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Q&A: Delaware Gov. Jack Markell

On industrial policy, corporate tax cuts, preschool and prison aid

Half of the 50 States have Republican governors and legislatures. Delaware is one of just six that are run by Democrats. (The rest of the states are split.)

Though he holds the state's top job for its dominant party, Delaware Gov. Jack Markell won the governor's house in Dover the hard way: Raising money from past donors to Joe Biden and Ed Rendell, the former Novell and Comcast executive beat a party-backed candidate (John Carney, the ex-U.S. Rep. who will finally succeed Markell next month), and took office just in time for the 2008 recesssion.

Five locally-based companies (DuPont, MBNA, Wilmington Trust, Delmarva Power, Hercules) that dominated downtown Wilmington have all been merged and downsized in recent years; the state's two auto assembly plants, its lone steel mill and oil refinery, all shut down; even its major drug company, AstraZeneca, has demolished research labs and sold half its campus.

Markell responded to mergers and closings in part with an aggressive industrial policy, which didn't always work. His administration subsidized a new owner who reopened what is now the PBF Refinery in Delaware City, and cut corporate taxes to induce DuPont Co. and Dow Chemical to site two of their three planned successor companies in Wilmington, at least at first.

On the other hand, under Markell the state spent millions on the proposed Fisker electric car plant that fizzled; backed a giant data center the University of Delaware blocked; has pushed land acquistion and clearance policies along the Delaware that have yet to attract new employers; and forced electricity prices higher by making consumers subsidize the "Bloom Box" factory, which has failed to generate promised jobs.  

Still, scared by the recession, Delaware business leaders, and even rival Republicans on occasion, justified some of Markell's efforts to "do something." 

The Governor gave me an hour in Wilmington earlier this week to review his legacy; questions have been edited, and some answers shortened, for clarity.

Will Delaware ever replace its lost corporate jobs? Actually, we already have. Just in the past year, our growth is now above the 2010 (recession) baseline. Since that year we are leading every state, both for (proportional) job creation, and labor force participation. Big picture, we are doing well. (Federal data shows Delaware with around 475,000 jobs, up from a peak of 447,000 before the recession and 430,000 at its worst. Compare to U.S. data here.)

 You lost a lot of high-end research and management jobs at DuPont and AstraZeneca. Have you gained other quality jobs, or are the new positions more in places like the Amazon warehouses in Middletown and New Castle?  This is broad-based. There are people who have (left DuPont R&D) and are starting their own companies. The real credit goes to the entrepreneurs and the business leaders who have put in their sweat equity. Government's role is to make sure they have the right environment here, they don't have to leave.

My world view is there are two major factors in force on our economy. First, employers have more choices than ever about where to hire people. When I grew up here, we were entitled... (the U.S. and the West) as where jobs went. But now employers have the whole world to choose from. That has huge implications.

And, as a result of automation, employers need fewer people...

We have plenty of employers in Delaware today. They produce a lot more than 10 years ago. But with fewer employees [per employer].

So what do we do about it? We invest in skills. You could make a pretty good argument that there's never been a better time to be somebody with the right skills. And there's never been a worse time to be somebody without skills.

So we created a program, three years ago, Pathways to Prosperity. We're putting high school students into hundreds of hours of classes at Deltech or in college. They are working toward recognized certificates that prove they can do a job. We started that first year with 27 students. This year we have 6,000 participating.

You're training them for what, factory jobs? We started with manufacturing. Now we also have bioscience, computer programming, culinary, allied health, general science.

We asked the question -- why do so many kids drop out of high school? And we looked at the problem. And we found, a lot of the drop-outs are intelligent. A lot of them think what they are learning isn't relevant to the rest of their lives. With this program they can see the relevance.

Delaware has lost its big independent banks, Wilmington Trust, MBNA, First USA... We have a dynamic financial sector. MBNA is now part of Bank of America, they have 7,000 people. JPMorgan (which includes the former First USA) has 10,000. Capital One (succeeds the former ING Direct Bank) has close to 3,000. Citi is 2,000 plus, they're doing very well. Barclays has 1,500.

Now, that's still not DuPont. I grew up here, I know at their peak they had 30,000 people. They are close to 5,000 now.

You gave DuPont a major corporate tax reform -- lower rates -- foregoing tens of millions in future state revenues, to keep what's left here...  We made major moves to simplify. We had to lower the gross-receipts tax on manufacturing.  We got rid of what was a real disincentive -- that the more you invested and the more people you had, the more you would pay.  And we extended our R&D tax credit.

They would have shut down and moved away, really?  The Experimental Station is so expensive to run just for one company. With two they can share the expenses. They would like to get more companies in there.

So when I met (DuPont CEO) Ed Breen last year, about staying in Delaware, I said we wanted to help reposition the Experimental Station (as a facility attractive to other scientific tenants.) We're trying to make lemonate out of lemons.

DuPont laid off 1,700 in Delaware last winter, with more layoffs ahead... Maybe one-third were ready to retire. A third were pretty quickly picked up by other companies -- through the Delaware Bio Association, through the job fairs.

And there's another bunch, who have a lot of ideas. We have been focused on them from the first day they become available. That's where W.L. Gore (the Gore-Tex maker) came from. Ideas people had at DuPont but maybe couldn't get developed there.

You were in Switzerland, you've been to South America, you just got back from India. What does the state gain from your travels?  I don't think Donald Trump agrees with this: A lot of wealth is being created outside this country. Our job is to make sure the people of Delaware benefit from that wealth created elsewhere (through port development, attracting foreign investors and other trade-based projects.)

Is there enough capital in Delaware to support would-be DuPont spin-offs? Don't they typically relocate to bigger places? Money can cross state borders as well as national borders. There's plenty of money up in Wayne, Pa. You'll be hearing more about partnerships between DuPont, U.D., the state and others.

And remember we also have some promising growth companies, like Incyte (biomedicine) in Wilmington...

There are probably 20 financial tech startups in Wilmington alone. Like Joe DiPaulo, he used to work for Al Lord at Sallie Mae, he's raised $10s of millions (from Comcast and other investors). His company is College Avenue Loans, he's got 30 employees down here so far, in the old I.M. Pei building. It's an affordable place to do business. We have affordable talent.

Look, when I used to go to a tech investors' event in Delaware, for years it was the same people. Now it's a lot bigger crowd, and a lot of people I never met.

A lot of Coastal Zone land is being primed for redevelopment -- the old Claymont Steel site, the old DuPont Edge Moor plant, Deemers  Beach in New Castle. Won't energy companies, won't port managers and chemical companies, want Delaware to loosen environmental regulations so they can 'bring back jobs?'

The jobs we have, they are cointinuing to pay well. Our private-sector wage growth, check the data, it has been among the best in the country.

AstraZeneca cut back; we had JPMorgan expand into their property. We worked with them (Delaware gave JPM job-training and hiring grants).

Three years ago, I called all the local leaders of the financial services in Delaware and some of the other tech employers. I asked,'How do you recruit talent?' And they said, 'We recruit from each other!'

Well, that's a lousy recruitment strategy.  I talked to Ben (du Pont, a local investor and Longwood Foundation director, whose father, Pierre S. "Pete" du Pont IV, was Delaware's Governor in the 1970s). Ben's idea was to get the employers to cooperate on a project he was developing -- a Coding School -- he had to explain to me, that's a whole educational environment, that teaches people with no particular background in math or science how to work with computer programming languages and double or triple their wages from retail and maintenance type jobs.

So I got back on the phone with two dozen Delaware employers and asked, 'How many coders do you have, and how many do you need, and what languages do you need?' And I tried to convince a California coding school to open here... The guys in California were not interested. So we got the state to kick in $250,000.  Ben and his friend Porter and (bank executive) Jim Stewart took the lead, they hired the teachers and found the space and recruited the students.

The result is Wilmington's Zip Code Academy, which graduates a couple dozen new coders every few months.   It's not a state-run entity -- and it shouldn't be. Ben would say our assistance helped get it off the ground.

I'm not prepared to compete with my arms tied behind my back. I knew where DuPont could go if it moved (the planned pesticide and seeds spin-off) to Indiana. I know JMPorgan could expand in Ohio, or in Arizona.

You've put federal aid and state money into preschool, forcing daycare agencies to add teachers, bathrooms, teaching protocols. 

Six years ago 5 percent of Delaware low-income students were enrolled in 'highest-quality' early childhood centers. Now it's 70 percent.

So, the Federal Reserve Bank of Minneapolis has done significant research on this.  They've concluded the most effective economic development investment is preschol.

Instead of giving money to companies... We would be so much better off investing the money in workforce develpment and quality of life. That's how we ought to compete.

So why don't states concentrate on the basics and stop direct subsidies and special tax breaks? The leverage has certainly shifted to the employers, big or small. You have to differentiate yourself, particularly whe you're a small state. You have to show a can-do attitude. Which means, cash...

If you measure it on party registration we're doing better than we've ever done.

Until 1998, we were a bellwether State. We are less (typical of the U.S.). now. We've been reliably Democratic, especially in Presidential years.

But as Democrats we are not entitled to anything. We have to deliver. Hopefully we'll continue to build on it.

In talking to State Sen. Greg Lavelle, the Republican leader, often he criticizes you on many points, but supports your position on others, particularly on activit economic development. Is Delaware less partisan than the nation generally? 
This is Delaware. I run into Greg sometimes at the grocery store. There's this expectation by our voters -- they could care less if they're Democratic issues or Republican issues.

After you leave office, are you going back to a corporate job? 
Nobody has called me up and offered me. Nobody's talked to me.

A little early for that? Conflict-of-interest time?
I am very fortunate. I've loved being governor. It's been phenomenal. I've been very happy doing these things.

But you know, my phone is not ringing off off the hook. If it were, I couldn't talk to them about a job, not now.

Anything Delaware is doing that's unexpected? Language immersion. We've got 3,000 students. 10 pct of the state's kindergarteners, learning Spanish or Chinese. We're adding schools and grades.

That's a bipartisan issue, also. People told me we would have to put money into starting a new prison. I said No.... A lot of the women in our prisons have never been convicted of a crime; they are pretrial detainees. They don't all need to be in prison. We've borrowed a New York program where people who have not previously been in prison are connected with services to make sure they meet their court dates without having to be under supervision.... We've expanded workforce training, transportation, substance abuse, drivers' licenses...Our prison population has dropped by 240, which is a lot, given our size.