Suspension of legislature - Opportunity for fiscal evaluation (Whipple)

This year’s proceedings of the Delaware General Assembly were interrupted by the coronavirus pandemic, which resulted in suspending the legislative session from March 18 until May 26. Quite a setback for those who were hoping to push through legislative proposals this year as the money bills for the new fiscal year that begins on July 1 will predictably take up most of the remaining time.

While the legislative session could be extended beyond the normal end point (June 30) in order to consider still-outstanding proposals, that would require action by the governor or by the presiding officers of both Houses. No one has suggested such an extension, so it’s probably not going to happen.

Another approach might be to view the break in the normal legislative action this year as an opportunity for creative reflection versus an unwelcome setback.

Should the General Assembly be judged based on the number of bills it passes or on the quality of its work? Sometimes, as the saying goes, “less is more.”

And are there perhaps some important issues that the state’s political leaders have fallen into the habit of ducking because they’re not sure what the right answers are. By way of illustration, here are some potential candidates for the “let’s get it done” list.

Property tax reassessment – However carefully real estate properties may be assessed initially, the values inevitably get out of whack in time. Some people with properties that have appreciated will wind up paying less than their fair share of the total tax bill, while others are overpaying. The only remedy is to periodically revalue all properties on a consistent basis, as is required in most states. Not Delaware, however, where the last round of property tax reassessments were in 1974 (Sussex County), 1983 (New Castle County), and 1987 (Kent County).

It’s not as though no one knew about this problem, it’s been pointed out repeatedly by the News Journal among others, but our elected political leaders never got around to taking action. Now a suit in the Chancery Court will change this. The judge, Vice Chancellor Travis Laster, recently ruled that the valuation discrepancies are so significant as to render the state’s property tax system unconstitutional; further judicial proceedings are planned to fashion an appropriate remedy.

Query why court action should have been required to solve this problem, thereby putting the courts in the position of acting as an alternative legislature. And even now the court has ruled on the legal principles, we still haven’t noticed either the executive branch or the General Assembly volunteering to take over this project (the results of which will inevitably gratify some taxpayers while disappointing others) and see it through to completion.

Fiscal prudence – Delaware makes a point of passing a balanced budget every year, which is important among other things to maintain a AAA bond rating and be able to borrow at the lowest available rates. This hasn’t always been easy, e.g., a last minute round of spending cuts and tax increases was needed in 2017 to bring the books into balance.

Not that the state’s budget is truly balanced, as capital projects such as road improvements are financed by the bond bill and the amounts involved seem to keep growing. Also, future obligations of certain employment benefits have not been fully funded.

Delaware’s pension obligations were about 83% funded (11th out of 50 states) as of Fiscal Year 2018. After factoring in recent stock market reverses, the current unfunded liability is probably around $2 billion.

The liability for post-employment healthcare benefits payable to state employees after they leave government service has been largely funded on a pay-as-you-go basis, however, following an accounting approach adopted during the Minner administration. The unfunded liability has grown substantially over the years, and currently totals some $7.2 billion (substantially more than the state’s annual budget).

Citing a recently adopted rule of the Government Accounting Standards Board, which now requires notice of the unfunded liability on the state’s balance sheet, DE Governor John Carney recently re-established a Retirement Benefit Study Committee to review the situation and recommend corrective action. The list of potential fixes includes both funding increases and cost reductions. Executive Order 34,
9/13/19.

The RBSC was directed to submit its final report by March 2020, but to date – perhaps due to the coronavirus pandemic – does not appear to have done so.

Renewable Portfolio Standard – Delaware’s Renewable Portfolio Standard (RPS) calls for 25% “renewable energy” (wind, solar, and Bloom Energy fuel cells) by 2025. The goal is prescribed by legislation enacted in 2005 as amended. Although the details of the RPS arrangement are rather complicated, the general thrust is to tax electric power acquired from conventional sources (fossil fuels & nuclear) and distribute a portion of the proceeds as subsidies for various “green energy” and energy conservation programs.

The RPS charges (effectively a tax) have inflated the electric power bills of Delawareans, e.g., adding some 15% or more to the distribution charges otherwise billable by Delmarva Power. While some “green jobs” have undoubtedly been created, the loss of existing jobs is probably more significant.

Sen. Harris McDowell (D. 1st District) has been working on a bill to expand the RPS, phasing in an increase in the target to 40% renewable energy by 2035. The stated rationale has been the success of the RPS program to date, but neither the benefits nor costs of the legislation appear to have been quantified. Also missing is any explanation of why this program should be expanded before full implementation without a thorough assessment of the results to date.

There has been a notable reduction in regional CO2 emissions since 2005, but it was mainly due to the fracking boom (which has encouraged a shift from coal to natural gas for conventional power plants) versus the RPS. Moreover, (1) the manmade global warming theory remains scientifically unverified, and (2) increased CO2 emissions in China, India, etc. have dwarfed reductions in the US.

Wind & solar power are unsuitable to drive the electric grid due to their intermittency, and Bloom Energy fuel cell power is inordinately expensive. Accordingly, increasing use of wind & solar power would necessitate the operation of dispatchable power plants (fossil fuel or nuclear) on a back-up basis, thereby inflating the cost of the dispatchable power as well as raising RPS charges. Expanding RPS will cost Delaware, Caucus newsletter,
April 2020.

On behalf of several like-minded citizens, I’ve written to Governor Carney to lay out our concerns and volunteer our pro bono participation in the review process. Let’s hope this offer will be accepted, because the RPS program truly represents a solution in search of a problem.

Closing thought - For best results, the Delaware political system should feature a lively exchange of views on major policy decisions. We don’t need a “one-party” state, nor a Republican Party that offers only “me too” policies. Why aren’t Republican leaders pointing out these and other longstanding problems and attempting to offer better solutions? Who knows what they might accomplish if they did!

**********FOLLOW-UP**********

#7/6/20, forwarded link to SAFE directors & David Legates.

#7/7/20, mailed copies to Richard Gebelein, Esq., DE Senator Bryant Richardson, and Chair Jane Brady, Delaware State Republican Party for information.

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