January 8, 2014
We have come back from the worst economic crisis to hit our state since the Great Depression, and I want to talk today about how we move ahead.
The national Bureau of Labor Statistics put our unemployment rate in Delaware at 6.5% in November. That’s the best it’s been in five years – it essentially puts us back to where we were when the national economy crashed in late 2008. Some people say that number is deceptive because the labor force is smaller now, but the labor force number goes up and down over time – our state labor force today is larger than it was in November, 2010.
How does that unemployment rate compare to our neighbors? Maryland is right around where we are at 6.4% — but with a full 25% of its nonfarm workforce in recession-proof government work, compared to 14.7% of ours. Pennsylvania’s unemployment rate is 7.3%. New Jersey’s unemployment rate is 7.8%. New York is 7.4%. Connecticut is 7.6%. Rhode Island is 9%. Are we the best in the country? No. Are we even close to satisfied with being the best in the region? Absolutely not – we won’t be satisfied until every Delawarean who wants work can find it. But as we look ahead to determine how we will build on our success, we should appreciate how far we’ve come and the better place from where we start.
When we are at our best in Delaware in creating economic opportunity, we are doing three things well. First, we are making our state an attractive place for anyone to do business. We recognize that no one – least of all government agencies – bats a thousand guessing winners and losers in these unpredictable economic times, and we have to make sure that the fundamentals of our economy are such that we are an attractive place to move and grow for all types of employers. Second, while we are strengthening our overall profile as a state to do business, we need to be smart about those economic areas where we have, or could work to have, strategic advantages, and pay special attention to those areas. And third, when there are particular companies that are interested in locating or expanding here and offer the real prospect of putting Delawareans to work, we need to be extremely responsive to them. We can’t lose our focus on any of these three areas – it doesn’t matter, for example, how nimble or responsive we are to potential new employers, if the underlying economic environment in our state isn’t attractive to them.
The fundamentals are easily stated but hard to do. The Governor and I hear them over and over from employers. Employers want a well-educated and trained workforce – students graduating from high school, college graduates, and adults who have learned skills after finishing school. Employers want a low cost of doing business. They want to be in a state that has a good quality of life – where they and their employees will want to live. And they want a supportive government, not one that necessarily gives them everything they want but one that listens and understands that for business, time is money.
On those fundamentals, we have solid progress to report but still a lot of work to do together. Our public schools are doing a better job than they were doing five years ago, but there is still substantial room for improvement. We have made major new investments in quality Pre-K education and professional development for teachers, two of the areas where experts tell us we can have the greatest impact on the quality of classroom instruction. We’ve launched some innovative new programs such as the Chinese language immersion program championed by the Governor. Out of my office, we have pursued a number of initiatives designed to deal with some of the nuts and bolts challenges of running good schools, many of them working closely with our state legislators:
- A successful change to state law to make it possible for school districts to make earlier hiring offers to new teachers. This is helping us to better compete with surrounding states for the best new teaching candidates.
- An expansion of funds for programs targeted at academically advanced students – which will result in innovative new programs in both the Caesar Rodney and Capital School Districts next year.
- Changes in the law to try to ensure that more students with disabilities get the support services they need.
- The creation of a new graduate program in speech language pathology at the University of Delaware, which over time will dramatically improve the availability of speech therapists for Delaware schools.
- Financial bonuses for schools whose students – especially those from challenging economic backgrounds – improve over the course of the year on academic tests. I just came from one of the award-winning schools, Lake Forest East Elementary School.
- More intensive scrutiny of how local school districts spend their public dollars; in particular what percentage of those dollars go into the classroom rather than overhead.
- And renewed focus on parental involvement, highlighting schools that have come up with innovative and successful programs to better involve parents in their kids’ educations. A number of the schools that have been recognized have been from the Caesar Rodney School District.
I talk about this issue at such length because it is so important to economic development. It has a huge impact on the quality of the workforce that we can offer to employers. And it is also a major quality of life issue, because employers care about where they and their families will send their kids to school.
Yet with all that good news to report, we are still not where we want to be or where we need to be. We have taken steps toward elevating the teaching profession, but not enough. The resources that we dedicate to our schools should be weighted far more toward teacher salaries and the salaries of other classroom professionals than they are now. And when we are paying teachers higher salaries, we will be able to have higher expectations of their qualifications and training when they come to our public schools. We also need to better recognize that our kids cannot be educated in a cookie cutter fashion. At the same time that we focus – as we should — on the percentage of our kids who are proficient at various grade levels, we should be redoubling our efforts for kids who demand a different approach, providing much more challenging classwork for kids who can do advanced work, and doing a better job meeting the needs of students who are struggling to overcome disabilities. And once our students have graduated from high school, we need to do a better job of providing them with the more specialized training that is required to perform 21st century work. I became one of the newest members of the state’s workforce investment board last year, and now that I have had some time to see what we are doing and learn about what is working elsewhere, I am going to be proposing some specific ideas in the near future about how we can improve workforce training.
Keeping business costs down is another area where we have worked hard but still have a lot to do. The best thing we can do at the state level to keep taxes low is to keep expenses low, and our state agency employment rolls – the part of the state budget over which we have the most control – have actually gone down substantially since 2009. I want to repeat that, because no administration, Republican or Democrat, since records were kept starting in the mid-1970s could say it before now: there are fewer people working for state agencies today than there were when we took office in 2009. The national Tax Foundation did a very sophisticated study last year of the overall tax burden on businesses imposed by each state. Delaware was about average for existing companies and in the top third of the country for new companies. But in some areas that I think are incredibly important, we did exceptionally well. For example, we had the fourth lowest tax burden in the country for companies seeking to start new capital-intensive manufacturing businesses, and the eighth lowest tax burden in the country for companies seeking to start new labor-intensive manufacturing businesses. So once again, room to improve but a good place to start.
One area where I am paying special attention is in controlling workers compensation costs for our employers. In 2006, not that long ago, Delaware was the third most expensive state in the country to purchase workers compensation insurance. In 2007, when I was the state’s Insurance Commissioner, I worked with the General Assembly to put in place a variety of regulatory and legislative changes that cut workers compensation rates by over 40%, allowing Delaware improve to 13th best in the country with respect to our rates. But as you have probably felt, the state lost ground in 2011 and 2012, with workers compensation rates going up by high double digit percentages in two consecutive years. That is not the type of low-cost business environment that we need for our economy to thrive. So for the first half of 2013, I chaired a state task force that came up with a series of recommendations to stem these rate increases, including a two year freeze on what doctors can charge for treating workers compensation patients, and the creation of a ratepayer advocate to speak up for the businesses paying the bills during the rate approval process. We are now midway through the first rate-setting process since these changes took place. We are waiting to see how they impact the rates, and if the impact is not enough, we’ll propose additional changes. This is an area that we must control if we are to have a competitive business environment.
The state has been very aggressive in the second of the third areas I mentioned, which is being responsive and receptive to the needs of individual companies that are potential employers. That’s been true on a large scale, on projects like the PBF refinery in Delaware City where the Governor’s involvement with a purchaser literally saved hundreds of jobs there when the prior owner announced its shutdown. And it’s been true on a more limited scale, including right here in Kent County. It’s resulted in the expansion of existing businesses, like Kraft Foods and the former Camdel Metals, and its helped open new businesses ranging from the Uzin Utz floor manufacturing facility scheduled to open at Garrison Oak Technology Park to smaller enterprises like Acorn Books and the Bayard Pharmacy.
Let me speak last to the issue of a responsive government. This is an area where we have made real improvements. The Governor and I have both made a habit of visiting both large and small businesses throughout the state, and listening to their concerns. But I’ve come to realize that that is not enough. Small business, in particular, needs a regular channel of input, to have its concerns heard at the state government level. So early last year, I created a small business advisory group that I meet with every couple of months to talk about what is on the minds of small businesspeople. Its members are the leaders of real small businesses from a broad range of vocations and regions – not spokespeople, but the people actually paying the bills and opening the doors every day. It has been incredibly helpful. We’ve had members raise regulatory issues with me that we were able to address, such as pointing out to New Castle County a permitting procedure that was unnecessarily burdening contractors. And it has focused our attention on a particular issue of concern to the small business community: the availability of loans and credit. Thanks to the focus on this problem, this is an area where we are going to have some concrete proposals in the next several weeks.
Being responsive also means listening to the larger business community when it believes it has strategic opportunities that should be pursued. Here in Kent County, the state has been actively involved since the beginning in the proposal to build an athletic complex in Frederica. Although I know there is some disagreement about how quickly some road improvements adjacent to the facility should be made, the state has committed to make them if the project moves forward and, on top of that, to invest an additional $3.3 million in infrastructure improvements. I want to put the magnitude of that investment into context. That $3.3 million is one of the largest investments in the history of the state’s infrastructure fund –the only larger ones were for the Amazon distribution facility, the University of Delaware’s health campus, PATS Aircraft, and the Port of Wilmington, all four long-established, major employers. And I was very pleased to see the interest at last September’s Kent County Economic Summit in trying to develop a focus on food innovation districts. That is great thinking, an approach that capitalizes on some of the real advantages our state has in agriculture production and life sciences, and I am looking forward to working with the county to refine the plans and forge ahead in that area as well.
This is a critical time for our state and for Kent County. Working together, we fought back against the worst economic storm to hit our state in generations, and we are poised to take the next step. It won’t be easy, important things rarely are, but I’m confident that if we take care of the fundamentals, think strategically, and act responsively, that we will be one of the best places in America to start and grow a business.