On the final day: Casino tax relief approved

Gov. John Carney is surrounded by legislators and state employees and their family members after signing into law 12 weeks of paid parental leave for state government workers.
He’s handing the signed law to its prime sponsor, Rep. Debra Heffernan, D-Brandywine Hundred. The legislative session came to a close Saturday. (Special to Delaware State News/Gary Emeigh)

DOVER — The Senate passed legislation Saturday that will give Delaware’s casinos a long-awaited tax break, a vote that left one high-ranking Dover Downs official “elated.” Gov. John Carney signed the measure into law about three hours later.

By a 17-3 vote, with one member abstaining, the chamber sent to the governor a bill that will take $16.8 million in revenue away from the state government in perpetuity but will, supporters hope, reverse the situation for Delaware’s struggling gaming establishments.

The legislation will lower the slot tax rate 1 percent, slash the table game tax rate almost in half and suspend the $3 million table game license fee. It will also give the casinos a chance to decrease the slot rate another 2 percent by investing a certain amount of money in their facilities and will provide additional money to the horseracing industry.

The product of years of work by casino executives, Sen. Brian Bushweller, D-Dover, and others, the bill was developed after negotiations between the administration and the casinos and was further amended by the House Thursday.

Sen. Brian Bushweller gets a standing ovation from members for his work on the casino. legislation. (Special to the Delaware State News/Gary Emeigh)

“The casino industry is the No. 1 private employer in Kent County, and the bill helps ensure that remains the case, that all those thousands of employees, subcontractors and their families will breathe a little easier,” Sen. Bushweller said.

The Senate passed the bill in April, but it remained awaiting a vote in the House for two months primarily due to opposition from House Speaker Pete Schwartzkopf, D-Rehoboth Beach. By a wide margin, the House passed the legislation with an amendment two days earlier, sending it back to the Senate.

Sen. Bushweller introduced legislation to provide tax relief in 2015, 2016 and 2017, but none of those bills went anywhere. With the state on firmer financial ground this year, the odds were — finally, some would say — in the casinos’ favor.

Supporters say change was critical to prevent jobs from being eliminated, not to mention to ensure the state keeps receiving more than $150 million in revenue from gaming.

Dover Downs had 1,401 employees, including 889 full-time workers, as of the end of 2016, according to the Securities and Exchange Commission. Because Delaware Park and Harrington Raceway & Casino are not public and thus not required to file financial reports, their exact numbers are not known, but Sen. Bushweller said in the Senate debate two months ago the three businesses combined employ about 4,500 people, while the horseracing industry supports another 2,200 jobs.

Although Dover Downs has avoided discussing bankruptcy, it lost nearly $1.1 million in 2017, the second time in four years it has ended the year in the red.

The bill is the biggest tax break the casinos have received in a decade, Dover Downs Hotel & Casino President and CEO Ed Sutor said after the vote.

“It’s been a long time coming, but we’re relieved it’s finally here. … We’re going to live up to our end of it, we’re going to make capital investments, we’re going to make additional marketing expenses, we’re going to try to drive additional business to the state of Delaware,” Mr. Sutor said.

Minimum wage

As of 10 p.m., the House had yet to vote on legislation that would raise the state’s minimum wage by $1. The bill passed the Senate earlier in the night 11-10 on party lines, three months after an identical bill failed by one vote.

The difference this time was Sen. Bushweller, who supported the increase after abstaining in March.

The General Assembly last approved a minimum wage increase in 2014. Senate Bill 170 would lift the wage floor from $8.25 to $8.75 on Oct. 1 and then again to $9.25 on the same date next year.

Supporters said the bill would help lift people out of poverty and argued opponents are repeating many of the same unproven claims from prior debates. The federal minimum wage is $7.25, and 23 states have higher minimum wages than Delaware.

“A couple years ago when we tried to raise the minimum wage and the economy was really bad, we heard that was a bad time to raise the minimum wage. And now we hear the economy’s getting better and it’s a bad time to raise the minimum wage,” Sen. Dave Sokola, D-Newark, said. “I don’t know when a good time to raise the minimum wage is.

“But I do know that we heard every time that it was a job killer, and the evidence just does not support that. … We have to stop using these blanket statements about what something does when it doesn’t do that, when evidence simply does not support the statement that’s here on the floor.

“This is a bill that’s worth supporting. It’s about time and I urge everybody to support it.”

But opponents countered, as they have in the almost-annual debates over minimum wage, that an increase will cause prices to rise, drive companies and nonprofits out of business and force employers to lay people off.

“You raise the minimum wage and everybody above that has to go up too, so it’s just not that level. You can’t start somebody at $9.25 when the guy that’s been there is making $9.25,” Sen. Dave Lawson, R-Marydel, said.

Retirees will especially be hurt, Sen. Gerald Hocker, R-Ocean View, said, prompting retiring Minority Leader Gary Simpson, R-Milford, to joke he was abstaining from voting due to a potential conflict of interest because he may be seeking a job after he leaves his seat this fall. (He ended up voting against the bill.)

Gov. Carney supports a $10.25 minimum wage.

Budgeting executive order

The governor on Saturday signed an executive order focused on limiting budget growth, although the directive does not bind legislators.

Based off recommendations issued last month by an advisory panel on budgeting, the order instructs the council that sets the state’s revenue forecast to develop a benchmark aimed at slowing the growth of the budget by setting aside revenue that, if expended, would cause the spending plan to pass a certain point.

The decree comes after a constitutional amendment that would have essentially accomplished the same thing failed to advance through the General Assembly, primarily due to opposition from Democratic lawmakers, members of the governor’s own party.

While the administration hopes to use the executive order to end the cycle of boom and bust that has plagued decision-makers over much of the past decade, it is ultimately advisory, meaning the General Assembly can choose to completely ignore the limit and expend beyond what the benchmark calls for.

Asked if the idea behind the order was to put political pressure on legislators, Gov. Carney, who has made budget reform his main priority, did not deny it.

“Well, the intent is to lead, to say to the public that this is the way we ought to do it, this is a better way,” he said. “It protects our priorities in down cycles better than our current system. Our current system in some ways creates an incentive to appropriate into a bubble because it allows us to do so.”

Under the executive order, the Delaware Economic and Financial Advisory Council will be tasked with developing an “index” based on the three-year average of the state’s personal income and population growth, as well as inflation on government goods and services.

From there, the council will create a spending limit the governor’s proposed budget, unveiled in January every year and used by lawmakers as the basis for the eventual final spending plan, will adhere to.

Should revenue totals exceed the benchmark, the extra money would be set aside in a new fund. In years where revenue falls short of the level, the stabilization fund could be accessed.

But while the governor firmly believes the plan is what is right for Delaware, it remains to be seen if the Joint Finance Committee stays under the benchmark.

“I don’t think we need to place artificial constraints when we’re proven that we” are responsible, JFC co-chair Sen. Harris McDowell, D-Wilmington, said.

Legislators imposed some fiscal controls on themselves this year, setting $46.7 million aside for next year to avoid building too much into the budget and potentially creating an obstacle next year. The General Assembly typically allocates 98 percent of revenue, holding tens of millions in case of a financial emergency. This year, with revenue collections booming, legislators budgeted at 97 percent, a decision roundly applauded by state officials.

The executive order came as a surprise to both Democrats and Republicans, with lawmakers being excluded from the news conference detailing the decree and at least some not even being aware of the exact details of the announcement at first.

“Well, I just saw it a couple minutes ago but I’m just going to go back that the last 10 years we’ve been fiscally responsible, that we’ve kept our budget under 3 percent growth (per year on average) and this year we’ve been very responsible with moving it from 98 percent from 97 percent, and we’ve put money aside,” House Majority Leader Valerie Longhurst, D-Bear, said.

“So, we’ve been pretty fiscally responsible, so we’re going to continue down that path, and the governor has his budget and every year the governor always proposes a budget, so that’s what I guess he’s going to do again.”

An actual smoothing fund, as called for by the task force and detailed in House Bill 460, would be the biggest change to Delaware budgeting in more than 35 years. While House Bill 460 had bipartisan support, it was also opposed by some of the General Assembly’s most powerful Democrats.

Republicans, in contrast, strongly supported the plan: 23 of the Legislature’s 26 GOP lawmakers cosponsored the bill.

Both the House and Senate Republican caucuses applauded Gov. Carney’s intent Saturday after the details were released, although their comments differed in focus.

“Times have changed and our state needs to change with them. Twice in the last eight years, Delaware experienced the largest budgetary shortfalls in its history. We have also witnessed windfalls during this span,” House Minority Leader Danny Short, R-Seaford, said in a statement. “These boom-and-bust cycles are indicative of basic flaws inherent in our system — weaknesses House Bill 460 was specifically designed to correct.

“The governor’s Executive Order 21, which seeks to implement some of House Bill 460’s reforms, is well intentioned. However, such an order is binding only on the executive branch and will not prevent the General Assembly’s majority budget writers from disregarding it.

“The General Assembly’s leadership has failed in its obligations to our citizens and has squandered a prime opportunity to alter our financial processes in a way that would have provided more predictability, accountability, and stability for state government and the citizens it serves.”

Senate Republican leadership said “there is no question that the Governor gets it,” although Minority Leader Gary Simpson, R-Milford, and Minority Whip Greg Lavelle, R-Sharpley, lamented spending in the fiscal year started today increased by almost 10 percent over last year. However, that calculation is misleading, as it includes the $816M bond bill, the highest capital spending plan in 13 years.

The operating budget for the new fiscal year rose by 3.99 percent — 5.21 percent including $49 million in one-time funding passed through a separate bill.

The harshest criticism of the governor’s declaration came from a fellow Democrat: Never one to shy away from controversy, Rep. John Kowalko, D-Newark, blasted Gov. Carney, calling the executive order a “blatantly disrespectful attempt to abrogate power from the legislature.”

“In a dramatic example of a petulant personality that cannot get his way (HB460) through the legitimate legislative process, Governor Carney has chosen to emulate a Trumpian tactic that shows a healthy disdain for democratic principles of separation of powers,” he said in a statement.

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