That tinny noise you hear this month is the “can being kicked down the road” again.
It was like they came to bat in Dover, down a run, with a man on base, and a home run would have won the game for the home team.
Instead, the Delaware General Assembly – with a new governor ready to make history – could cobble together only an infield single.
Well, let’s celebrate the accomplishments – and there were three.
First, the General Assembly cobbled together some enhanced miscellaneous revenue sources ““ e.g., increased sin taxes on alcohol and tobacco, as well as a spike in real estate transfer taxes that will principally hit people moving into and from Delaware, as well as move-up and move-down buyers, in an effort to close a $400 million gap and balance a $4 billion operating budget. We’ll see if that works.
Second, perhaps with more job-creating possibilities, it passed some limited modifications to the famous and nearly sacred Coastal Zone Act to allow industrial and business re-use of grandfathered sites in the zone.
Third, hopefully the administration upgraded its Economic Development function, using HB 226 to close the Delaware Economic Development Office, for a newly created Delaware Prosperity Partnership, a public-private partnership.
Business and state leaders hope to get it underway by early fall, with a 15-member board and an executive search firm seeking a CEO. That will be supported by $2 million from the state and $1 million within the business community each year for the next three years.
“The state made some progress in both economic development and in advancing our entrepreneurial eco-system,” said Bob Perkins, executive director of the Delaware Business Roundtable, a consortium of the state’s larger businesses and employers.
Left undone, though, is the proverbial “elephant in the room,” the strategic overhaul of the state’s finances.
What that means to business leaders is a re-envisioning of what state government should be doing, and what the state should spend for it. At the same time, assuming it’s able to cap its unchecked growth and roll it back some, business leaders may be willing to talk about new taxes – that create an altogether different foundation for funding state government.
To business leaders, in addition to capping, if not rolling back, spending, it means reducing the cost of government by encouraging competition among state suppliers. Specifically, more than ever before, the business community is calling for an end to prevailing wage that pays a premium to union labor, despite its name, and alleviates the requirement to join a union in a workplace that has one.
Also, as the American work place has moved away from defined benefit pensions to defined contribution 401(k) retirement plans, the state’s public sector remains the last hold out for gold-plated pension benefits and highly paid employee health care.
Private conversations with dozens of business leaders over the last year confirm to me that – if the state capped growth in its spending – they’d be willing to look at new revenue sources, specifically, a modest sales tax, and perhaps even a state property tax.
Expert study after study by credit rating agencies and others have told leaders of this strategic weakness. No
one would proactively design the revenue system the state uses today to fund its $4 billion operating budget.
Odd-numbered years like this one are the ideal time for that because, given the political world in which legislators work, every even-numbered year is an election year. No one wants to raise taxes, or add a new tax, four months before voters go to the polls.
“Election year is going to be a big challenge,” said Perkins. “The state needs to change its mix of revenue sources. The revenue sources are not elastic, they don’t grow. We rely on diminishing revenue sources. We’re happy to understand that and talk about that.”
The big question for Delaware business in 2018 is whether it will be talking to itself, or whether there’s a conversation here to be had.
