Category Archives: Budget

FY 2016 Budget Outlook: Surprisingly Fragile

VRS_portfolio

Distribution of Virginia Retirement System portfolio, March 2015. Image credit: VRS.

The stock market correction has frightened the bejeebers out of investors large and small — and it ought to frighten the bejeebers out of state and local governments, too. As John Rubino, publisher of DollarCollapse.com, noted yesterday, falling stock prices will reduce the capital gains that have been fueling rising income tax revenues for state and federal governments. Writes Rubino:

A bear market-related sell-off in capital gains would cause a double crisis, cutting pension fund investment returns (and thus raising the level of underfunding) and cutting tax revenues, diminishing states’ ability to even keep up with their current pension funding schedule.

Progressive income tax rates are fun when asset prices are rising, as the Federal Reserve Board has engineered them to do with its near-zero rate interest policies: States reap an income tax bonanza in capital gains taxes. But they are a disaster when assets prices tumble and capital gains take a dive.

Virginia isn’t as vulnerable as some states, which rely more heavily upon income tax receipts. But the individual income tax is the largest single source of revenue for the General Fund. The commonwealth closed fiscal year 2015 in June with a $553 million surplus, which Governor Terry McAuliffe attributed mainly to a surge in individual income tax revenue, which increased 8.1%, ahead of the 4.7% forecast. Most of that increase came from people cashing in capital gains from the stock and bond markets, not from rising wages and salaries. With the stock selloff, a repeat of that performance is highly unlikely. Fortunately, the budget assumes only a modest increase in individual income taxes this year, so the exposure is modest.

Less visible is the Virginia Retirement System’s exposure to falling equity prices. As of March 31, 2015, 21.4% of the VRS investment portfolio consisted of domestic equities. Another 16.5% consisted of non-U.S. equities — it would be interesting to know how much of that was invested in China, whose stock market meltdown has been cataclysmic. Another 3.6% was in emerging market debt, which is looking shakier and shakier as developing-nation economies take a beating from falling commodity prices, while another 4.8% was held in unspecified “emerging markets” assets.

In 2014, the VRS generated a 15.7% return on its investment portfolio, driven mainly by strong performance in its equity investments — and far above the 7% annualized return the VRS is aiming for. Given the state of U.S. and global financing markets today, it will take a minor miracle to meet that 7% goal this year. Of course, that’s only one year. Stock prices go up, stock prices go down, then they go back up again.

But Virginia faces another round of sequestration-driven cuts to the federal government, and the state economy will struggle to grow. Given the fact that we’re in the sixth straight year of a national economic expansion, our economic and budgetary outlook is surprisingly fragile.

— JAB

More Sequestration Pain for Virginia

pentagon_burning

Pentagon burning

by James A. Bacon

The pain of federal budget sequestration cuts in Virginia is not yet over. Look what The Washington Post reports today:

According to the Defense Department research, things are likely to worsen over the next four years. From 2010 to 2012, Virginia experienced $9.8 billion in defense cuts, with the vast majority of losses in Northern Virginia. Direct defense spending in the state is projected to drop from $64 billion this year to under $62 billion in 2019.

That’s only $2 billion in cuts compared to $9.8 billion previously. That sounds bad but not that bad. Actually, it is, says Sen. Mark Warner, D-Virginia: “If we have the return of sequestration, it’s going to be even worse than it was a couple of years ago, because every agency, particularly the Defense Department, has cleared out most of their coffers.”

I’m not sure exactly what “cleared out their coffers” means, but I’m guessing it means that defense agencies have burned through their budget gimmicks and are planning real cuts.

Adding to the woes, the impact of federal budget cuts will percolate through the rest of the economy. As government contractors consolidate, they’ll need less office space. That puts pressure on lease rates region-wide, there will be less construction work, and the necessary process of restructuring from inefficient and expensive land-use patterns to more cost-effective patterns will drag out. Meanwhile, transportation planning assumptions, predicated on wildly out-of-date assumptions about growth and development, will veer farther and farther from reality.

The rule is so simple: Things that can’t go on forever… won’t. The defense spending boom of the post 9/11 era could not continue forever… and it didn’t. The downturn and all the ugly consequences stemming from it were utterly foreseeable — I’ve been ranting about them for years.

I don’t lose a lot of sleep over real estate developers losing a fortune. They’re big boys and they know how to hedge their bets. (If they don’t, they shouldn’t be in the business.) I’m a lot more worried about the state and local government sinking billions of dollars on infrastructure designed for the go-go 2000s. It is astonishing to me that serious consideration is still being given to the Bi-County Parkway near Manassas, and I have serious questions about the assumptions underpinning the billions of dollars of improvements planned for Interstate 66 and the second leg of the Rail-to-Dulles project. Any project whose revenues are predicated on assumptions of increased traffic, which are based on the 2000s-era economic growth rates extended in a straight-line projection forever, will create nothing but headaches for taxpayers.

Capitalism Triumphs Again!

RAM clinic, Pikesville Ky., June 2011. Photo by Scott Elmquist

RAM clinic, Pikesville Ky., June 2011.
Photo by Scott Elmquist

By Peter Galuszka

If there were any questions about just how capitalism has failed, one need look no farther than Wise County, where, this week, hundreds, if not thousands, of people will line up for free medical care.

The event is ably noted in The Washington Post this Sunday by a young opinion writer named Matt Skeens who lives in Coeburn in the coalfields of southwestern Virginia.

This week, the Remote Area Medical clinic will come to the Wise County fairgrounds to offer free medical and dental care to anyone who needs it.

You might ask yourself a question: why do so many people in one of the parts of the United States that is fantastically wealthy with natural resources need free medical care? Where is the magic of capitalism so often lauded on this blog?

A few insights from Mr. Skeens:

“Local representatives of Southwest Virginia will travel to the fairgrounds to stand on a coal bucket and assure us they’re fighting against President Obama and the ‘war on coal.’ These politicians won’t mention that with their votes to block Medicaid expansion, they ensured that the lines at RAM won’t be getting any shorter. But hating Obama in these parts is good politickin.”

Skeens runs through a list of mountain folk who can’t afford health care. One is a breast cancer survivor who hasn’t had a screenings in years. His grandfather, a retired electrician and coal miner, had also camped out at RAM clinics to get help.

Odd that this is the way I found neighboring West Virginia when I moved there with my family from suburban Washington, D.C. in 1962. Just as it was then, the riches that should have helped pay for local medical care went out of state. Much of the coal left by railcar or barge. Now, natural gas released by hydraulic fracking will find its way to fast-growing Southeastern cities or perhaps overseas thanks to new proposed pipelines such as a $5 billion project pitched in part by Dominion Resources.

While I have never been to the Wise County RAM clinic, I did happen to drop by one in Pikesville, Ky., a coalfield area that is one is Kentucky’s poorest county. It is not far from Wise. I was busy researching a book on Richmond-based Massey Energy, a renegade coal firm, in June 2011.

Photographer Scott Elmquist and I were on our way from Kentucky to an anti-strip mining rally in West Virginia when we noticed the RAM signs. More than 1,000 people had started lining up at the doors around 1:30 a.m. at the local high school.

It was packed inside. A Louisville dental school had sent more than 50 dental chairs that lined the basketball court. Some of the patients said they were caught in a bind: they had jobs but didn’t have enough health coverage and couldn’t pay for what they needed.

Since then, there’s been some good news. Unlike Virginia, whose legislature has stubbornly refused to expand Medicaid to 400,000 residents who need it (supposedly in a move to tighten federal spending), Kentucky expanded Medicaid last year. Now, 375,000 more people have health insurance.

Not so in Virginia. People continue to suffer while those with comfortable lives laud the miraculous benefits of capitalism.

Another Idol Has Fallen: Virginia’s Fiscal Condition Not So Great

Virginia state finances -- not the gold standard we thought.

Virginia state finances — not the gold standard we thought.

by James A. Bacon

Once upon a time, Virginia was widely regarded as the Best State to Do Business. No longer. That reality is slowly making an impression in government and economic development circles, and I sense a growing awareness that Virginia can’t continue doing things the same way it always has.

Virginia also has long enjoyed a reputation for fiscal rectitude, due mainly to its AAA bond rating, the maintenance of which is a bipartisan priority. However, Virginia’s fiscal solvency is slipping, too — and the problem runs deeper than temporary problems caused by cutbacks in federal spending. I don’t get the sense that this reality is yet sinking in.

In research for George Mason University’s Mercatus Institute, “Ranking the States by Fiscal Condition,” Eileen Norcross rates the financial health of U.S. states in FY 2013 based on short-and long-term criteria. Virginia ranks only 21st on the list, lagging Alabama and South Carolina, among other states. (For those on Boomergeddon watch, the states with the most precarious finances are New York, Connecticut, Massachusetts, New Jersey and, of course, the U.S. poster boy for fiscal irresponsibility, Illinois.)

The key insight here is that balancing the budget is only one measure of fiscal health. “State spending may be large relative to the economy and thus be a drain on resources,” writes Norcross. Also, she adds, “The state may define budgetary balance to exclude certain funds or to mask debts, thus obscuring the true cost of spending or the resources required to finance long-term obligations.”

The report compiles five measures of financial strength:

Cash solvency. Can the government pay bills that are due over a 30- to 60-day horizon? On average, the states have a ratio of cash to short-term liabilities of 2.3 to one. Virginia ranks 30th most solvent by this measure.

Budget solvency. Can the state government meet its fiscal year obligations? In other words, are revenues running ahead of spending? Virginia’s capacity by this measure ranked 29th nationally.

Long-Run solvency. This ratio represents the proportion of long-term liabilities — bonds, outstanding loans, claims and judgments, compensated employee absences — relative to total assets. Virginia ranks 27th by this measure.

Service-level solvency. This measure captures how much “fiscal slack” states have by measuring the size of taxes, expenses and revenues relative to state personal income. It is a general measure of whether a government  has room to raise taxes or increase spending. Virginia ranks 5th — the only measure it which it stands out as being in solid shape.

Trust fund solvency. The final measure factors in long-term obligations such as long-term debt, pension obligations and other post-employment obligations (such as health insurance for retirees). Virginia ranks 15th by this measure.

(Hat tip: Tim Wise)

Disgraceful

Richmond City Hall

Richmond City Hall

by James A. Bacon

Fiscal Year 2015 in Virginia came to a close yesterday but the City of Richmond still had not filed its Comprehensive Annual Financial Report (CAFR) for FY 2014, reports the Richmond Times-Dispatch. The report provides an audited overview of revenues, spending, assets and debts critical to appraising a locality’s financial condition.

The City of Richmond is one of only three localities still to have failed to issue the report, the filing deadline for which was seven months ago. With a population of 218,000, Richmond is by far the most populous of the three, which includes poverty-stricken Wise County (pop. 40,000) and the town of Dumfries (pop. 5,100).

“A ten-month delay for something that should be a basic function of government is unconscionable,” said City Councilman Jonathan T. Baliles. “This is what happens when you ignore the fundamentals of government.”

City officials, reports the TD, have cited employee turnover, a lack of training and challenges in implementing a new financial system as reasons for this year’s delay. In other words, city officials blame dysfunctional management.

The problems did not materialize overnight, however. The city issued emergency procurement documents for outside help from an independent consultant to ensure timely completion of the 2013 CAFR. Payments to that consultant have risen from an anticipated $95,000 to $295,000 under  March contract extension.

Shortly thereafter, the city’s auditing firm, Cherry Bekaert, fired the city as a client. According to the TD, partner Eddie Burke cited “a high-risk, dysfunctional working environment that ‘has continually gotten worse every year.'” Ask yourself: How bad did the situation have to be for a midsize CPA firm to turn down a $320,000 annual contract?

Bacon’s bottom line: As Baliles says, balancing the books is fundamental. Add this failure to a string of other spending and administrative scandals over the past few years, and it seems pretty clear that government in Virginia’s capital city is a mess. It wasn’t always this way. Long-time residents remember when Robert C. Bobb ran the city in the 1980s as one of the most effective city managers in the country.

Ultimately, it is the responsibility of one person — the mayor — to ensure that the city functions properly. While Mayor Dwight C. Jones is good at striking the right rhetorical chords on a variety of issues, he has proven ineffectual as an executive.

I admire Jones’ response to the controversy over the Confederate flag and other symbols of the Confederacy, including the statues along Monument Avenue. “Rather than tearing down,” he said recently, “we should be building up in ways that establish a proper sense of balance and fairness by recognizing heroes from all eras to tell a richer and more accurate story of Virginia’s history.” Those are the words of a uniter and a healer, not a divider.

But I’m concerned that Jones doesn’t have much interest in the nuts and bolts of government. Perhaps that is understandable considering that he has divided his time between his responsibilities as mayor, Senior Pastor of First Baptist Church and for a year, chairman of the Democratic Party of Virginia. But when he does focus on his mayoral duties, instead of making sure the trains run on time, Jones has promoted high-profile projects like the Shockoe Bottom baseball stadium, the Washington Redskins training park and the World Road Cycling Championship.

Private investors are pouring money into the city. What most of them want to see, however, isn’t wheeling and dealing that rewards a privileged few. They want to see a city that does the things that cities are supposed to do. Like close out the books on time.

Richmond’s Pathetic Leadership

At the Diamond

At the Diamond

By Peter Galuszka

Richmond is going through an existential crisis. Its “leadership” can’t get anything done after wasting the public’s time and attention on the supposed possibilities of this so-called “Capital of Creativity.”

Two examples come to mind. One is the city’s and region’s utter failure to do anything about its crumbling ballpark. The other is wasting everyone’s time on pushing an independent children’s hospital and then having VCU Health and Bon Secours pull the rug out from everyone.

Mind you, you hear ramblings out the wazoo about how Richmond is all about “regionalism” and how the “River City” is just a dandy place to live. One of the worst offenders is Bacon’s Rebellion, which shamelessly crams Richmond boosterism down readers’ throats.

But what really sets me off is a full page and unabashedly revisionist editorial in this morning’s Richmond Times-Dispatch titled “Ballpark in the Bottom? Definitely not.” The writers claim they “having listened carefully, and at great length, to all sides, we have become convinced a proposal that seemed promising at first is fatally flawed.”

Yipes! This comes after a couple years of the newspaper’s flacking Mayor Dwight C. Jones’ dubious plan to put a new $67 million stadium in historic Shockoe Bottom for the city’s Minor League AA team, the Flying Squirrels, rather than refurbishing or replacing the crumbling Diamond on the Boulevard near the strategic intersections of Interstates 64 and 95.

TD Publisher Thomas A. (TAS) Silvestri, the one-time and obviously conflicted chair of the local chamber of commerce, pushed the Shockoe idea because that was the flavor of the month with parts of the Richmond elite, including some developers, the Timmons engineering group, the Jones regime and others.

It was a bad idea from the start and had been shot down before. The Bottom has no parking and is too cramped. Even worse, it would disturb graves of slaves and other reminders of the city’s darker past such as being the nation’s No. 2 slave trading capital (this is before the “creativity” part).

The AAA Richmond Braves hated the Diamond so much that they bolted to a new stadium in Gwinnett County outside of Atlanta in 2009. A new team associated with the San Francisco Giants decided to move in. The Flying Squirrels have been an outstanding success and in the five years they have been here, their team has drawn more fans than any other in the Eastern League. In fact, their stats place them among the best draws in all of minor league baseball.

But the Squirrels had been led to believe they would get new or greatly improved digs. Instead of focusing on the Diamond (which has ONE elevator for the sick and elderly and it often doesn’t work). A couple of weeks ago, Lou DiBella wrote an open letter to the community noting that nothing has happened. Their deal with the city end next year, raising the issue of whether they will bolt as the Braves did.

Squirrels owner DiBella

Squirrels owner DiBella

I did a Q&A with DiBella for Style. Here’s how he put it:

“We have been a great asset for the whole Richmond region. Where am I looking? I’m not trying to look. You want me to look, tell me. I want to create a dialogue. I want people to be honest and open and candid right now. If you’re going to screw around with us the same way you did with the Braves, the way Richmond did under false pretenses, and there’s no chance of any regional participation or the city being creative in building a stadium — let me know now because I do have to start thinking about the future.”

He has a point. Richmond did screw around with him. Chesterfield and Henrico Counties did, too. The Squirrels get most of their spectators from the suburbs but their political leaders don’t want to spend anything to help. They neatly got off the hook when they conveyed the Diamond from the Richmond Metropolitan Authority, of which they are members, to the city exclusively.

The Jones administration, meanwhile, wasted everyone’s time (except that of the Richmond Times-Dispatch) by pushing the Bottom idea. The business elite sponsored trips for so-called local leaders to fly around the country and look at other stadiums.

Then, nothing. A development firm called the Rebkee Co. came up with a plan to build a new stadium near the Diamond with private funds. But the city refused to even review the plan. They did not accept formal written copies of the idea.

The Jones team did manage to come up with a summer practice area for the Washington Redskins that is used about two or three weeks a year. It hardly draws anything close to what the Squirrels do, but they had little problem pushing with their idea.

Bill Goodwin

Bill Goodwin

Next up is a stand-alone children’s hospital, an idea backed by a group of pediatricians and Bill Goodwin, a wealthy philanthropist and one of the most powerful men in Richmond. He and his wife pledged $150 million for the project and many, including the RTD, talked about it to death. Goodwin’s idea would be to create a world class hospital on the level of the famous Childrens Hospital of Philadelphia.

Then, without warning, non-profits VCU and Bon Secours health system pulled the rug out from under Goodwin and everyone else. They said an independent children’s hospital wasn’t needed, there was no market for it and pediatric care is moving more towards out-patient service, anyway.

The real reason, says Goodwin, is that a stand-alone children’s hospital would mean that other local hospitals would have to scale back their money-making pediatric units.

Also for Style, I asked Goodwin for his thoughts. He was flabbergasted at shutting down the idea without warning. He said:

“We were planning for an independent children’s hospital that was regional and would provide more comprehensive coverage than what VCU and Bon Secours are currently providing. This effort would have been a heck of an economic driver for our community and would provide significantly better medical care for children. Better medical education and research were also planned. We would be creating something that was creating good jobs, and it would be something that the community would be proud of, which we haven’t had recently.”

So there you have it, sports fans – a moment of truth. With its current leadership, Richmond couldn’t strike water if it fell out of a boat. You know it when the editorial writers on Franklin Street start revising history.

The Volcker Alliance Appraises Virginia’s Budget

virginia_finances

Source: “Truth and Integrity in State Government”

by James A. Bacon

Critics of Virginia’s state constitution often point to the one-term limit for governors as a source of dysfunctional governance. The state’s chief executives have little time to put their imprint on policy and the budget before they’re gone. But it is precisely that term limit — and the resulting shifting of budgeting power to professional budget and finance officials — that the Volcker Alliance points to as a strength of Virginia’s budgeting process.

“Professional budget and finance officials in Virginia tend to last through multiple administrations, while governors are barred by the state constitution from serving a second consecutive four-year term and thus have relatively limited influence over the biennial budget cycle,” states the Volcker Alliance report, “Truth and Integrity in State Budgeting.” As a consequence, the report summarizes, Virginia has a budgetary policy “that is more administrative than political.”

The Volcker Alliance, launched in 2013 by former Federal Reserve Board Chairman Paul Volcker, praises Virginia’s budget process overall, although it does note some areas where it could stand improvement. The study provides an in-depth look at the budgets of California, New Jersey and Virginia as part of an ongoing effort to shine a light on opaque and confusing budget practices and encourage best budgeting practices. Among the study’s main observations of the Virginia budget:

Revenue forecasting. Revenue forecasting is a strength of the Virginia budget. Forecasts are based upon input from the Joint Advisory Board of Economists and from the Governor’s Advisory Council on Revenue Estimates, two statutorily established panels. “While the practice does not guarantee more-accurate forecasts,” the study states, “its wide range of inputs allows political leaders to focus more on the debate about expenditures than on a debate about the level of revenue.”

In actual practice, the  forecasts missed the downturn in state income tax revenues stemming from a downturn in capital gains income when president George W. Bush’s tax cuts expired in 2012. But the system recovered fairly quickly.

Either because it was late in the budget process or because the governor was unwilling to re-estimate revenue by year-end, the fiscal 2015-2016 biennial budget was not adjusted downward for $1.55 billion in diminished revenue expectations ($950 million in 2015 and $600 million in 2016). Still, the so-called money committees — House Appropriations and Senate Finance — subsequently adjusted appropriations to address the expected shortfall. Their actions included zeroing out most discretionary spending increases and preparing to tap the Revenue Stabilization Fund, the state’s rainy day fund, if needed.

Borrowing. Maintaining Virginia’s AAA credit rating imposes a “powerful discipline” on policy makers. “Total borrowing is limited by how much the state has received in the last three years from income and sales taxes. Virginia avoids using bond premiums for its general fund; leaders instead use the proceeds to reduce borrowing.”

Transferring revenues and costs. Not so admirable was Virginia’s use of an accelerated sales tax program in 2009 that obligated many businesses to prepay a year of expected levies — an initiative the state has yet to fully reverse. The state also allows for transferring costs from one fiscal year to the next within the biennium.

Pension funding. While Virginia fell way behind it its pension funding, it has been aggressive in recent years to restore the Virginia Retirement System to fiscal health.

The pension is underfunded compared with other states, with actuarial assets only 65% of liabilities in fiscal 2013 — the legacy of years of underfunding. Wilshire Consulting estimates that the funding ratio for state funding plans nationwide was 75 percent in 2013, up from 72% in 2012. (By 2014, the estimate of the funding ratio had risen to 80 percent.)

While Virginia has historically not paid the full amount that actuaries recommend for the annual contribution, it is moving toward full annual funding. The General Assembly has put itself on a schedule to increase funding each year until it hits 100 percent of the recommended contribution in fiscal 2019.

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Who Are the Real Fiscal Conservatives?

Source: "Truth and Integrity  in State Budgeting"

Source: “Truth and Integrity in State Budgeting”

Paul Volcker is one of the real heroes of the modern economic profession. During the late 1970’s and early 1980’s he conquered the “Great Inflation” by taming the growth of the money supply. Interest rates rose to levels unprecedented in modern American history. During my time in charge of cash management at AIG, I bought and sold money market securities yielding 20%; today similar instruments yield less than 1%. His efforts led to President Ronald Reagan’s “Morning in America” and a renewed attention to monetary policy. His success, as painful as it was,  gives him lots of “street cred.”

The Volcker Alliance recently published an analysis of the budgets in three states:  California, Virginia, and New Jersey.  The results will be surprising to many.  He gives kudos to California and Virginia, and holds a dim view of New Jersey, home of Republican presidential wanne-be, Chris Christie.

Standing alone, California would be the world’s eighth biggest economy with domestic output equaling US$2.1 trillion. Under Democratic Governor Jerry Brown, the Golden State’s credit ratings have been raised multiple times by the rating agencies.  Under his leadership,  voters have approved some temporary tax hikes, increasing budget reserves and improved funding for pension liabilities of teachers and other government employees.  According to Volcker, California’s outstanding debt has been reduced by approximately US$10 billion in three years.

The Old Dominion comes in for praise by the former Fed Chairman.  In an interesting comment he states that the budget professionals in Richmond serve for many years while the Governor is restricted to one 4-year term.  Budget cycle planning, which takes as long as 6 years, removes some of the politics out of Virginia’s budget process.  Virginia’s unfunded pension liability of US$ 3,436 per employee is only a few dollars more than that of the Golden State.

New Jersey, home of Gov Christie, leaves much to be desired according to the former Fed Chairman.  Volcker’s analysis paints a messy picture of the Garden State’s fiscal condition.  Volcker lists myriad accounting and financial tricks that have been employed to balance the home of the Jersey Boys: these do include not using the proceeds of bond sales for their stated purposes.  Frequent use of non-recurring revenues for operating purposes.  And diverting tolls from the turnpike from their stated use to maintain that highway.

It is a shame that Volcker did not include Kansas in his analysis.  Governor Sam Brownback, a Tea Party favorite, has enacted a budget cutting, tax reducing program that only a “fauxconomist” like David Bratt would endorse.  The budget deficit has ballooned, school systems in some detracts have closed early due to lack of funding, and a liberal website reports today that the Kansas Gov has threatened to cut off funding for the judicial system if it does not rule in his favor should a court challenge arise to his policies.

— D. Leslie Schreiber

Is SEAL Team 6 Out of Control?

Seal_Team_Six_old_insigniaBy Peter Galuszka

Dam Neck Annex is a forgettable piece of beachfront landscape amidst the strip malls of Virginia Beach. F-18s Hornet jets roar past from nearby Oceana Naval Air Station and the traffic is typical for the area: vans with soccer moms, bikers’ choppers and sedans with families headed for the sand.

Surrounded by thousands of yards of barbed wire and other protections, the annex which consists of shooting ranges and blocky buildings is home to SEAL Team 6, one of the most celebrated covert warrior groups in the world. Despite their fame and penchant for grabbing publicity, there’s evidence that SEAL Team 6 is out of control – in more ways than one.

On Sunday, The New York Times printed an extensive investigation showing that TEAM 6 has been serving as a covert hit-job unit in Afghanistan and other parts of South Asia and the Middle East. The highly-trained unit has been involved with many high risk missions but one stands out, according to the Times. It is “Operation Omega,” started by former Army commander Lt. Gen. Stanley McChrystal who was concerned in 2006 that the U.S. did not have sufficient troops in Afghanistan to beat back an increasingly aggressive insurgency by the Taliban.

The Times says that Operation Omega was modeled after the infamous Phoenix Program in South Vietnam that was designed to identify and eliminate, often by assassination, members and supporters of the Viet Cong. From 1965 until 1972, up to 41,000 people were killed in the process.

It isn’t know what Seal Team 6’s death count was, but the Times reports that from 2006 to 2008, there were weeks at a time “when their unit logged 10 to 15 kills on many nights, and sometimes up to 25.”

These, apparently, are not traditional night raids or return-fire situations when an American patrol is ambushed. These were surgical, precision strikes including kidnappings and at times, apparently, assassinations.

One issue is that because of their intense secrecy and worries about security there is not much oversight into the Team’s activities. The Times says that Team 6 by passes usual military judicial processes and is overseen by the secretive Joint Special Operations Command (JSOC).

The Virginia-based SEAL time had been tasked with special, high-risk missions such as the highly-acclaimed rescue of Capt. Richard Phillips, a commercial sea captain, who had been kidnapped by pirates off of East Africa when his ship had been taken by pirates in 2009. One concern in the Times is that such special missions were subverted as TEAM 6 was pushed into using its special snatch and grab or kill expertise in a more routine basis in Afghanistan and other countries.

Another strange issue is that for what is purported to be a highly covert unit, Team 6 gets a ton of publicity, some of it sleazy, and some of its members tend to get into trouble when they get back home.

For example, when Tom Hanks made a movie in which he portray the rescued cargo ship captain, the Navy willingly laid on a small fleet of ships and helicopters to help.

Book publishers have been inundated by supposedly non-fiction tomes about Team 6’s heroics. A couple involved who actually nailed Osama bin Laden. Robert O’Neill penned one claiming it fired the last fatal shot. Matt Bissonette, writing ‘No Easy Day,” under the nom de ’guerre Mark Own, said he did. Both SEALS drew criticism for violating security and going after big bucks.

The hands-down worst case involves “American Sniper” about the famed shooter Chris Kyle who was the subject a best-selling (two million copes) book and a box-office smash movie directed by Clint Eastwood. The book made $6 million and the movie hit the $400 million mark. But strangely, Kyle’s family didn’t see much of it after Kyle was murdered at a Texas shooting range two years ago.

The Virginian-Pilot reported recently that the family has seen none of the funds raised to help Kyle’s family by some so-called military help funds.

So, it seems you have two serious questions. Has Seal Team 6– and other SEAL units –morphed into an assassination team that has little accountability. If this is so, why are so many trying to cash in on it, especially, it seems, the United States Navy.

I’ve not been in the military service but I have known a few people who have been, including covert operators. Many tend to operate within strict rules and they don’t say anything about what happened.

Finally, Tobacco Commission Gets Reforms

Feinman

Feinman

By Peter Galuszka

Virginia’s infamous tobacco commission appears to be finally getting needed reforms 15 years after it went into existence.

Gov. Terry McAuliffe announced today that he was appointing a new executive director, Lynchburg native Evan Feinman, ordering a slimmed down board of directors and requiring a dollar-for-dollar match on grants the commission doles out to support community development in Virginia’s old tobacco belt.

In another break with the past, McAuliffe is renaming the old Virginia Tobacco Indemnification and Community Revitalization Commission as the Virginia Tobacco Region Revitalization Commission.

That might sound cosmetic, but any change is welcome given the commission’s history.

Since its formation after the 1998 Master Settlement Agreement between 46 states and four large cigarette makers, the commission has been spending millions of dollars won from the tobacco firms supposedly to help tobacco growers in a region roughly following the North Carolina border wean themselves off of the golden leaf toward economic projects that are far healthier.

Instead, the commission has been racked by scandal after scandal, including the conviction of a former director, John W. Forbes II, for embezzling $4 million in public money. He is now serving a 10-year jail sentence.

The commission also figured in the corruption trial of former Gov. Robert F. McDonnell since it was suggested my McDonnell as a possible source of funding for businessman Jonnie R. Williams Sr. during McDonnell’s trial for corruption. Williams, who was the star prosecution witness against McDonnell, got help from McDonnell in promoting one of his vitamin supplement products. McDonnell was convicted of 11 felonies and is now appealing.

The old commission also has been criticized by a major state audit for funding dubious projects and not keeping track of whether the money it has doled out has done much good. It had been criticized for acting as a slush fund for projects favored by Southside and southwestern Virginia politicians.

McAuliffe’s reforms include reducing the commission’s board from 31 to 28 members and requiring that 13 of them have experience in business, finance or education.

Feinman has been deputy secretary of natural resources and worked with McAuliffe’s post-election team.

It’s too soon, of course, to know if these changes will bring results, but anything that moves the commission away from its past and the grasp of mossback Tobacco Road politicians is welcome.