A Brighter Future

An Agenda To Reduce Poverty

The Delaware Senate Republican Caucus

March 2016

INTRODUCTION
Persistent, intergenerational poverty is one of the largest problems facing the people of our state and nation. Too
many of our fellow Delawareans struggle every day to fund the everyday basics of life: food, clothing, shelter &
transportation. The societal costs of persistent poverty continue to mount, as do the resulting costs to taxpayers. Despite 50 years of the federal governments War on Poverty, which now costs nearly $1 trillion per year, a
higher percentage of people under 65 in America are in poverty today than in 1966.
Unfortunately, our 50-year governmental anti-poverty initiative has changed the approach people take to this
issue. Ask a bureaucrat how were doing on the issue of poverty in America or Delaware, and the answer usually
involves how much we spend or how many government programs we have, and not any measure of how successful those programs are.
It is time to change the focus from spending trillions to ease the difficulty of poverty, and instead aggressively
focus on getting people out of poverty. It is only through reducing intergenerational poverty that our state will
truly see a long-term benefit.

OUR GOAL
We recognize that completely eradicating poverty in Delaware is an unreasonable goal for now, but we feel that
making Delaware the lowest-poverty state in America by 2024 is not only an achievable goal, it is the right statement to make at this time to those in Delaware who are suffering in poverty.

A NOTE ON ECONOMIC DEVELOPMENT

The easiest way to reduce poverty in Delaware is through the creation of solid, consistent, middle-class jobs. Our
caucus has consistently offered policy measures we feel would lead to robust job creation. Many of those ideas lie
unaddressed in Senate committees controlled by our Democratic colleagues. We will not rehash those ideas in
this agenda, though we feel that robust economic development and private-sector job growth would accelerate
the reduction of poverty exponentially.

A NOTE ON THE CAUCUS AND THIS AGENDA

The Senate Republican Caucus is made up of nine unique individuals with unique perspectives, who each represent diverse districts. While the Senators agree with each other most of the time, we do have points of disagreement and differing areas of focus. When we agreed to tackle the issue of poverty in Delaware, we did so knowing
that each individual idea presented wouldnt necessarily be supported by 100% of the caucus. Every Senator came
to the table with ideas, but each also reserves the right to withhold support from certain individual ideas as they
are developed.

A NOTE ON FAMILY STRUCTURE

Recently, the American Enterprise Institute and The Brookings Institution, stalwart think tanks of the right and

the left, came together for a report on poverty and opportunity. The best minds from both sides of the ideological spectrum produced a compromise document that focused on three areas: work and education (which we
addressed in our agenda) and the family. They determined that family composition has a direct effect on poverty
levels. Marriage and delayed childbirth directly reduced the risk that a family would end up in poverty. According
to the report, in 2013, the poverty rate for children in single-mother families was 45.8 percent, compared with
9.5 percent for children in married-couple families. While it is not the role of government to tell people who and
when to marry, the numbers cant be denied.

A NOTE ON REDUCING GOVERNMENT

We firmly believe that we can help a significant number of people move from state-supported poverty to self-sufficiency in Delaware without creating expensive, permanent new government programs. In fact, we are convinced
that through innovation and a focus on leveraging the private sector, we can reduce both poverty and government
spending over the long term.

AN EARLY SUCCESS
Throughout our research on this subject, we have issued a call for ideas from the general public. One housing
nonprofit approached us about creating an exemption from a 2011 law that mandated certified electricians perform all electrical work on a construction project. Prior to 2011, nonprofit builders like Habitat for Humanity
used skilled volunteers to run electrical wire under the supervision of an electrician. The difference between pre2011 costs and post-2011 costs was $5,000 per house. An exemption would mean more families in poverty would
be able to rise into homeownership.
As a result of our intent to create an exemption as part of this agenda, certain members of the nonprofit housing
community held discussions with other legislators about supporting our legislation. During those discussions, it
was discovered that the desired exemption already existed, but that none of the nonprofits had been notified. Now
that the nonprofit homebuilders are aware of the exemption, the benefit to their organizations will be as much as
$250,000 per year. That represents multiple extra houses per year that will go to deserving low-income families.
Sometimes just asking the right questions at the right time makes a difference. Were proud to have participated in
this valuable discovery on behalf of the nonprofit builders.

THE AGENDA
One of the consistent problems we came across in researching this agenda is the fact that federal programs are
structured so as to trap people in poverty. Many people who receive benefits know precisely the line in which
making one additional dollar means they will begin to lose those benefits, and therefore they will attempt to
increase their quality of life, but only up to the line in which those benefits begin to go away. The incentives in
these federal programs are to keep people in them, and they allow for no innovation and no creativity. And for
too many in Washington, the fidelity is to the programs, not to the outcomes. Our fidelity is not to a specific food
program, for instance, but instead to the outcome people having enough to eat.

The only way to stop this hardened structure of misaligned incentives is to allow states flexibility to apply anti-poverty dollars in ways that create the best outcomes for individuals and families at the bottom of the economic ladder.

IDEA #1: FEDERAL BLOCK GRANTS WITH RAILS

Though we have little control over the actions of the federal government, we will be introducing a resolution in
the Senate calling for our federal delegation to create and/or support legislation to send all anti-poverty funds to
the states in the form of block grants each year. Justice Louis Brandeis, in his famous states are the laboratories
of democracy speech, also said [t]here must be power in the States and the nation to remould, through experimentation, our economic practices and institutions to meet changing social and economic needs. We couldnt
agree more. If given the ability to be flexible with major federal funding, we are certain that Delaware could
creatively realign incentives for people to steadily work their way out of poverty.
That said, it is critical that block grants from the federal government contain rails, or special provisions creating lockboxes that prohibit state governments from using those funds for anything other than strictly defined
anti-poverty programs. Those rails would serve as an impediment to any efforts by the state to use those funds
for other purposes, or to balance the annual budget. We must guarantee, in exchange for the flexibility, that anti-poverty federal block grant dollars will be used exclusively for anti-poverty purposes.
Though we will be calling on the federal government to switch to this structure, and we believe that the flexibility
created by a block grant funding structure would accelerate the reduction of poverty in Delaware, we cant simply
wait for Congress to take action. Therefore, the following items in our Agenda are all actionable at the state level
right now.
In fact, the next two items on are agenda are already underway in a bipartisan fashion. We look forward to
working with elected officials of all stripes in pushing this agenda forward.

IDEA #2: MAKE THE STATE EITC REFUNDABLE

The Earned Income Tax Credit (EITC) is recognized by both Democrats and Republicans as one of the best
anti-poverty tools we have. In its simplest form, the EITC rewards the poorest working people with a tax cut. In
the process of compiling this agenda, we quickly identified as an effective tool, and slated it to be included. In the
meantime, Democratic Rep. Paul Baumbach created legislation to make the EITC refundable in Delaware at a
rate of 6% of the federal EITC. A good idea is a good idea, no matter where it comes from, therefore many members of our Senate Republican caucus signed on to cosponsor the legislation, and we will encourage its passage in
the Senate.

IDEA #3: OCCUPATIONAL LICENSING REFORM

Just 5% of jobs in 1950 required a license from the government. Today, that number is nearly 30% and growing
rapidly. Many of those licenses are required in industries that pose little to no risk to the public. Unfortunately,
low-income jobs are too often affected by these burdensome regulations. There are 49 separate low-income occupations in Delaware that require licensure, including cosmetologists and barbers. We agree with a recent report
from the Obama White House that states, licensing restrictions cost millions of jobs nationwide and raise
consumer expenses by over one hundred billion dollars.
We feel that a robust review of the necessity of these licensure requirements is due, but instead of offering legislation at this time, we have pledged to work with Governor Markell on the issue following his statement in the
State of the State address to focus on occupational licensing reform. We have already had productive conversations with the Governors staff and aim to continue playing an active role in that process, so that people at the
low end of the economic ladder have every opportunity to move up.

IDEA #4: PAY FOR SUCCESS FINANCING

As governments grow larger and larger, we tend to measure our performance by focusing on the amount of
money in the budget we direct at certain areas. Anti-poverty programs are regularly renewed and regularly see
increases based simply on demand and need. Rarely, if ever, do we focus on the measured outcomes of these programs. An ideal government would be one that focuses nearly entirely on the measured outcomes of programs.
The advent of Pay For Success financing and Social Impact Bonds represents a generational opportunity to revolutionize anti-poverty programs in Delaware.
Pay For Success (PFS) is an innovative funding mechanism underway in a handful of states that creates a
win-win-win environment that increases outcomes while eliminating risk on the part of government. In a PFS
program, private investors front the money for a Social Impact Bond directed at funding a program with specific measurable goals (i.e. reduce recidivism by 5% in four years). Should the program prove successful, the government then pays the investors with interest. The government carries no risk, and even after the interest is paid,
saves money. The investors, who are often large charitable foundations, shoulder the risk in exchange for financial rewards. If successful, they now have more money to put into the next program.
On February 16, 2016, both the Democratic Governor of Connecticut and the Republican Governor of South
Carolina announced PFS programs for their states, joining six other states and many counties and municipalities
who are exploring this innovative form of financing. Governor Malloys project in Connecticut will address drug
addiction, supporting new treatment teams delivering Family-Based Recovery (FBR) to families in need. Governor Haleys project in South Carolina is aimed at improving health outcomes for mothers and children living in
poverty through home-based nursing visits. Both projects are measurable and funded through a public-private
PFS formula.
Our legislation will create a Task Force to vigorously study this form of financing to pay for social programs. We
believe a focus on outcomes is the paradigm shift our state government desperately needs at this time. Innovation and big ideas like PFS are critical to making important changes as to how we govern in Delaware, but equally important are making minor changes that will greatly affect Delawareans, especially those in poverty.
We feel that recidivism is a significant contributor to persistent poverty, and an equally significant cost driver for

state government. Given that we know the cost of housing a prisoner, and therefore know specifically the cost
savings of anti-recidivism programs, we feel that this area would be an excellent starting point for PFS financing
in Delaware.

IDEA #5: CREATE A POVERTY HOUSING TAX CREDIT

One of the areas in which we can greatly improve the quality of life for Delawareans in poverty, and springboard
them toward a brighter future, is in housing. The lack of stable housing holds back the poor in measurable ways:
children perform worse in school; parents have trouble finding work with no mailing address; and families suffer
because they have no security.
While the government cant be all things to all people, there has been great success in the recent past by focusing
on housing. In fact, President George W. Bushs housing first program helped reduce chronic homelessness
by around 30% from 2005 to 2007. And in Delaware, we have a strong sector of nonprofits focused on housing
those who need it. Organizations like Milford Housing Development Corporation, our Habitat for Humanity
Chapters and others work with families to create permanent housing, and groups like Family Promise work to
provide temporary housing for those in immediate need. Weve seen the benefits that housing can have on ending multi-generational poverty, and these hardworking Delaware organizations are having a large impact.
We will create a $500,000 Poverty Housing Tax Credit modeled after the Neighborhood Assistance Act Tax Credit, which applies to those who provide neighborhood assistance both directly and by contributing to neighborhood organizations, to benefit individuals living in impoverished areas or low and moderate income families.
While housing is one category of need listed in the Neighborhood Assistance Act Tax Credit, we feel that the
importance of housing as a basis for reducing poverty justifies the creation of its own tax credit. The positive
impact on the budget that comes from permanently housing families greatly outweighs the temporary reduction
in state revenue.

IDEA #6: SCHOLARSHIP TAX CREDITS

Stable housing is critical for the here and now, but the most effective way to end multi-generational poverty is
through education. Increasing educational opportunities for our poorest children is paramount to their escape
from poverty.
One way to increase educational options for students in poverty is by incentivizing Delawareans to help those
students go to the school of their choice, whether that school is public or private. At least 16 states have some
form of scholarship tax credit, where an individual or an organization receives a tax credit for donating to a
nonprofit that funds scholarships for low-income students to attend private school. Delaware should be one
of those states. This legislation would create that tax credit, limited to $25,000 per individual or business and
capped at $1,000,000 total for the first year.

IDEA #7 WORKFORCE TRAINING REVIEW COMMISSION

While education is the key step to ending inter-generational poverty, not everyone completes the educational
process. Though some people emerge unskilled and with no degree, those Delawareans are valued members of
society with much to offer. For them, workforce training is a must, and it is critical that the training match the
jobs of today and tomorrow.
For many decades, we have layered program upon program, with very little focus on measured outcomes. In fact,
it is extremely difficult to even determine how many different government-funded workforce training programs
exist in Delaware. Therefore, the time has come for a review commission to study our workforce training programs with questions like these: Are our programs measurable? Are they being measured? How much duplication of programming is occurring? Are there areas of need that arent being addressed? Are programs training
for the future or the past? Can we provide better training for less money? The first step in reforming our training
is a full vetting of the information available. Our legislation will create a committee to study these and other
questions and make recommendations for actionable change.

IDEA #8 EXTERNAL TRAINING TAX CREDIT

In the modern era, training can be found in a multitude of places. Zip Code Wilmington teaches Delawareans to
code in Java in an intense, 12-week program. Students emerge from this program with vastly increased earning
potential, and the first class of the program resulted in 100% employment. Other programs exist throughout the
state that are both attainable and would immediately put a family on the path out of poverty. One example is the
Commercial Transportation Certificate program at Delaware Tech, which in a short time prepares individuals
to drive a commercial hauler a good-paying job that is in need in this economy. Our legislation would create
a tax credit for companies that pay for certified external training for long-term unemployed Delawareans whose
household income is beneath the poverty line. The credit would cover the cost of training up to $5,000, with an
annual cap of $1,000,000.

IDEA #9 APPRENTICESHIP TAX CREDIT

Sometimes the best training is not external, but exists inside the operation. On-the-job training that provides a
marketable skill is extremely valuable to both the employee and the state. Once a marketable skill is obtained,
the chances of an individual slipping back into poverty are considerably reduced. Our legislation would create
a $5,000 tax credit covering the first year of a newly hired apprentice who lives below the poverty line, has been
unemployed for six months or longer and/or is newly released from prison. The annual cap for the tax credit
would be $1,000,000.

IDEA #10 SEED FUNDING FOR NON-COLLEGE PROGRAMS

Another method of funding training would be to allow the states SEED (Student Excellence Equals Degree)
funding and similar programs to be used for certified training outside the walls of our states colleges and universities. As we stated previously, traditional education is a great path forward. However, there are plenty of
non-college programs that provide a marketable skill. Students at successful training programs like Zip Code
Wilmington should be eligible for state funding as well.

IDEA #11 CREATE A COTTAGE FOOD INDUSTRY

While workforce training is valuable, sometimes a person has the training they need, and has the entrepreneurial
motivation, but simply needs the government to get out of the way so they can unleash their talents directly into
the economy.
In 2012, California reformed their food regulations to create a cottage food industry, simply by allowing
non-hazardous food producers like bakers to use their home kitchens for production. As a result, 1,200 new
businesses and thousands of jobs were created. Our legislation would follow suit, allowing home producers to
operate with a license requiring that producers complete a food safety certification course and carry proper
amounts of insurance. This represents a wonderful opportunity for families, including those in poverty, to create
a side business and add income to the family budget. And over time, this initiative would increase the probability
that one of those home-based businesses takes off and becomes an employer of hundreds of Delawareans.

IN CLOSING
It is our goal to see Delaware become the lowest-poverty state by the year 2024, and we believe that action on
these agenda items will increase our chances to meet that goal while reducing government spending in the long
run.
In addition to the specific legislative items mentioned in this document, there are many other ideas that are not
actionable in the same light, but that are worth mentioning. This document is a beginning, not an ending. We
will continue the conversation as these bills are introduced and in the years to come. We look forward to robust
discussion with the rest of the General Assembly and the Governor, and stand willing to work together to move
this agenda forward. These low-income Delaware families deserve our best effort, and together we can make Delaware the First State in moving people from government-supported poverty to complete self-sufficiency.