A
State of Mind
A
"yes" vote for the statewide,
education-and-
parks
bond referenda this fall would speed Virginia's
transition to the Knowledge Economy.
For
the first time in our credit-sated memories,
“debt” has become a four-letter word. Having
incinerated trillions of dollars of wealth, Enron,
WorldCom and other ne'er-do-wells have discredited the
notion that indebtedness can be reconciled with
financial prudence. Given the parade of defaults and
defalcations in the corporate world, Virginia
voters might be forgiven if they do not warm to the
proposal, proffered amidst the worst state budget
crisis in a decade, to stoke up the Commonwealth’s
debt by another billion dollars.
But
I intend to vote “yes” this fall in favor of two
sets of general obligation bonds: one that raises
$900 million for higher education, and one that sets
aside $119 million for parks and conservation. The
bonds will make possible long-term investments in Virginia’s
future that the state cannot responsibly do without.
And despite short-term fiscal woes, Virginia
is fully capable of taking on the added debt without
endangering its coveted AAA bond rating.
In
a nutshell, my argument for the college bonds is this: In a globally
integrated economy, knowledge and the innovation
that springs from it are Virginia’s
only sustainable sources of competitive advantage.
Colleges and universities are founts of knowledge
and innovation. If we fail to invest in higher
education, we consign ourselves to a future of
mediocrity and economic stagnation. Slam dunk, end
of argument.
The
case for parks and conservation, though not quite as
compelling, is still strong. For an unsentimental
realist like myself, the park bonds aren’t about
protecting the birds and the trees – they’re
about enhancing Virginia’s
quality of life. It makes no sense to invest in our
educational system if we can’t make the state an
attractive place to live for the scientists,
engineers, professionals and other knowledge workers
who emerge from that system. They value recreational
amenities in a natural setting, and we should make
them available.
To
appreciate this argument, it helps to stand back a
bit and look at the big picture. In an integrated
global economy in which the manufacturing and
back-office functions of U.S.
corporations are rapidly migrating to China,
India
and other industrializing nations, how
can Virginia compete? Our companies can do it by
out-innovating their competitors: creating new
products, applying advanced technologies, and
deploying more sophisticated business practices. Our
can employees do it by outfitting themselves with
the skills companies need to make those things
happen. Regions can do it by stimulating R&D,
entrepreneurial activity and workforce development. That’s it. The only
alternative is to compete on the basis of cost – a
losing strategy when Third
World
nations will always have access to cheaper
labor,
cheaper real estate and, often, cheaper,
government-subsidized capital.
How,
then does
Virginia
nourish innovative companies and productive workers?
Several elements are essential, but of those that
can be influenced by government policy, two stand
out:
Stimulate research and development, and invest in
human capital. Colleges and universities are the
institutions where those things happen.
Increasingly, R&D in the U.S.
is being conducted in a university environment. And
only colleges and universities are equipped to
educate scientists, engineers, programmers and
professionals in large numbers.
In
a report released last week, the Milken Institute, a
Los Angeles-based think tank, published a “State
Scientific and Technology Index” that predicts how
well the 50 states are positioned to prosper in the
technology-intensive information age. The good news
is that Virginia
ranked 5th among all the states. The bad
news – which the report did not state outright,
but is evident to anyone who knows the Old Dominion
-- is that most of Virginia’s
information-technology assets reside in Northern
Virginia.
If Northern
Virginia
seceded, the Rest of Virginia might rank no better
than Kansas
or Missouri.
The
Milken report identified 73 indicators that fell
into five broad categories: R&D inputs, risk
capital and infrastructure, human capital
investment, technology and science workforce, and
technology concentration and dynamism. According to
authors Ross
DeVol, Robb Koepp and Frank Fogelbach, these
factors account for 75 percent of the variation in
per capital income across the 50 states.
“The elements that make a state or regional economy vibrant and
prosperous today are fundamentally different from
those in the past,” the authors write. “Some
states have been slow to recognize these changes or
to make the required transformation to participate
fully. States that don’t alter course quickly will
leave their economies and citizens ill prepared and
potentially devastated in the future.”
The higher
education bonds, if approved by voters, will
finance about 100 renovation and new-construction
projects in museums, colleges, universities and
community colleges across the state. James
Madison
University
will get a new center for the arts. The University
of Virginia
will erect a building dedicated to materials-science
engineering and nanotechnology. Old
Dominion
University
will renovate its chemistry hall. Danville
Community College
will construct a new maintenance building.
Virginia’s
universities are in no fiscal condition to undertake
these projects on their own. The Virginia Business
Higher Education Council contends that higher
education is already under-funded to the tune of
$200 million a year. Meanwhile, enrollments are
soaring. Higher ed resources will be strained even
more by the need for public colleges to accommodate
an estimated 31,600 additional students by 2010.
Compared
to other states, public universities in
Virginia
don’t get much help from state government,
according to the Higher Education Council. When Virginia
institutions are compared to their peers (as
determined by the academic programs offered and
research conducted), most rank near the bottom when
measured by state support per student. For example,
the University
of Virginia
belongs in a group of 15 public peer institutions;
13 received more state funding, only one received
less.
Virginia
Institution
|
Number
of
U.S.
Public Peer
Institutionsa
|
Virginia
Institution's
Rank
in State Support
per Student
|
George
Mason
|
23
|
23
|
Old
Dominion
|
24
|
21
|
UVa
|
15
|
14
|
VCU
|
20
|
13
|
Virginia
Tech
|
21
|
16
|
William
& Mary
|
9
|
7
|
Christopher
Newport
|
21
|
15
|
UVA
at Wise
|
7
|
2
|
James
Madison
|
20
|
18
|
Longwood
|
16
|
11
|
Mary
Washington
|
3
|
3
|
Norfolk
State
|
24
|
11
|
Radford
|
24
|
22
|
VMI
|
7
|
-b
|
Virginia
State
|
22
|
11
|
Community
Colleges
- Average
|
20
|
17
|
a
Number includes Virginia
institution.
b Four of VMI's seven peer
institutions are the U.S.
military academies that do not receive state
appropriations.
Source:
Virginia
Business Higher
Education Council
|
Admittedly,
these numbers may exaggerate the funding gap with
other states. According to the Milken Institute
report, Virginia
ranked in the second quartile of all states when
measured by state appropriations per capita for
higher education. That’s nothing to brag about,
but it’s hardly the portrait of parsimony painted
by the Higher Education Council. If Virginia
has an exceptional
number of quality schools which
measure themselves against prestigious peers, the
funding per institution may be lower because the
state is spreading its resources over more colleges
-- not because the state is austere in its overall
spending.
But
there’s no denying the second-rate status of
academic R&D in Virginia.
Although Virginia Tech, UVa,
Virginia
Commonwealth University and other schools have a
number of excellent programs, the total level of
research is third rate. Literally. The Milken
Institute places Virginia
in the third quartile of states ranked by
academic
R&D per capita.
According
to the 2002 edition of the “Top American Research
Universities,” published by University of
Florida-affiliated theCenter, Virginia’s
R&D champion, Virginia Tech, is ranked only 49th
nationally for total research. The University
of Virginia
ranked 56th.
There
is a world of difference between No. 1 and No. 49
– more than $700 million to be exact. The
top-ranked research university in the country, Baltimore’s
Johns
Hopkins
University,
racked up $901 million in R&D in 2000 compared
to Virginia Tech’s $193 million.
Virginia
Tech has publicly proclaimed a goal of becoming a
“top 30” research institution. Getting there
won’t be easy. North
Carolina
State
holds that position right now, with $278 million in
R&D. That means Virginia Tech needs to generate
an additional $85 million in R&D annually to
catch up – assuming
N.C.
State
stands still, which it won’t.
The
higher ed bonds will provide Tech with $72 million
in capital funding, including $40 million for a new
biology building, vivarium and engineering facility.
Tech will need to raise millions more in operating
revenue to hire top-notch research faculty, graduate
students and administrative support. The bond
proceeds represent little more than a down payment
for what the school needs to achieve its ambitions.
But
at least it’s a start.
The
park bonds, if approved, will be used to improve
Virginia’s
state parks and acquire nature preserves for the
protection of rare and threatened elements of
Virginia’s
natural heritage. The plan calls for using $41
million to purchase land for three new state parks,
11 existing parks and 18 natural area preserves. The
other $78 million will pay for construction and
repairs of cabins, trails, campgrounds and shoreline subject
to erosion.
Talk
about bang for the buck! Despite ranking 49th
in the country in spending per capita, Virginia’s
state park system has been recognized as the best in
the nation. In 2001, the National Sporting Goods Association's Sports
Foundation Inc. gave Virginia's Department of
Conservation and Recreation its gold medal. I’m
not worried about these guys squandering the money
we would entrust them.
Virginia
is blessed with abundant natural beauty. I’ve
personally enjoyed jogging and biking in the False
Cape
State
Park,
one of the most spectacular natural wetlands remaining on the East Coast. I’ve
also marveled at the Breaks
Interstate
Park
on the
Kentucky
border, site of the deepest canyon east of the Mississippi.
There
are many sentimental reasons for upgrading our park
system, but there are practical ones, too. In his
analysis of the “creative class” -- the artists,
professionals and technical gurus who drive the
knowledge economy – economic developer Richard
Florida noted that creative people value outdoor
activities such as bicycling, jogging, kayaking and
even extreme sports such as trail running and
snowboarding. Such people are drawn to communities
where outdoor activities are prevalent, “both
because they enjoy these activities, and because
their presence is seen as a signal that the place is
amenable to the broader creative lifestyle.”
Members
of Florida’s
“creative class” are highly mobile. They choose
to live in communities that offer the lifestyles and
recreational opportunities they desire. As Virginia
positions itself as a leader in the knowledge
economy, it must invest in the amenities that
creative people partake in, or risk seeing them move
to communities more to their liking.
Make
no mistake, the college and parks bonds are
long-term investments in Virginia's competitiveness
and quality of life. The bonds will provide little
immediate stimulus to Virginia’s
wheezing economy. Pam Currey, deputy secretary of
finance, says she expects the bonds to be issued
over a seven- to eight-year period as the money is
needed to bring the parks and college projects
online. It’s a great time to borrow, with
municipal rates below 5.0 percent. The annual debt
payment would peak around $87 million, about 0.7 percent of current
General Fund revenues.
The
$1 billion in bonds are well within the range of
$1.26 billion that the state can issue biennially in
tax-supported debt, according to the December 2001
Debt Capacity Advisory Committee. The long-term
structure of the bonds is appropriate to the
long-term life of the physical assets they’re
paying for. Despite its short-term fiscal woes, Virginia
is fully capable of taking on the added debt without
endangering its coveted AAA bond rating.
Unfortunately,
Voters may be in a querulous mood this fall. The
state budget crisis seems to deteriorate weekly.
Meanwhile, the regional sales tax referenda in
Northern
Virginia
and Hampton Roads are engendering strong anti-tax
movements in those regions. If large numbers of
people in both those populous regions show up at the
polls this November to vote against the tax
increases, their ire may know no bounds That would
be a shame because the colleges-and-parks bond
proposals are vital for Virginia’s
transformation to the Knowledge economy.
--
Sept. 23, 2002
|