House Republicans on April 27 touted a list of proposals they say would save the state at least $125 million annually.

    House Republicans on April 27 touted a list of proposals they say would save the state at least $125 million annually.
    Many of the proposals deal with reducing costs to Delaware’s education system. State taxpayers fund approximately 70 percent of the cost of building, renovating and operating Delaware’s public schools.  Approximately one out of every $3 in the state’s operating budget is spent on public education.
    “These are common-sense proposals that should be adopted and adopted quickly,” said State House Minority Leader Richard Cathcart (R-9th district).  “They won’t close the state’s budget gap, but they will make significant strides towards that goal.”
    The latest state revenue estimates from the Delaware Economic and Financial Advisory Council, combined with the Markell administration’s spending estimates in the upcoming budget, leave a gap of more than $775 million.
    As part of his plan to close that gap, Gov. Markell has proposed a package of six tax hikes, including increases of the state personal income tax, cigarette tax, and alcoholic beverage tax.
    “Before we raise taxes on people that are in a poor position to afford it, we should be doing everything we can to cut expenses,” said State House Minority Whip Dan Short (R-Seaford).

Suspending prevailing wage
    Chief among the proposals is suspending the state’s “prevailing wage” requirement on school construction and renovation projects.  Current law requires that workers on state-funded construction projects be paid mandated wages set by the Delaware Dept. of Labor based on an annual survey.  The wages vary by location and occupation.
    The prevailing wage law can trace its roots back to federal Depression-era legislation that was enacted to encourage the use of local labor.  But Edward Capodanno, president of the Delaware chapter of Associated Builders and Contractors, Inc., said the law has outlived its usefulness and is significantly increasing the cost of government projects.
    “Many studies have shown prevailing wage requirements increase construction costs by 15 to 18-percent,” Capodanno said.  “Prevailing wage is a misguided and outdated government mechanism.  When DuPont or Bank of America build a new facility, they use the competitive forces of the marketplace to maximize the efficiency of their dollars.  I don’t believe there’s a comparative difference between the quality of those buildings and the ones constructed by the state, nor are the people working on those projects poorly paid.  Why should taxpayers needlessly spend more money to artificially boost someone’s salary?”
    Last year, the non-partisan Leadership for Education Achievement in Delaware – a group empanelled by Gov. Ruth Ann Minner – issued a report that recommended suspending the prevailing wage on school construction projects, while studying the effect of that suspension on cost and quality.
    “Similar actions were taken in Florida, Ohio and Kentucky,” Capodonno said.  “In each case, those studies found that suspending the prevailing wage reduced costs without impacting quality.  All of those states have since abolished prevailing wage, to the benefit of taxpayers.”
    Legislation to suspend Delaware’s prevailing wage for four years for school construction and renovation, while the Department of Education evaluates the results, has already been introduced in the State House.  House Bill 110 is pending action in the House Labor Committee and is due to be considered at a hearing this Wednesday.
    “According to the LEAD report, this bill could save upwards of $34 million annually,” said Rep. Short, the prime sponsor of HB 110.  “How can the governor or any state legislator justify cutting state employees’ salaries, while simultaneously using tax money to keep the wages of selected construction workers at above-market prices?”
    “In the best of times, it’s difficult to defend wasting tax money,” said State Rep. Deborah Hudson (R-Fairthorne).  “But under the current economic circumstances, with the state facing a shortfall of more than $750 million, it’s all but impossible to defend this practice.  We shouldn’t just be suspending prevailing wage on school construction.  We should be abolishing it on all state projects.”

Harnessing ideas for efficiency
    Another component of the cost-cutting package would create a program whereby state employees and private citizens could get paid for making cost-cutting suggestions.
    “We started a program like this when I was mayor of Seaford and it produced results,” Rep. Short said.  “We’re not exactly breaking new ground here.  There are countless companies and governments that have implemented such programs, so it would be a fairly simple matter to survey the best practices and adapt them for use here.”
    Rep. Short noted Seaford’s incentive program produced suggestions that reduced the city’s phone and mailing costs.  He said they also implemented an idea to have city employees handle a function at Seaford’s water plant that had previously been done by an outside contractor.  Combined, the program produced suggestions that saved taxpayers thousands of dollars annually.
    Under the proposal supported by House Republicans, the person (or group) submitting an idea to cut the state’s costs would get 10-percent of the estimated annual savings.  Awards would be capped at a maximum of $25,000.
    “I think this is a great idea,” said State Rep. Greg Lavelle (R-Sharpley).  “To facilitate this, I think we should enact legislation I’m sponsoring [House Bill 90] to create a searchable, online database of the state budget.”
    Rep. Lavelle noted that such searchable databases have produced significant savings in states where they have been put into practice because it gives citizen activists a chance to comb through state spending.  “If you combine this powerful tool with an incentive program, the mind boggles at the potential.  Even if it results in cutting costs by one percent – and I think it could produce considerably more than that – you’d be looking at $30 million in savings.  That’s more than the proposed hikes in the alcohol and cigarette taxes would produce, combined.”

Other ideas
    Other proposals being backed by House Republicans include saving money on school construction by standardizing designs and leveraging better prices on the purchase of materials – a recommendation the LEAD committee estimated could save up to $14 million annually.
    “Of the five suggestions we’re making in this package, four of them were recommended by the non-partisan LEAD committee,” Cathcart said.  “Making good public policy turns on the ability to recognize and embrace quality ideas, even when you didn’t originate them.”
    Rep. Cathcart says his group is also calling for implementation of another LEAD committee suggestion to cut administration and support costs of local school districts by using broad, shared services.  An estimated $30 million could be saved annually.
    “This suggestion makes a lot of sense,” said State Rep. Joe Booth (R-Georgetown), who is a former Indian River School District school board member.  “You constantly hear people saying we should consolidate the 19 school districts we have in the state, but issues like taxation, labor contracts, and governance make this a difficult knot to untangle.  The charm of this approach is that the districts are preserved, local control is maintained, but costs are lowered by acting collectively and eliminating duplication.”
    On a similar note, House Republicans also say a pilot “centralized procurement program” for local school districts, vocational-technical school districts and charter schools needs to be expanded statewide.  Money to test this concept was included in the current state budget.
    “These are all prudent proposals,” said State Rep. Gerald Hocker (R-Ocean View), who is well-known in Sussex County for his business acumen.  “We’re not suggesting anything that has not already been proven to work by private businesses.  The private sector is always looking for ways to increase efficiency, improve buying power through better economies-of-scale, and using competition to drive down costs.  Given the grim fiscal realities we face, I can think of no better time for government to embrace these concepts and reap the huge potential savings they offer.”