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Economic Development Features

Business Roundtable’s short version: Mission control, we have a problem

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Sam Waltz

Sam Waltz
Founding Publisher

What will keep the State of Delaware and its economy – two altogether disparate interests – away from the precipices of continued job erosion, fiscal irresponsibility and financial chaos?

Frankly, that’s the question that should be on our lips this 2016 election year, in the conversations each and every one of us have with political candidates at state, county and municipal levels. Ask!

For more information on the issue, join several dozens of Delaware business and civic leaders at Sept. 29 at 5 p.m. at the University and Whist Club in Wilmington for a roundtable on the topic. Check www.GPSEG.org for more information from the sponsoring organization, the Delaware branch of the Greater Philadelphia Senior Executive Group (GPSEG).

That no “silver bullet” exists is at the heart of the findings of a nine-month consultant’s study financed by the Delaware Business Roundtable, a consortium of Delaware’s corporate leadership, led by WSFS Bank CEO Mark Turner.

Rather, answers are in a series of smaller, even incremental changes, among them:

  • Greater fiscal responsibility by the State of Delaware, and its General Assembly, which writes the annual budget, tax bills, and bonded indebtedness.
  • Improved eco-system of entrepreneurship and innovation for early-stage business incubation, a “grow your own” approach that had given Delaware a 200-year legacy of benefits from DuPont.
  • In the face of the erosion of manufacturing and corporate headquarters jobs, long a Delaware mainstay, it looks to public-private leadership with a focus on job creation in financial services, business services and related areas.
  • Acknowledging the impact of potential infrastructure issues, it calls for a competitive state-of-the-art government-run school system alongside a fresh look at other issues, including the coastal zone.

In terms of greater fiscal responsibility – that is, as simple as strategically and comprehensively balancing the state’s budget for the long term. Delaware is not yet at risk of being the next Puerto Rico or Illinois.

Its dependence, however, on a narrow base of unreliable revenues is aggravated by the absence of a strategic and comprehensive approach to reconciling what it spends with what it knows it can raise, and how and where it raises its revenues.

Frankly, that’s not a new problem. When I came to Delaware in April 1975, covering the Delaware General Assembly and governor and state agencies (and an under-35, newly elected U.S. Sen. Joe Biden), that kind of lack of financial discipline was undermining a struggling state then and its $420 million or so operating budget (now about 10 times larger!).

It was about 1976 when, to shore up more shortfalls, the General Assembly passed a sales tax that it wisely misnamed a gross receipts tax. That allowed Delaware and its businesses to keep up the façade that Delaware is sales tax-free, hence, as citizens, we lie to visitors with state signage proclaiming “Delaware: Home of Tax-Free Shopping.”

Adding insult to injury, the 1976 General Assembly said the new sales tax (oops, gross receipts tax) would be temporary. Forty years later, as any of us could have predicted, the “temporary tax” still is being paid by Delaware businesses. Any tax that is not based on profits, but rather based on sales, is a sales tax, regardless of what the legislature calls it.

The times were so bad that, when Gov. Pierre S. “Pete” du Pont IV gave a major speech early in 1977, he repeated the obvious, acknowledging that the state is bankrupt. Yes, he used the B-word, for the first and only time, and Delaware’s bond ratings – impacting the interest it pays to borrow money – dropped virtually overnight.

While it seems like Delaware has come a long way in 40 years, perhaps not so much.

When we look at Delaware’s culture of innovation and growing your own, we’re struck by the narrow sourcing of the major job-creating players.

The DuPont Co. and family gave Delaware ICI / Zeneca / Astra Zeneca (the former Atlas Powder Co.), Ashland (the former Hercules), W.L. Gore (a global company built on a DuPont Co. product), Rodel / Rohm & Haas / Dow (another global company built on a DuPont Co. product), the Wilmington Trust Co. legacy now owned by M&T Bank, and others. Are we seeing a trend here?

One bit of good news is that, as universities do in other communities, the state’s flagship University of Delaware has stepped forward in the last few years to become much more of a catalyst, via its Office of Economic Innovation and Partnerships to its expansion of its Small Business Development Center. The chambers are stepping up more, from the smallest like the Delaware Small Business Chamber to the largest like the Delaware State Chamber of Commerce, with incubation support at the New Castle County Chamber.

In the 12-step method, it begins with admitting you have a problem. In Delaware’s case, the good news is that the self-examination is under way, and we’re admitting we have a problem. A big one.

Success will have many fathers, and mothers. Will you be one?

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