Archive for the ‘Government Spending’ Category

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

Read about our energy policy here: http://caesarrodney.org/index.cfm?ref=30100&ref3=11

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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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In a recent edition of the Wilmington News Journal (Tuesday, Feb 2 2010), we were reintroduced to the saga of the table top French Fry machine which claimed its fame last year when it received $50,000 from Delaware’s FY 2010 Bond Bill in a rather conspicuous fashion.

The back story on the machine’s inventor, Fry Manufacturing’s ties to State Senator Robert Venables has been well documented (Venables chairs the Bond Bill Committee and is related to the company’s co-owner, Mike Ruggiero by marriage).

So, what was the issue this time?  Well, it seems that Fry Manufacturing is upset with our very own DEDO (Delaware Economic Development Office) for not supporting their bid to take even more of our taxpayer’s dollars.  They are threatening to go out of state, and take their jobs with them.  Virginia, they say, is the next state they will peddle in an attempt to garner easy money.

Now, this is the part that needs to be examined: why does Fry Manufacturing believe that the state of Delaware ought to be in the capital investment game?  Is it the state’s place to place taxpayer dollars at risk in a venture capital fashion?  Isn’t that the role of the private sector, and why is Fry Manufacturing not seeking to capitalize in the same way as any other enterprise?  So many questions, with one simple answer; risk assessment.  It is much easier and requires much less risk to assume debt in the form of governmental economic development because no one will come lock the doors if you are late on a few payments as happens when dealing with a bank.  Additionally, to seek assistance from a private venture capital source, such as an Angel Fund, requires the forfeiture of a large portion of business ownership.  Neither of those avenues are as attractive as simply seeking to take more of our money in the form of low-interest government loans.

The government itself doesn’t deserve all of the blame. Many individuals share the credit for expecting the government to provide, provide, provide well beyond its constitutional scope.  In fact, it brings to mind the famous quote of President John F. Kennedy, “ask not what your country can do for you—ask what you can do for your country.”  Somewhere in all the recent talk of hope and change, the message of personal initiative and perspiration has been replaced by the idea of spreading the wealth.

It begs the bigger question of government’s role in the economy.  Should the State of Delaware be in the business picking winners and losers?  Should taxpayers be on the hook for a private company’s failure – whether that company is AIG, a bank, or an upstart French fry vending company?  Or, is government’s proper role to simply set a fiscal and tax policy that is conducive to an entrepreneurial society full of hardworking men and women who are indeed willing to take the necessary risks involved with starting or expanding a business and creating jobs.

There is one silver lining to this cloud, however. DEDO said no.  They chose to do the right thing, and kudos for it.  The government, of course, cannot and should not pick winners and losers. Who are they to know who will succeed and who will fail? And they most certainly should not be using taxpayer dollars to make investments such as the $50,000 included in the FY 2010 Bond Bill for Fry Manufacturing, LLC. 50k which will be lost is Ruggiero is successful in obtaining funds from Virginians.

There were no strings attached to the $50,000, and now, the company is looking to Virginia for more funding following the state of Delaware’s refusal to provide more money. According to Alan Levin, Director of the Delaware Economic Development Office, the decision to not award more money was made back in October.

Typically, funds such as those received by Fry Manufacturing, LLC would be approved through the Council on Development Finance which would have the ability to build in requirements for the recipient to produce a certain number of jobs or meet various other metrics. However, because this money was dispersed through the Bond Bill, no such stipulations were built in.

The way this situation unfolded serves as reinforcement for increased transparency in government – specifically as it pertains to spending decisions. Fortunately, the budget committees are now supposedly open for any and all to see – a move which should limit similar situations in the future.

As Secretary Levin points out in The News Journal coverage of this recent development, if the company was poised for success and had orders for the machine, then a bank would likely provide the loan. Given the state’s fiscal situation, the absence of private support and the nepotistic nature of the original funding, the state rightly decided to not invest more money in the company.

In the end, if the only way we can convince Fry Manufacturing, LLC to stay in Delaware is to keep feeding them taxpayer dollars, then there is only one word left to say.  Goodbye.

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            Imagine Delaware with $800 million more dollars a year in the private sector, a small income tax, and a much smaller government that stayed out of our way.  Delaware would be a magnet for business leading to high employment and good paying jobs.  Instead we are faced with a bleak future of shrinking employment, lower pay, and budget crunches year after year.

            One simple budget change twenty-five years ago would have made the difference.  If we had limited year to year increases in state budgets to cover the twin rising cost drivers of inflation and population growth our current state budget would be 30% lower, about $2.2 billion/yr instead of $3 billion/yr.  We would only need one-fifth of the billion dollars a year raised by state income taxes.

            Furthermore, Delaware’s public sector spending per capita would be closer to average for the country instead of the second highest in the land.  David W. Singletons’s August 2, 2009 article in the News Journal titled “Rethinking Government Spending” drew needed attention to this issue.  We spend 13% more than third place New York, 40% more than fifth place California, and 69% more than the national average. 

            If we were at the national average, our state budget would translate to about $1.85 billion/yr. Singleton observed, “Until recently, Delaware state and local governments have added programs and staff at a fairly steady pace, but have rarely shut down or overhauled services that were unnecessary, inefficient, or otherwise substandard”.  Singleton makes the important point we need to have the very basic debate about the proper role of government in our state!

            How did we get to this point?  The Dupont Administration certainly got things started in the right direction.  Starting out with a budget disaster, Governor Dupont drastically reduced top income tax rates leading to a rapid increase in revenue, installed an improved revenue estimating system still used today, and passed the Financial Center Development Act which led to the rise of the banking industry in Delaware with its’ high employment and well paying jobs.  After eight years the state was moving in a positive direction and spending had increased slower than population growth plus inflation. 

            The changes were so successful, starting about 1984 the state was awash in new revenue.  Each year DEFAC would say you have this much to spend and the legislature would spend it!  Spending is a good way to get re-elected. We do not need to continue to back into poor budget decisions thoughtlessly.  A bill to limit budget growth to the rate of inflation and population growth can be passed this year and we could enjoy the benefits for years to come. 

           David T. Stevenson

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            When the founders spoke of limited government they meant it.  Washington’s first administration consisted of the Departments of War for security, State for diplomacy to avoid war, the Attorney General to maintain the Rule of Law, and the Treasury to raise the money for the other three departments, mainly through tariffs, and to provide a stable currency to promote commerce.  The budget was an estimated 2% of the new nation’s economy.  The Revolution was the culmination of a two century pursuit of individual liberty over tyrannical monarchies.  Individualist virtues of independence, self reliance, individual initiative, local responsibility, voluntary cooperation, willingness to bear risk, non-interference with one’s neighbors, tolerance of the different, and a healthy suspicion of power and authority had won out.

            Contrast this with the National Socialist Party in Germany before World War II.  A founding principle of the party was the individual has no rights, only duties.  Government, driven by someone’s ideas of social justice, must have absolute power to organize society for its purposes.  When do individual rights disappear?  Friedrich A. Hayek wrote in his seminal work on the battle between individualism and socialism, “Once the communal sector, in which the state controls all the means, exceeds a certain proportion of the whole, the effects of its actions dominate the whole system.” 

            Hayek, once responsible for collecting economic data in Austria, estimates this occurred in Nazi Germany when the government controlled 53% of the national income.  By the way, if you are looking for a clear understanding of individual liberty, you need to read “The Road To Serfdom”.  Milton Friedman wrote in his introduction of the fiftieth edition in 1994, “Over the years, I have made it a practice to inquire of believers in individualism how they came to depart from the collectivist orthodoxy of our times.  For years, the most frequent answer was a reference to the book for which I have the honor of writing this introduction.”

            Where do we stand on this road to socialism?  By 1900 government spending was only 3% of the nations’ income, by 1950, 24% and by 2009, 47%.  Now add industries targeted by current government initiatives such as private health care and insurance at 7%, banking at 7%, and energy production at 13%, and we will easily exceed the point where government controls everything. 

             Not convinced?

             Read these prophetic lines from Hayek written in 1944, “We can rely on voluntary agreement to guide the actions of the state so long as it is confined to spheres where agreement exists.  But only when the state undertakes direct control in fields where there is no such agreement is it bound to suppress individual freedom.”  Compare this to the clarity we have gotten from those trying to save the health care bill since the Massachusetts election.  They now talk about two key goals of reform and the problems of meeting these goals.  One is to stop insurance companies from refusing coverage to people already suffering medical problems.  But this requires forcing everyone to buy coverage so healthy young people won’t wait until they need coverage.  This mandate comes with fines and even jail terms!  The second goal is to expand coverage to more low income people.  This requires government subsidies so they can afford the premiums.  The money for this must come from the forced transfer of wealth in the form of higher taxes on everyone else.  You already know the penalties for not paying taxes.  This clearly is an example of government passing socialist laws where there is no consensus agreement so it can only be done by suppressing individual freedom.  It is sad some people get caught without coverage but turn to Hayek again for this wisdom, “We shall never prevent the abuse of power if we are not prepared to limit power in a way which occasionally may also prevent its use for desirable purposes”.  Freedom comes with risks.

            This is my first blog.  I wanted to establish the basis for my writing.  Future blogs will address creeping socialism that can only lead to our complete loss of freedom.  It is not enough to slow the creep as Reagan did.  It must be reversed and that will require education.  The majority of people in this country still would tell you they support the individualist virtues summarized in the first paragraph.  They don’t realize how far we have moved in the wrong direction. 

David T. Stevenson 1/27/10

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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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