps/pbcs.dll/article?AID=2012305310022&nclick_check=1

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(Editor’s note: a high-resolution PDF version of this story can be found in CRI’s Special Reports section.)

A nine-month investigation by the Caesar Rodney Institute has uncovered lucrative no-show jobs and no-bid contracts for campaign donors, allegations of fraud and a systemic misuse of millions of taxpayer dollars.

By Lee Williams

Attorney Steve Kinion receives $16,000 taxpayer dollars per month to serve as director of the Delaware Department of Insurance’s Captive Insurance Bureau, even though he works and lives in Springfield, Illinois, where he maintains a thriving law practice.

A staffer in Delaware’s Captive Insurance Bureau – who asked not to be identified – at first said Kinion “commutes” to Delaware from Illinois.

The same staffer later admitted Kinion hasn’t been in the office for months.

Kinion’s two colleagues, who receive $16,000 and $10,000 dollars per month in similar contracts, have backgrounds that raise questions and concerns about the overall stewardship of the Captive Bureau.

All three well-compensated officials were handpicked to run the newly-created bureau by Delaware Insurance Commissioner Karen Weldin Stewart. Kinion donated thousands of dollars to Stewart’s 2008 election campaign.

Karen Weldin Stewart

The Department of Insurance (DOI) Stewart heads is entirely self-funded because of the fees and taxes it receives from insurance companies doing business in the state. What the DOI doesn’t spend on operating costs, it is required to contribute into the state’s General Fund.

A nine-month investigation by the Caesar Rodney Institute has found that Delaware taxpayers may not be getting their fair share of the millions of dollars the DOI rakes in annually – at a time when state employees’ salaries are being cut and services scaled back because of the worst economic crisis in recent memory.

Based on numerous interviews, court records and nearly a dozen Freedom of Information Act (FOIA) requests, including one for all of Stewart’s e-mail correspondence, and another for Global Positioning Satellite (GPS) data for her state-owned Dodge Avenger, CRI found an agency fraught with problems, some of which include: questionable hiring practices, questionable contracts for campaign donors, failure to comply with state law and most troublesome, millions of taxpayer dollars paid to out-of-state consultants.

Meanwhile, hardworking DOI staffers – longtime state employees who’ve seen insurance commissioners come and go – say they are keeping their heads down, waiting for the shoe to drop. They say something ultimately must change, and the department’s out-of-control spending must end. They just don’t want to get involved or caught up in the inevitable fallout.

Nowhere, they say, are the problems within the DOI better exemplified than at the Captive Insurance Bureau which Stewart created.

A ‘revenue generating’ bureau

The commissioner unveiled the “Captive-Financial Revenue Generating Division” on July 30, 2009.

Right from the start, the intent behind the Captive Bureau was to make money.

“The mission of the bureau will be to accelerate the formation of all types of new captive insurance companies in Delaware, while developing, implementing and growing several other potential revenue streams,” Stewart is quoted as saying in a press release announcing the new unit.

According to her written statement, captive insurance companies are “owned by the entities that they insure, are usually formed by businesses that wish to better manage the cost and administration of their insurance coverage, and are established with the specific objective of financing risks emanating from their parent group or groups.”

Captive insurance, or reinsurance, is provided by a company that is formed primarily to cover the assets and risks of its parent company or companies.

Basically, captives can be thought of as in-house insurance.

Companies turn to captives to reduce costs, enhance risk management, gain greater control over their insurance, and to directly access the reinsurance market.

Several offshore jurisdictions, such as the Cayman Islands, Anguilla, Barbados or the British Virgin Islands, have lower capitalization requirements that allow captives to be established with less initial investment and lower reserves.

Delaware has to compete nationally for its share of the lucrative captive market.

Like a more-traditional insurance company, a captive pays taxes and fees to the DOI in order to operate in Delaware.

Questionable appointments

Commissioner Stewart chose three outsiders to run the Captive Bureau. Bill White, who had been contracted for $15,000 per month to administer the DOI’s captive efforts, when it was a program rather than a bureau, did not renew his contract with the department.

According to Stewart’s press release, Steve Kinion was appointed as Director of the bureau. Kinion had been serving as “senior advisor” to Stewart and as a member of her transition team. There was no mention of his Illinois residency or law firm. He is not admitted to the bar in Delaware.

Stewart appointed her longtime acquaintance Mary Jo Lopez as the Captive Bureau’s Director of Business Development.

Lopez is the founder of Affinitee Group, LLC, which Stewart described in her written statement as an “insurance management and consulting firm.”

Wilmington attorney Edmond Ianni was chosen by Stewart to serve as the bureau’s Director of Strategic Development.

Stewart included an italicized disclaimer in the July 30 press release about the three appointments: “The positions of director, director of business development, and director of strategic development are independent contractor positions subject to Delaware’s procurement law and open bidding process.”


According to Stewart’s 2008 campaign finance reports, Kinion paid $900 for a breakfast fundraiser on Sept. 23, 2008, and donated $1,200 to Stewart’s election campaign in May of that year.

Kinion’s Illinois-based law firm Zack Stamp, Ltd. names him as the lead attorney employed by the office. His bio on the company’s Web site describes his employment as “1999-present.” His Zack Stamp office phone includes the message “This is Steve Kinion. I am currently away from my desk.” There is no mention about his directorship of Delaware’s Captive Bureau or instruction on how to contact him at the Wilmington office.

The Caesar Rodney Institute obtained a copy of Kinion’s contract with the DOI through a request made pursuant to the state’s Freedom of Information Act (FOIA).

In the contract, he’s identified as “Zack Stamp Consulting,” which is abbreviated as “ZSC.”

“In consideration for work being performed by ZSC, the Department shall pay ZSC a monthly fee, in advance, of $16,000,” the contract states. “ZSC shall be paid the initial monthly fee of $16,000 upon signing this Agreement and the sum of $16,000 per month no later than the 15th day of each month thereafter for the remaining term of this Agreement.” There is no residency requirement in the contract.

Stewart’s Chief of Staff Elliott Jacobson, who many say is actually running the day-to-day operations of the DOI, described how Kinion’s $16,000 per month salary compares to actual state employees.

In an e-mail sent May 4, 2009, Jacobson tells Kinion, “If we subtracted what estimated annual expenses would be, as well as subtracting an estimate of the cost of the benefit package an employee receives from your fee, it would bring us to a figure that favorably compares with the Deputy Commissioner’s salary, plus the benefit package, plus expenses.”

Kinion did not respond to calls, e-mails or personal visits made by CRI to the Captive Bureau seeking comment for this story.


Stewart’s pick for the Captive Bureau’s Director of Strategic Development, Wilmington attorney Edmond M. Ianni,  also did not respond to calls, e-mails or personal visits made by CRI to the Captive Bureau seeking comment for this story.

Stewart sent an e-mail May 11, 2009 to Ann Visalli, director of the Office of Management and Budget, seeking OMB’s approval of Ianni’s $16,000-per-month contract. The insurance commissioner described Ianni as a “nationally recognized authority on the ‘Delaware advantages,’” who had already begun working at the department, and who could provide “critical services to me and the Insurance Department.”

“All of this will result in generating revenue for Delaware and retaining and creating jobs here in our First State,” Stewart wrote. “This agreement (which does not include the provision of legal services) is consistent with existing OMB-approved agreements that the Insurance Department currently has with others serving our Department.”

Ianni began billing the DOI before OMB had even approved his contract.

In an e-mail sent to Stewart on June 13, 2009, he attached an invoice for June, and complained that his payment for May was late.

“How can you bill me for June before the month has ended?” Stewart wrote in her reply. “The State still has not approved the contract. Stop dunning me. I have been trying everything to get the Department’s contracts approved.”

Visalli did not respond to interview requests for this story.


Mary Jo Lopez began working as the Captive Bureau’s Director of Business Development in February 2009, after Stewart signed off on the contract with her newly-created New Jersey-based corporation, Affinitee Group, LLC.

According to the contract, which was obtained by the Caesar Rodney Institute through a FOIA request, Affinitee Group, LLC was chosen to provide “business development and marketing services for State of Delaware, Department of Insurance, Captive Insurance Program.”

In her July 2009 press release that announced the formation of the Captive Bureau, Stewart said Lopez was the “founder” of Affinitee, which she described as “an insurance management consulting firm.”

Affinitee, however, has no working Web site, no client list, a minimal Internet presence and appears to consist of just Lopez.

According to the New Jersey Secretary of State’s Office, Lopez created Affinitee Group, LLC in November 2007. Lopez is the only officer, director or board member listed on the business entity status report.

Affinitee’s phone number is answered by a machine, in which a recorded voice states: “This is Mary Jo Lopez.” There is no mention of Affinitee Group, LLC in the recording.

According to the contract, Lopez/Affinitee can work from home or the Delaware office, and the state will pay her travel costs, which amounted to nearly $5,000 for just three months of 2009.

Despite her title of Director of Business Development and hefty $120,000 annual salary, e-mail correspondence obtained through FOIA indicates that Lopez acts more like Stewart’s personal assistant, arranging meetings, planning travel needs and sending thank-you notes.

An unannounced visit

Rather than housing the Captive Bureau in DOI’s offices in Dover or Wilmington, the bureau is housed in a $4,000-per-month suite on the sixth floor of the One Custom’s House building, located on King Street in Wilmington, across the hall from KISS 101.7 FM.

There are no other DOI offices in the building.

Insurance department insiders say the bureau was moved to an offsite to cut down on scrutiny.

The Caesar Rodney Institute visited the bureau last month.

The Captive Bureau is not marked or identified as a state office. It’s only identified by a “602” on the door, in self-adhesive mailbox numbers.

Neither Kinion nor Ianni or Lopez were present.

None of their offices were labeled. There were no names on desks or doors. Their offices had no pictures, photos or bric-a-brac on the walls or desks. One office had cardboard boxes piled where a visitor would sit. It appeared as though they weren’t being used.

The entire suite has a temporary, just-moved-in feel.

When asked whether Kinion was in the suite, a staffer who asked not to be identified said he may arrive later in the week.

“He commutes,” she said. “He doesn’t get reimbursed for travel.”

Lopez, she said, was absent because the electricity was out at her New Jersey home.

She did not know Ianni’s whereabouts.

“They haven’t been here for March or February because of the snow,” she said. “March and February were pretty bad.”

Kinion, Ianni and Lopez received a combined total of $84,000 taxpayer dollars for March and February.

Where’s the money going?

Of all the state insurance departments in the country, the Delaware Department of Insurance, at $25 million, has the 14th largest budget, according to the most recent data available from the National Association of Insurance Commissioners (NIAC).

Delaware DOI’s budget is greater even than Pennsylvania’s, whose insurance office operates on $23.5 million, even though they bring in nearly eight-times more revenue than Delaware, and have nearly four-times as many employees: 303 compared to the 81 employees working for Stewart.

Delaware’s insurance department is also the least efficient office in the region. Employee efficiency ratios show that Pennsylvania, Maryland, New Jersey and Virginia all produce more revenue for their states, per employee. In addition, Delaware spends more money to collect its revenue dollars when compared to the surrounding states.

A history of not commenting

None of the current or former DOI staffers interviewed by the Caesar Rodney Institute for this special report were willing to allow their names to be used in this story.

Many former DOI employees are still involved with the insurance industry, and are concerned their current employers would suffer if they spoke on-the-record. They said their firms could be banned from the state’s lucrative insurance market.

Current DOI staffers say they’d be fired for speaking publically about the department’s failings.

Commissioner Stewart was not willing to be interviewed for this special report.

Instead of the standard, face-to-face interview sought by the Caesar Rodney Institute, Stewart and her Chief of Staff Jacobson insisted they would only respond to questions submitted in writing.

“I need a list of questions, so that I can have the information available to answer any question(s). We do that with every reported (sic) and/or individual,” Stewart wrote in an e-mail.

“It is the policy and practice of the Commissioner of Insurance and the Department of Insurance to respond to all proper and legitimate inquiries from news organizations and other parties concerning matters affecting the Department and Delaware’s citizens,” Jacobson wrote in an e-mail sent March 12.

The Caesar Rodney Institute explained that it resists submitting written questions because often they are answered by a team of lawyers and spokespersons, rather than the elected official. Also, requiring written questions prohibits follow-up questions.

The Caesar Rodney Institute told Jacobson its reporting had uncovered issues Stewart would undoubtedly want to address.

“What are those issues?” Jacobson wrote. “Perhaps we can negotiate an arrangement. The Commissioner will be away until next Wednesday so I propose in the meantime we try to come to some kind of an agreement.”

Jacobson never explained what the “arrangement” entailed.

Stewart’s e-mails indicate it is highly unlikely the commissioner would ever personally answer any written questions submitted by the Caesar Rodney Institute or anyone else.

Instead, Stewart relies on a team for guidance on dealing with the media, and for damage control, which includes Jacobson, various DOI staffers and Wilmington blogger Nancy Willing.

One e-mail Jacobson sent to Stewart in March 2009, indicates he and the DOI’s chief insurance examiner spent two days “putting together talking points” for the commissioner, prior to a phone call from a newspaper reporter seeking quotes for a daily story.

In an e-mail Willing sent to Stewart and Jacobson in March 2009, the blogger points out a story discussed on WDEL’s Rick Jensen Show was picked up by local blogs.

“Karen, if you or Elliott have a public statement, you might give it to me. Not answering the phone for the WNJ reporter wasn’t so great,” Willing wrote. “Would you like to provide commentary for the public consumption, or do you want the public to assume that what the radio and press are saying to be the last word.”

Two days later, in an e-mail titled “This is a disaster and it doesn’t have to be,” Willing expressed her disappointment with the response Jacobson had posted on the local blog.

“This was poorly played and will haunt you,” Willing wrote.

Use of outside experts

On July 17, 2008 the New York-based law firm of Stroock & Stroock & Lavan, LLP donated $1,000 to Stewart’s election campaign.

On Sept. 15, 2008, two partners from the law firm each donated $1,200 to Stewart’s campaign.

Two weeks later, the firm gave her an additional $1,200.

A month later, another Stroock employee made a $250 campaign donation.

Why would a New York-based law firm donate to a relatively unknown candidate running for insurance commissioner in Delaware?

According to the Delaware State checkbook, an online listing of payments made by the DOI and every other state agency, Stroock & Stroock & Lavan, LLP became one of a large and growing list of out-of-state law firms and consultants who began receiving millions of Delaware taxpayer dollars after Stewart was elected – money that could have gone into the state’s General Fund.

In June 2009, Stroock received five checks from the DOI, totaling more than $45,000, for “consulting.” By the end of the year, they’d been paid an additional $20,000.

The Caesar Rodney Institute obtained a copy of Stroock’s contract with the DOI, which is valid for three years.

According to the contract, the New York-based firm agrees to “serve as Expert Legal Consultant and perform such consultancy duties as assigned by the state.”

Two of the firm’s attorneys were chosen for the project. One bills the DOI at $712 per hour, and the other receives $399 per hour, but these totals pale when compared to the taxpayer dollars paid to other firms.

Regulatory Insurance Services and it’s sister firm INS Consultants Inc. receive millions of dollars from the DOI.

According to its Web site, four of Regulatory Insurance Services’ five “principals” have previously worked at the DOI, including John Tinsley, who Stewart named as “Special Deputy for Examinations” of the Captive Bureau.

Regulatory Insurance Services conducts financial examinations for the DOI. It’s not known what type of consulting services its sister firm provides to the department. The two firms use the same address.

From the start of FY-09 through the first two quarters of FY-10, Regulatory Insurance Services received $19 million – an average of more than $1 million per month.

INS Consultants Inc. was paid more than $1.2 million over the same time period.

Apparently someone within the DOI noticed the large amount of money being funneled regularly to these two firms.

An e-mail sent between DOI staffers in March 2009, which was copied to the commissioner and Jacobson, titled “INS Aging reports as of 3/20/09” asks: “Why are the 90 day and over receivables so high, over $72,000?”

It is not known what actions were taken. No response to the e-mail was provided to the Caesar Rodney Institute as part of its FOIA request.

Alan Shaw, president of Regulatory Insurance Services, did not return calls seeking comment for this story.

In addition to consultants and accountants, the DOI pays million of dollars to outside law firms. Like Stroock & Stroock & Lavan, many are located out of state.

The DOI itself is having difficulty tracking all the contracts it has given to these out-of-state lawyers. Stewart’s e-mails contain dozens of references to problems locating these contracts within the agency.

Violating state law

Title 29, Chapter 100 of the Delaware Code spells out the state’s Freedom of Information Act.

“It is vital in a democratic society that public business be performed in an open and public manner so that our citizens shall have the opportunity to observe the performance of public officials and to monitor the decisions that are made by such officials in formulating and executing public policy; and further, it is vital that citizens have easy access to public records in order that the society remain free and democratic,” the Act states.

The FOIA law codifies what type of documents are public records – obtainable under the act – and what type of records are not public, and therefore not subject to FOIA.

These exceptions to FOIA include: trade secrets, labor negotiations or collective bargaining, personnel files, medical files, criminal files or intelligence files compiled for law-enforcement purposes.

The list of exceptions does not include personal communications, if made on the state’s e-mail system, messages that may be embarrassing to an elected official, or documents the official simply doesn’t want someone to have.

The Delaware Department of Insurance is violating the state’s Freedom of Information Act.

On July 14, 2009 the Caesar Rodney Institute submitted a FOIA request to Stewart for “copies of all e-mails sent or received from your state electronic mail account.”

Jacobson immediately wanted to know why CRI wanted the e-mails, and who was talking.

“May I ask, in the interest of FOIA, what inspired these requests?” he stated in an e-mail.

Jacobson was told that state law does not require the public to provide the inspiration behind a FOIA request.

“You are quite right,” Jacobson said in his reply. “The law does not ‘require’ you to provide the ‘inspiration’ behind a FOIA request. However, it also does not ‘prohibit’ you from providing the ‘inspiration.’ More to the point, this request comes out of the blue for God knows what reason. Therefore in the interest of transparency, elementary fairness and ethical journalism it would not prejudice your ‘sources’ to voluntarily answer the questions ‘Why?’ and  ‘Why Now?’”

Jacobson was told that the Caesar Rodney Institute never reveals confidential sources, and that when elected officials seek to identify these sources, it produces a chilling effect on the First Amendment.

“I did not mean to suggest I was inquiring about your sources,” Jacobson replied. “I tried to make the point of mentioning that I did not want to ‘prejudice (i.e. not revealing) your sources.’ I made this inquiry on my own. The Commissioner most certainly did not order me to investigate your actions.”

The DOI started to process the request.

The Caesar Rodney Institute paid the Delaware Department of Technology and Information to retrieve the commissioner’s e-mails from the state’s computer system.

In November, Elayne Starkey, DTI’s chief security officer, said the email archive search resulted in 3,641 emails.

Starkey then gave all 3,641 e-mails to Stewart and Jacobson, along with their in-house counsel, Deputy Attorney General Julie “Jo” Donoghue, so they could review them before turning them over to the Caesar Rodney Institute.

During one phone conversation, Jacobson said he’d be withholding all of the “personal” e-mails sent or received by his boss.

During the review process, Deputy Attorney General Donoghue abruptly quit the DOI. Her reasons for leaving are not known. She was not willing to be interviewed for this story.

The Caesar Rodney Institute was forced to retain an attorney who threatened to sue the DOI unless they responded to the institute’s FOIA request.

After receiving the attorney’s letter, Jacobson began turning over the e-mails, in batches, one or two CDs at a time.

Even though DTI located more than 3,600 e-mails, the Caesar Rodney Institute has only received 1,500, and of the ones furnished, many are heavily redacted with a black marker.

CRI has posted some of Commissioner Stewart’s e-mails on its Web site. The e-mails can be accessed here.

A car of her own

Commissioner Stewart did not own a car when she was elected. After taking office, she used a state-owned vehicle as if it was her own – during the workweek, on weekends and on holidays.

The Caesar Rodney Institute submitted a FOIA request for the Global Positioning Satellite (GPS) data for her Dodge Avenger.

The data, which can be seen here, shows that Stewart took the car to and from work, on shopping trips, to hair salons, restaurants and night clubs, at all hours – often at excessive rates of speed.

This personal use of a state vehicle came after the February 2009 order from Markell, which required a “zero-based approach with respect to the use of the state fleet vehicles and take-home privileges. In other words, the use of all fleet vehicles will need to be justified. Previous use will not be viewed as sufficient justification to keep a car.”

Unprecedented travel

According to several DOI staffers, during the 15 months she’s been commissioner, Stewart has traveled out of state twice as much as any previous commissioners did during their entire four-year term.

Often accompanied by a retinue of staff, the commissioner has visited San Diego, San Francisco, Minneapolis, Chicago, Scottsdale, Arizona and other cities, along with frequent trips to New York City and Washington, D.C.

Last week, Stewart took a dozen DOI staffers with her to Denver, including the newly-hired Deputy Attorney General who replaced Donoghue.

Several of the trips have been to lawyers’ offices for “Meet and Greets,” where the commissioner and her staff have presented what they call the “Captive Road Show.”

The department’s frequent flying has been noticed by other state agencies.

Lt. Gov. Matt Denn served as Insurance Commissioner before he ran for the state’s second-highest elected office. Stewart succeeded him as commissioner.

Denn and Stewart have sparred, via e-mail, over files she claims are missing from the department.

“Thank you for your March 10, 2009 letter,” Denn wrote in an e-mail reply. “I tried to contact you earlier but was told that you were staying in San Diego with your senior staff.”

In February 2009, Delaware Gov. Jack Markell slashed $28.7 million from the FY-09 budget shortfall partially by trying to reduce out of state travel by state employees.

Markell instructed the Office of Management and Budget to cut costs by curbing trips they considered non-essential.

His order produced a harsh memo to the DOI from OMB director Visalli, which was not provided to CRI as part of its FOIA request.

Some of the DOI staff questioned whether they should follow OMB’s directive, or whether they should continue to travel to out of town meetings as directed by Stewart and Jacobson.

Jacobson, in an e-mail, told one of these worried staffers that Stewart had spoken to Visalli, who gave the DOI “quite a bit of leeway” to attend the meetings.

As to how often the DOI staffers were traveling out of town, Jacobson wrote “every employee that travels to these meetings sacrifices a month of weekends a year. They deserve our gratitude.”

Caesar Rodney Institute research fellows Sara Clark and Danny Russell contributed to this report.

Contact investigative reporter Lee Williams at (302) 242-9272 or lee@caesarrodney.org

The Caesar Rodney Institute is a 501(c)(3) non-partisan research and educational organization and is committed to being a catalyst for improved performance, accountability, and efficiency in Delaware government.

© Copyright March 30, 2010 by the Caesar Rodney Institute

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