VOLUME 36, ISSUE 4

INSIGHTS

 

Distributed quarterly by mail and email, the Conservative Caucus of Delaware's newsletter contains relevant information and insights from noted leaders, authoritative stakeholders and like-minded members who demonstrate their passion for the truths we hold dear by putting pen to paper!

Delaware Lags Behind Other States

By William Whipple, III

       

     How does Delaware stack up against the other 49 states, not in size (we can’t compete in that regard) but on a per capita basis?  Based on

various surveys published in recent years, the state’s rankings are often disappointing.  And come to think of it, the “small wonder” promotional campaign (launched in 1982) seems to have disappeared.  “Delaware a small wonder no more?”  Melissa Nann Burke, News Journal, Jan. 5th, 2015. 

     Surveys can be tricky in terms of the attributes measured and data

comparability, but let’s consider some of the results to see what they may

indicate.  In sum, corrective action

appears to be called for in several areas – especially the last one discussed - and it needs to start sooner than later. 

     Freedom – Delaware has

experienced significant losses in

personal and economic freedom,

according to a recently released study, and is now accorded a rank of 43 in this regard. The only less free states are said to be Oregon, Maryland, Vermont, New Jersey, California, Hawaii and New York.  Freedom in the 50 states, Delaware, William Ruger & Jason Somers, Cato Institute, 2018.

     Dozens of factors are taken into account for this ranking.  Among the reasons cited for Delaware’s low

standing: Overall tax burden at 9.8

percent of personal income is “worse than average,” government finances are highly centralized at the state level, no right to work law, relatively strict gun control laws, renewable portfolio standards for utilities, massive legal sector, and stringent asset forfeiture laws.

     While this kind of study is interesting, there must be a lot of qualitative judgments in determining how the laws of the several states stack up re all the factors considered.  Take the results as a reminder that Delawareans need to scrutinize new or expanded government programs, bearing in mind the adage that “as government expands, liberty contracts.” 

State Economy – Delaware’s overall economic results (which primarily reflect the efforts of the private sector) have been middling.  Although the state’s overall ranking was reported as 19 in a recent study, the results cited (see below) seem to paint a less favorable picture.  “Which state tops list for having the best and worst economies?” Michael Sauter et al.,usatoday.com, Aug. 27, 2018.

  • Five year GDP annual growth rate: +1.3 percent (20th smallest increase, ranked 30th)

  • 2017 GDP: $61.5 billion (9th smallest)

  • June 2018 Unemployment: 3.9 percent (tied - 25th highest)

  • Five year annual employment growth: +1.4 percent (16th largest increase).

     The survey reports that over half of all publicly traded US companies are registered in Delaware, which is

attributed to Delaware’s “highly

permissive business laws.”  Regulatory requirements for business operating in the state are rather onerous, however, and the manufacturing sector has been in a long-term decline. 

     Rather than firms that export goods and services, thereby generating an inflow of funds into the state, the two top employers in Delaware are 

reportedly the state government (including agencies) and Christiana Care Health System.  Top 5 [DE]

employers, M.A. Smith, newsmax.com Feb. 23, 2015

     Education – In terms of spending on secondary schooling, Delaware is ranked near the top (11th) with average expenditures per pupil of $14,713 for 2016.  Of this total, 1/3 goes for

support services  (perhaps reflecting the large number of school districts in the state) versus classroom instruction.  “Education spending per student per  

state,” governing.com. Delaware’s

secondary schooling quality is ranked somewhat lower (18th), reflecting

mediocre school test scores (Math 34, Reading 36). In sum, Delaware tax-

payers aren’t clearly getting their

money’s worth from the states’

educational outlays.  It’s time for a

serious look at reducing the administrative bloat at the top and improving educational results.  

     Healthcare – Delaware’s healthcare quality scores fall primarily in the

middle of the pack, i.e., ranked 25th on an overall basis and ranked 21st for healthcare affordability (from a patient standpoint).  Nursing home quality is highly rated (6th), but the Infant Mortality Rate is abysmal (49th). “Best states, Healthcare ranking,” US News.

From a taxpayer standpoint, healthcare is a major driver in projected budget deficits.  According to a 50-state analysis by the Center for Medicare and Medicaid Services, Delaware’s per capita healthcare spending rate (which includes state and federal government subsidies) was $10,254 or more than 27 percent higher that the U.S. average.  DHSS Secretary Walker sent healthcare spending and quality recommendation to Governor Carney, Delaware.gov, Aug. 27, 2018

     The proposed benchmarking system would supposedly help to slow the growth of healthcare spending by

creating greater awareness of healthcare costs, but it remains unclear how this would be done without imposing de facto healthcare rationing. 

     Government Finances – The

General Assembly must pass a

balanced budget every year, and it always manages to do so (although this wasn’t easy in 2017).  Yet somehow the state’s debt and liabilities keep growing at a brisk pace.  A recent study by “Truth in Accounting” may help to explain why.  Delaware finances continue to crumble, statedatalab.org, May 2018. 

     First, capital expenditures are financed via the bond bill rather than general revenues.  Second, the current budget doesn’t include future outlays for post-retirement benefits of state employees except to the extent that said outlays are being covered by contributions to trust funds.  Not only are pension benefits underfunded (currently by $1.9 billion),  according to this study, but retirement healthcare benefits are being largely ignored (resulting in an unfunded liability of $8.4 billion). 

      By Truth in Accounting’s reckoning, each Delaware taxpayer’s share of the $10 billion shortfall works out to $30,400.  The study gives the state a grade of “F” for financial responsibility, along with eight other states with a shortfall of $20,000 per taxpayer or more.  The other states with failing grades are California, Connecticut, Hawaii, Illinois, Kentucky, Massachusetts, New Jersey and New York.

     The implication of this study is clear, namely Delaware needs to take a serious look at how these future liabilities are being recognized and provided for within the overall context of the state’s finances.  Most companies in the private sector have taken steps to phase out post-retirement healthcare benefits and replace pension plans with defined contribution (e.g., 401k) plans; it may behoove the state to consider

similar action. 

     Otherwise, the day may come when rising outlays for retirement benefits will force painful cuts in services for younger Delawareans and/or major tax increases. ■ 

  

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