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Archive for the ‘Transparency’ 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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Dear Reader,

As many of your know, CRI funds and sponsors the Transparent Delaware website, viewable at  www.transparentdelaware.org. Transparent Delaware has become the go-to website in the First State for data on State Payroll and State Vendor Contract Data for many concerned citizens.

Unfortunately, our grant to fund the yearly updates required to keep transparentdelaware.org up to date has expired.  We need $3900 to update the information on the site or else we will have to shut it down. We are asking you, our friends of CRI, to help us by making a contribution to CRI targeted to updating the transparentdelaware.org site.

CRI has worked hard to update the information on the site to bring you 2013 Payroll and Vendor Contract data so that anyone who is interested could view how the state pays its employees and those the state does contract business with. This information is critical to news reporters, elected officials, candidates for public office, concerned citizen activists, state employees comparing their salaries to their peers and superiors, or anyone with an interest in how the state spends money.

Now, Transparent Delaware will soon be unavailable to the public unless we raise $3,900 to keep the website updated and available to the public. Unfortunately, the internet is not always “free” and we would be disappointed to leave the most recently available data not easy accessible to you the public. Therefore, we are asking if you would give a most generous contribution to CRI for the purposes of keeping Transparent Delaware open to all. If you believe Delaware’s payment information should be available to the public, please click HERE to donate or send a tax-deductible contribution to:

Caesar Rodney Institute

P.O. Box 795

Dover, DE 19903

 

If we reach our fundraising goals our web host has said it will reactivate the website with the newest information.

We are grateful for your support. Any amount you can contribute to our goal will be appreciated.

Sincerely,

Jim Ursomarso
Chairman & CEO

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Just yesterday the Sea Level Rise (SLR) Advisory Committee came out with its updated report, suggesting Delaware could have between 1.6-4.9 feet of sea level rise on Delaware’s shores by the end of this century. At those predictions most of Sussex and eastern Kent County will be underwater. Needless to say, the amount of flooding “expected” will impact property owners and businesspeople downstate. Here are some of the comments submitted by the committee. Ones of particular note are in bold.

“Sussex County seems to be extremely backwards, with little ideas about science”

“Sussex County Council is an ignorant bunch. The Council… has never met a developer it doesn’t like”.

“Wait to see what happens” and “How will you implement retreat?” and “How much brainwashing do we need?” (thoughts on who would have said this)
Very Worried about insurance, both homeowner policy and FEMA”

“Local communities are essential in supporting anything you (state government) try to do. Getting them to support any initiatives is key.”

“SLR Statements included in all property sales/leases.”

“Signage in high risk areas and outreach!”

“1% hotel tax on tourism. Carbon tax is most fair.”

“Make sure someone from Sussex County Tourism is on the Advisory Committee…to combat the tears that will emerge from this discussion.”

“Giving DNREC authority to regulate development with a 100 year flood plan”

“New authority for DNREC to…manage…new lands”

“Developers should pay through permit/consultation fees”

“Provide timely consultation, set permit fees high enough especially for business/developers to sustain program.”

“I do not see much private sector involvement”

“This (SLR) seems like an insurable risk. Can a public insurance pool be set up, funded from land taxes and development permits?”

“To whom does the SLR committee report (good question)? I suggest either the governor or the committee of the state legislature.”

one committeemenber proposed a package of tax increases with more local control over how SLR actions are handled and paid for.

“We need to restrict development in sensitive areas before they start,

“I think it is only honest and fair to warn new homebuyer’s of the property’s potential future vulnerability. The potential future risk of sea level rise should be disclosed in the Delaware seller’s disclosure of real property condition report.”

“SLR predictions should be figured into…business development plans.”

“prohibit development in areas that will be flooding with SLR.”

“providing as much technical resources to businesses, industries. Land management is a critical role for the state.”

“I don’t believe public money should be used for replenishment of private beaches.”

One partially illegible comment suggested better engineering of dikes.

“Partnerships with consultants should be included. Consultants offer a wealth of expertise.”

“Most presentations suggest SLR is coming or just arrived.  Show people what damage it has caused over the past 100 years.”

“County ordinances which take care of land use in unincorporated areas.”

“Provide SLR planning to local governments…especially target Wilmington.”

“It would be helpful to have a cost estimate: Abandon, buyout, move. With some rough dollar number for the extreme we can evaluate other plans.”

The question is, what does all of this mean? From these statements, which are full quotes from unidentified names (blacked out in the document), there is a pattern which emerges: the government, possibly DNREC, should be allowed to levy taxes on landowners and land developers in Sussex County to pay for the sea level rise actions. Landowners in all three counties, but especially in Sussex and parts of Kent, will need to advise potential buyers that the property is in a “flood zone”-and the government should have the ability to either tell the potential buyers or make the landowners do so. The next step then is to decide how badly “SLR” will “devastate” Delaware’s shoreline.

Next week we will show more information obtained from these documents and explain what it means to you.

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DOVER, DE – Cause of Action, a Washington D.C.-based legal advocacy group, has filed suit today in US Federal Court, District of Delaware, against Governor Jack Markell and five members of the Delaware Public Service Commission.

The Caesar Rodney Institute (CRI), a Delaware-based non-partisan think tank, has challenged the merits of utilizing high-cost Solid Oxide Fuel Cells to produce electrical power for sale to ratepayers of Delmarva Power, Delaware’s largest energy utility provider.  CRI was the sole entity opposing the contract between Delmarva Power and Bloom Energy at the Delaware Public Service rate hearings in October of 2011, on the basis the economic impact on Delaware’s economy would be negative because of the contract.  CRI has been concerned about the constitutionality of the contract from the very beginning.

Since CRI and John Nichols, a citizen activist, were not able to convince the Public Service Commission to change its views on either the economic or environmental impact of the permit application, Mr. Nichols decided to take his case to the Coastal Zone Industrial Control Board.  He challenged the permit application on whether Bloom Energy had the right to build its Solid Oxide Fuel Cell technology in lands that were considered protected for wildlife. CRI funded expert testimony as part of Mr. Nichols’ motion to appear the permit decision.

The Board voted to deny Mr. Nichols standing at the hearing, which allowed Bloom Energy to proceed with installation of its Solid Oxide Fuel Cell units in the Coastal Zone.  Mr. Nichols opted to file a lawsuit against Governor Markell and five members of the Public Service Commission, using information CRI provided during testimony.  He was joined by Fuel Cell Energy, Inc., a company which makes fuel cells, and which feels it was denied the opportunity to do business in Delaware because of the government’s decision to not open the bidding process to outside companies.

Caesar Rodney Institute 

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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:

http://www.greenexplored.com/2012/05/first-state.html

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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Complainant wants the Delaware Public Integrity Commission to sanction Delaware’s insurance commissioner for unethical conduct and no-bid contracts.

By Lee Williams

A Lewes businessman has filed a complaint with the Delaware Public Integrity Commission accusing Insurance Commissioner Karen Weldin Stewart of violating state law.

Christian Hudson, a real estate entrepreneur, said he filed the complaint after reading the ongoing special report published by the Caesar Rodney Institute titled “Delaware Dept. of Insurance: Not in the Public Interest.”

“I don’t know if there’s a culture of corruption in Dover, but it clearly seems some of these allegations need further investigation,” Hudson said. “And if there’s wrongdoing, she should be held accountable.”

CRI’s 10-month investigation found that Delaware taxpayers might not be getting their fair share of the millions of dollars the department receives in fees and taxes from insurance companies it regulates.

Based on numerous interviews, court records and nearly a dozen Freedom of Information Act (FOIA) requests, CRI uncovered questionable hiring practices, questionable contracts for campaign donors, failure to comply with state law and millions of dollars paid to out-of-state consultants in no-bid contracts.

In his complaint, which was filed with the Commission earlier this month, Hudson alleges Stewart violated several areas of the Delaware Code including: contracting and procurement regulations, the Code of Conduct for elected officials, and rules regulating the use of state-owned vehicles.

Stories published by CRI have shed light on the commissioner’s penchant for issuing no-bid contracts to out of state firms, as well as using a state-owned vehicle on evenings, weekends and holidays.

Hudson was most troubled by a $700,000 no-bid contract Stewart awarded to a New Mexico financial services firm to conduct pre-tax audits of insurance companies based in Delaware.

“To give out $700,000 to people in New Mexico, when there’s clearly firms in Delaware that can do the same work is wrong,” Hudson said. “She needs to bid these things out.”

Hudson included copies of several stories published by CRI to buttress his allegations.

Stewart was not willing to be interviewed for this story.

Duties and powers

According to its Web site, the Delaware Public Integrity Commission “administers and implements Delaware’s ethics law (Code of Conduct) for the Executive Branch; its financial disclosure law for all three branches; and its lobbyists’ registration and expense reporting laws.”

After receiving a sworn complaint, the commissioners have several options, according to the agency’s attorney Janet A. Wright.

If the complaint is found to be frivolous or outside the Commission’s jurisdiction, it will be dismissed, Wright said.

“In general, if a violation is found, first there will be a probable cause determination, and then it goes through a full-blown trial procedure,” Wright told the Caesar Rodney Institute.

If the complaint involves an elected official, Wright said the only administrative penalty the Commission can issue is a formal public reprimand.

“We can’t remove them from office,” she said. “Other people, not elected officials, can be removed.”

The Commission can, however, refer a case for prosecution.

“If it rises to the level where the commission suspects criminal laws were violated, we can refer it to the Attorney General or any appropriate federal government agency,” Wright said.

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 May 25, 2010, by the Caesar Rodney Institute

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Regulatory Insurance Services receives $1 million per month from the Delaware Department of Insurance, but former staffers say the well-connected firm has been misclassifying its employees to avoid paying federal and state taxes for more than 16 years.

By Lee Williams

John Tinsley III is known as the “shadow commissioner” of Delaware’s Department of Insurance.

He’s been the behind-the-scenes shot caller for two of the last three insurance commissioners.

Tinsley is a principal at INS Regulatory Insurance Services (InsRis), a Pennsylvania-based financial services firm whose name has morphed over time, while its power and political connections have grown.

Three of the four InsRis principals, including Tinsley, have all at one time been employed by the Delaware Department of Insurance.

At a joint hearing of the House and Senate insurance committees held last month, Delaware Insurance Commissioner Karen Weldin Stewart introduced Tinsley to the lawmakers as her “special deputy for examinations” even though he is a contractor and not a state employee – a fact Stewart omitted from her testimony, until she was questioned about the relationship by lawmakers.

Tinsley is copied on nearly every significant issue at the Department of Insurance – even issues that do not involve his contract – according to e-mails obtained by the Caesar Rodney Institute through a Freedom of Information Act (FOIA) request. He often accompanies Stewart and her staff on trips to law firms in New York and elsewhere.

Stewart’s department pays InsRis more than $1 million per month to audit insurance companies based in Delaware, a requirement paid for by the insurance companies themselves. The costs of the audits vary depending upon the size of the firm and the complexity of the probe. The larger firms can pay more than $1 million per audit. InsRis, their examiner and the insurance department divide the fees according to set rates.

Several former InsRis examiners told the Caesar Rodney Institute that the firm intentionally misclassified them as independent contractors rather than actual employees, to avoid paying payroll taxes, operating costs and other benefits, including state taxes.

The practice, which they say first began in 1993, has already cost taxpayers, and could cost InsRis millions in penalties, back taxes and interest.

Neither Stewart nor Tinsley were willing to be interviewed for this story.

Going after firms that intentionally misclassify their workers to avoid paying their fair share of taxes is one of the top investigative priorities for the Internal Revenue Service, according to Special Agent Shauna Frye, spokesperson for the agency’s Philadelphia Field Office’s criminal investigation unit, which oversees Delaware.

It’s an investigative priority that can result in lengthy prison sentences.

“From a criminal standpoint, the sentences are generally guided by the amount of tax loss,” Frye told the Caesar Rodney Institute. “If you’re talking about an employer who has tax evasion, the number of years the illegal act has been occurring, and the amount of taxes evaded, are the driving force in determining the length of the sentence.”

The IRS has a responsibility to clearly establish willfulness – knowledge of the difference between an employee and an independent contractor, Frye explained.

“An individual purposefully misclassifying an employee as a contractor would definitely result in some sort of jail time,” she said. “We really only work cases that have potential of jail.”

Nationally, firms that intentionally misclassify their staff to save money are seeing increased scrutiny from both the IRS and the U.S. Department of Labor.

The “Misclassification Initiative”

U.S. Department of Labor Secretary Hilde L. Solis said her agency’s FY 2011 budget request “makes new investments in programs that protect workers’ rights, safety and health in the new economy.”

Solis’ $117 billion budget includes $25 million for the “Misclassification Initiative,” which will allow the Department of Labor to hire 100 additional enforcement personnel to target firms that willfully misclassify their workers as independent contractors, and provide grants and incentives for the states to address the problem.

“When employees are misclassified as ‘independent contractors,’ they are deprived of benefits and protections to which they are legally entitled,” Solis said in a written statement. “For example, independent contractors do not receive overtime and are ineligible to receive unemployment benefits.”

Delaware has made some effort to prevent intentional misclassification of some workers, but only those employed in the construction industry. Meanwhile, other more lucrative industries were ignored.

In July 2009 Gov. Jack Markell signed the Workplace Fraud Act into law.

The Act states: “An employer shall not improperly classify an individual who performs work for remuneration provided by an employer as an independent contractor.”

It provides civil penalties of up to $5,000 for every violation, but it applies only to the construction industry.

The test

The IRS uses an 11-point test to determine whether a worker is an independent contractor or an actual employee. According to the former InsRis staffers, it is a test their former firm fails miserably.

The criteria for the test consist of establishing the amount of control a firm has over their workers: behavioral, financial and relationship control.

Nicholas A. Mirkay is an associate professor at the Widener University School of Law. Mirkay received his J.D. from University of Missouri – Columbia School of Law in 1992, and an LL.M. in Taxation, with distinction, from Georgetown University Law Center in 1996. He spent two years in the IRS’ Office of Chief Counsel. His private practice has focused on federal, state and local taxation of business.

Misclassification, Mirkay said, is an issue the IRS has been fighting for decades, but one that’s relatively simple to understand.

“The issue is all about control – how much control the purported employer has over the purported employee,” Mirkay said. “The more control the employer has over their time, manner and work product, the more likely they’re an actual employee.”

The former staffers said InsRis controlled nearly every aspect of their job.

InsRis, they said, hired them, brought their names to the commissioner and scheduled all of their audits. The firm told them where to be, who to contact and even what type of dress was appropriate for the workplace.

The firm provided paid training and once a year scheduled an annual conference for all of the examiners. They were directed to contact an InsRis principal if they had questions, and were warned against going outside the company’s chain of command.

No aspect of their job was as rigidly controlled as their audit reports. The examiners submitted them to InsRis, and their supervisors went over them in great detail before submitting them to the insurance department. Sometimes these reviews could take several months.

InsRis reimbursed their expenses, and paid them with company checks. The examiners were paid based on an hourly rate. In theory, they said their time was broken into daily/eight-hour blocks. In practice, this amounted to an hourly rate of pay.

The employees said InsRis had strict rules about the amount of time they could spend on each audit, and questioned them when they exceeded this limit. They were also questioned if they finished an audit early, because the firm would receive less money.

Once hired, their relationship with InsRis was one of permanence. They went from one audit to another, indefinitely, without signing new contracts. The contracts themselves do not specify an end date, and can only be terminated by both parties in writing.

The Caesar Rodney Institute obtained a copy of a contract signed by one of the former staffers and InsRis. The first line of the document states, “Examiner is engaged as an ‘Independent Contractor,’ and not as an employee or agent…”

Published guidance from the IRS, however, suggests that the existence of a contact proves little when weighed against the other criteria in the test: “Although a contract may state that the worker is an employee or an independent contractor, this is not sufficient to determine the worker’s status.”

Mirkay said misclassification-related issues are found in more industries than just the construction trade.

“Ten years ago, the biggest abusers were accounting firms and law firms,” he said. “It’s not just your lower-paid employees. We see big service providers involved, because it triggers fewer taxes.”

Mirkay pointed out that the IRS is not the only agency likely to be interested in this possible misclassification.

“The State of Delaware’s withholding tax could be being skirted here as well,” he said. “The Delaware Department of Revenue should be interested in seeing their withholding taxes collected.”

CRI research fellow Sara Clark contributed to this story. 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 May 11, 2010 by the Caesar Rodney Institute

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