Category Archives: Economic development

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Posted in 2012, Economic development

The Dangers of Creeping College Privatization

Posted on December 26, 2011 by Peter Galuszka| 14 Comments

By Peter Galuszka

Virginia residents have long enjoyed a special advantage with higher education. Tuition at some of the country’s best-rated public universities — the University of Virginia, the College of William and Mary and Virginia Tech — is relatively modest. The schools offer a great deal for parents and students compared with nationally ranked private colleges.

But this advantage is unraveling. The process began seven years ago, when the General Assembly agreed to a deal whereby it would pay not as much for top public universities. In exchange, the schools would get more autonomy, including more freedom to set their own tuitions, capital spending programs and curricula.

The result? A creeping privatization that threatens to undermine the very
advantages that make Virginia’s top public schools what they are.

To be sure, state education bureaucrats and legislators call it not “privatizing” but “restructuring.” This euphemism means the schools will
gradually demand tuition closer to what is charged at the top national, private institutions but won’t have to go through the hassle that true privatization would entail — such as the selling of public property and making good on repaying decades of public investment.

There is some logic to this approach: If Virginia’s elite public colleges
start approaching market rates for tuition, the thinking goes, state money could be freed up to spend on lesser institutions. More financial-aid money would become available. The state could use those resources to reach for its goal of 100,000 more students earning degrees. Since 2005, when the concept was formalized in General Assembly legislation, Virginia Commonwealth University added itself to the list of schools willing to trade funding for autonomy.

The same year that “restructuring” was approved, John T. Casteen II, then the president of U-Va., announced an ambitious campaign to raise $3 billion through fundraising. Most of that has been collected, although the effort to raise so much private money at a public school raised eyebrows. More recently, Taylor Reveley, president of William and Mary, proposed
bringing his school’s tuition levels to market rates, which, for a nationally rated private institution, would be about $45,000 a year for tuition, room and board. Out-of-state W&M students now pay $44,854 a year, while in-state students pay $22,024.

Reveley notes that Richmond provides only 13 percent of W&M’s funding,
which is way down from the 43 percent of 30 years ago. This trend has been even more pronounced at other elite Virginia public colleges. At the University of Virginia, the state pays less than 8 percent of what the school needs. At Tech, the process has been slower. In 2000, the state provided 58 percent of the school’s needs; today it’s 28 percent.

Reveley argues that if more in-state parents or students paid full freight,
then his school could offer more generous financial-aid packages to middle- and lower-income students. He also believes that as top schools become more self-sustaining, a second tier of Virginia schools could be given more state funding and raise their own academic standings. These would include Old Dominion, George Mason, James Madison, Radford, Longwood and the state’s community college system.

But there is cause to worry about this argument. At present, many complain that lower-income Virginians have been forced to compete with an increasing number of deep-pocketed out-of-staters, whose higher tuition helps to balance the schools’ books. As those schools look to capture more revenue via in-state tuition, they will face strong incentives to accept a greater portion of in-state students with the means to pay all or most of their own way. And even with increased aid, worthy but less affluent students will confront barriers. Some will simply opt for less expensive, less competitive schools; others will emerge from school more deeply in debt.

Such an uneven playing field is contrary to the spirit of a state-funded
higher education: Why should a kid from affluent Fairfax have a better chance at attending U-Va. or W&M than someone with the same grades and test scores from Big Stone Gap?

I’ve noticed this kind of elitism beginning to appear in “Virginia” magazine,
published by the school’s alumni association. Its pages are filled with four-color advertisements hawking multimillion estates mostly in blue-blood
horse country. The message that’s suggested? “If you can’t afford these kinds of properties, then maybe you don’t belong at Mr. Jefferson’s University.”

Privatization is thought of by Virginia conservatives and even some moderates as a panacea for addressing the state’s budget woes while adhering to the state’s dominant anti-tax ideology. Tax hawks, for instance, constantly dodge the need for higher taxes to pay for highways by tossing the problem over to public-private partnerships. But applying the same thinking to public higher education risks undermining the very purpose of such institutions — building the highly educated middle class needed to keep Virginia competitive nationally and globally.

A straight sell-off of state schools isn’t likely. What is possible, says
James Alessio, chief of higher education restructuring at the State Council for Higher Education, is a steady series of tuition hikes in the 5 to 7 percent range. “Within maybe 40 years, you’ll see tuition at the public schools go to $40,000 or $50,000,” he told me.

Once that happens, the stealthy, half-privatization of Virginia’s academic
jewels will be complete, and probably irreversible. One possible solution comes from the University of California at Berkeley, which announced this month that it will cap tuition at 15 percent of what “middle class” families make, defined as $80,000 to $140,000 a year.

Virginia could try something similar. Otherwise, on its current trajectory, the state is fast moving toward a two-tier public college system heavily based on income — the exact opposite of what public higher education is supposed to be.

First published in The Washington Post

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Posted in Budget, Children and families, Economic development, Economy, Education (higher ed), Politics, Taxes

Tagged goozeviews

Merry Christmas, Amazon.com!

Posted on December 24, 2011 by Peter Galuszka| 4 Comments

By Peter Galuszka

Christmas, regretfully, is forced, propagandized consumerism under the guide of market capitalism, albeit in new forms. One is digital sales, of which Amazon is dominant.

Amazon also is about to become a big player in Virginia since it will open distribution centers in Chesterfield and Dinwiddie that will cost $135 million and employ 1,350. Gov. Robert F. McDonnell announced the projects with great flourish. Typically, the Richmond Times-Dispatch played its role as McDonnell’s personal “Pravda” and bannered the news to make us all understand just what a great jobs magnet our photogenic governor is.

To its credit, however, the RTD did break some news. It turns out that Amazon, which is getting $3.5 million from the Governor’s Opportunity Fund and $850,000 from the tobacco fund, will not be required to pay any states sales taxes on the goods its ships to Virginia customers from the two centers.

If you are a traditional, non-digital retailer, you will have to continue charging and paying the usual 5 percent sales tax. You may be competing for the same market with Amazon (2010 sales of $34 billion) but Amazon automatically gets a 5 percent advantage. That, dear shoppers and taxpayers, is Bob McDonnell’s idea of free and unfettered market capitalism.

To be sure, very few states charge a sales tax on goods traded over the Internet. The rationale was, back in the 1990s, was that the Net was waaay too cool to tax. The guys who developed it are waay cool types with a 60s hippie bent, like Bill Gates of Jeff Bezos, and if you make them play by the usual rules, well that’s like, soooo Old Economy. Everyone bought into this nonsense, especially George Allen who lobbied not to tax anything on the Net.

Of course, a lot of these Net heros are really conservatives or libertarians who don’t wear neckties. They are not out for the betterment of mankind, rather the betterment of their bottom lines. Meanwhile, routine mortals, such as journalists like me, have seen our free lance pay plummet because we are forced to accept far less or nothing at all for our content posted on the Web rather than in print. Anyway, that’s my private hell.

This kind of “The Net is Sacred” thinking is McDonnell’s excuse to land needed jobs. No argument about the need. Dinwiddie is mostly rural and can use jobs. Chesterfield has an imbalance of too many subdivisions and not enough industry.

The hypocrisy of the McDonnells is that while they play free market and tight budget and stick it to the schools and retirees and Medicaid recipients, they have no trouble handing out goodies to big firms like Amazon, that have no trouble taking care of themselves. Other states seem to be driving tougher bargains than Virginia. Tennessee got a similarly-sized distribution center from Amazon but also starts getting its sales tax from Amazon in 2014.

Also, it’s not as if big distribution centers are unheard of in Virginia. Back in the early part of the past decade, China was exploding with exports of consumer goods. Hampton Roads was booming. Mid-Atlantic distribution centers were going up from Suffolk and others spots for Wal-Mart, QVC, Target and other big box, mass retailers. I believe they did have to pay the 5 percent sales tax. Of course, the recession cooled that trend and Hampton Roads is stuck with the big box centers while competitors like Baltimore and Savannah eat Virginia’s lunch with other cargo. That’s another story, however.

Among the groups rightly angry with the big Mickey D are members of Richmond’s Retail Merchants Association, who still have to pay that pesky 5 percent sales tax. “The bottom line is that we just want a level playing field,” says Nancy C. Thomas, the group’s CEO and president.

Well, not in Virginia and not with Mickey D.

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Posted in Budget, Economic development, Economy, Finance, Regulation, Taxes

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Virginia’s Energy Fantasies

Posted on December 20, 2011 by Peter Galuszka| 4 Comments

By Peter Galuszka

Plans to mine uranium in Southside Virginia did not get the boost some had been hoping for now that a 22-month-long review by the National Academy of Sciences and the National Academy of Engineering has been released.

Far from rubber-stamping the plan, the independent analysis reported that there are “significant” health and environmental obstacles with the plan, which would allow mining 119 million pounds of uranium from the properties of several politically connected families near Chatham.

Among those challenges are that Virginia, which must protect the environment and the lives of mining workers, has no experience doing so and lacks any regulations covering mining uranium. The study did not give a go or no-go recommendation but said that mining could occur if proper safeguards were put in place. Getting them will take much time and effort.

In other words, the juggernaut towards the uranium mining idea, which has included all-expenses-paid trips to France for legislatures considering ending a two-decades-long ban on such mining, just got a big, bright yellow caution light, not exactly what proponents had hoped for.

Even supporters started backing away from the idea. Gov. Robert F. McDonnell, who wants to make Virginia “the Energy Capital of the East Coast” seemed to mumble that uranium mining should be done safely. Virginia Energy Resources Inc., which owns 29 percent of the mining project, put the happiest face it could on the report, stating that we now have a “roadmap” to employ the “best practices” in safety that have been in practice in the U.S. and Canada. Mining opponents hailed the report as vindication of their fears.

What’s going to be interesting is the next step. How Virginia’s business elite handles the report and the moratorium will be the determining factor about whether the ban is ended and the mining goes through.

The sad truth is that many of these people see only one side of the energy equation and are loath to consider environmental issues or even get a deeper understanding of energy itself. Instead, legitimate concerns are painted as over-regulation madness by the likes of Barack Obama and his band of socialists. What is sad is that these very critics really have no real idea of what the global energy mix and what the markets really are.

For proof, read a piece of a couple of weeks ago by Barry E. DuVal, the new president of the Virginia Chamber of Commerce who was once mayor of Newport News and a cabinet secretary under Republican Gov. Jim Gilmore. DuVal’s piece was a diatribe against the Obama Administration for not including areas offshore Virginia for exploration and drilling. He also attacked Obama’s concerns about the controversial Keystone XL pipeline that would take fossil fuel energy from an oil sands project in Canada to Gulf Coast refineries. Without a major change in direction from the White House,” DuVal wrote, Virginia won’t be able to drill offshore, expand renewable electricity sources and build nuclear power plants.

A few little problems here. First, there are no known, large deposits of oil off the Virginia coast. There may be natural gas, but nothing certain. If you want to discuss natural gas, one thing DuVal fails to mention, is that hydraulic fracking of Marcellus shale in Pennsylvania and New York, has resulted in an unexpected flood of new gas. The quantity is so great that electric utilities are shifting to gas from coal. As far as nuclear, DuVal seems to have forgotten the August earthquake that pushed the North Anna nuclear plant to its design limits and caused a national review of just how susceptible the country’s nuclear stations are to earthquakes. As for wind, Google plans a huge wind farm just off Virginia’s coast. No mention there. As for the Keystone pipeline, the petroleum is exceptionally dirty. The pipeline will result in zero jobs in Virginia, if you bother to look at a map.

And lastly, for the first time in decades, the U.S. has become a net exporter of energy. This is all happening without Bob McDonnell’s fantasy of the state becoming the “Energy Capital of the East Coast.” The Old Dominion is a huge shipping port for coal exports, but it involves coking coal for steel for skyscrapers in Shanghai and Mumbai and has nothing to do with energy.

So, given the level of understanding of the energy outlook, it should come as no surprise that this crowd will be pushing for an end to uranium mining and pressing on without substantive regulations. We hate regulations. We’re Virginians. In any event, it’s all Barack Obama’s fault.

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Posted in Economic development, Energy, Environment, Infrastructure, Politics

Tagged goozeviews

Secondary Payloads Lower Cost of Satellite Launches

Posted on December 18, 2011 by James A. Bacon| 5 Comments

Mid-Atlantic Regional Spaceport (MARS) at Wallops Island

by Jack Kennedy

Earlier this month, news of a proposed Virginia tax incentive for sending cremated remains into space went viral around the globe. Stories appeared in Germany, the Arab Emirates, Australia and throughout the United States. Most mocked the idea.

All missed the underlying storyline of opportunity to boost primary satellite payloads at a significantly lower cost than exists today. There is more to the story of the state tax credit than meets the eye.

If Virginia’s Legislature were to adopt a tax credit to seed the Virginia market for launching cremated human remains into low earth orbit, the buyers of mortuary space science would defray costs associated with carrying the primary satellite payloads to orbit. In many cases, the primary payloads of rockets lofting from Wallops Island are scholarly and scientific, involving students learning engineering and science skills.

In other words, Virginia high school, college and university students would have a better chance of lofting miniaturized satellite research experiments to space from Wallops Island at a more reasonable cost if coupled with a secondary commercial payload defraying the costs of the booster rocket. A small satellite (MicroSatellite or NanoSat) is typically less than 1,000 pounds with technology advancing to place them in low earth orbit at a significantly lower cost than the typical NASA suborbital sounding rocket.

Universities throughout the United States today are participating in various NanoSat space launches as a secondary payload. One such program is the University NanoSat Program administered by the United States Air Force. A similar program is underway among Kentucky universities under the moniker “Kentucky Space.”

While Virginia’s universities have yet to take a networked leadership position in building and flying NanoSats to low earth orbit, the time is right for them to make it so. The University of Virginia, Virginia Tech, Old Dominion University, James Madison University, George Mason University and others need to have such a discussion.

For example, Thomas Jefferson High School students have built a 10-centimeter cube satellite that weighs less than 1.2 kilograms. The Fairfax County students plan to place their space satellite into orbit from Cape Canaveral, Florida in 2012 after having it tested this month at Virginia headquartered Orbital Sciences Corporation.

High profile efforts like the Apollo program have come and gone. The space shuttle has been retired after 30-years of service. Government-sponsored launch programs are in demise. The entrepreneurial market for space access is emerging with a more diverse cast of actors.

Small, entrepreneurial rocket-launch firms are building markets and driving down costs. Unique and unusual means to generate cash flow will sustain business and provide access to space for the next generation of earth and space science researchers.

Virginia can seed lower cost university and high school space science experiments by boosting the economics of an underlying secondary satellite payload – human cremated ashes. Orbital Sciences Corporation, a Northern Virginia firm, first entered this unusual market when it flew human cremated remains as a secondary payload aboard a Pegasus air launch rocket in 2002.

The proposed tax credit exclusively for Virginians has a sunset provision after a few years. The chances of taxpayer costs exceeding more than a hundred thousand dollars would be slim. The opportunities created for science and engineering education may be significant, however.

Del. Terry Kilgore’s bill is already a success in generating worldwide media attention to Virginia’s emerging commercial spaceport and the tourist opportunities along the Eastern Shore. More Virginians will learn of their spaceport as well. Given serious effort, it may launch new science and innovation making the primary NanoSat payloads a more viable proposition.

If journalists resist the temptation to make the space burial legislation the butt of sarcasm, Virginia may continue as an innovative space policy leader. Building a capital nexus between student-driven NanoSat primary payload launches and the underlying secondary payload of cremated remains will provide a unique pathway to build a more dynamic Virginia space access market.

This column responds to a story, “HB19: Fly (What’s Left of) Me to the Moon,” posted by Groveton last week. The author, Jack Kennedy, is an attorney and former member of the state legislature. He holds a MS in Space Policy from the University of North Dakota. Contact him at Jack@JackKennedy.net.

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Posted in 2011, Economic development, Technology

HB19: Fly (What’s Left of) Me to the Moon

Posted on December 13, 2011 by Groveton| 5 Comments

2012: A space oddity. I have long commented on the bizarre nature of Virginia’s General Assembly. The annual General Assembly session in Richmond usually creates a sense of frustration and dismay among us voters. In addition, it always provides ample material for comedy. This year is no exception as Terry Kilgore (R – Scott County) has pre-filed legislation which would allow an individual income tax deduction for those opting to launch their cremated remains into orbit. I am not making this up. The bill can be found here.

Ground control to Major Terry. Del. Kilgore’s proposed legislation would provide an $8,000 personal income tax exemption for those who elect to have their cremated remains launched into either Earth or lunar orbit. And here’s the good news – you don’t actually have to die to get the deduction. You just have to sign a contract with a Virginia spaceport to have your remains blasted into the cosmos.

Corporate welfare vs. corpse welfare. Presumably, Del. Kilgore wants to drive a nail into the coffin of those who say that Virginia is not a modern society. He wants to kill the idea that Wallops Island is a lesser space base than Cape Canaveral. Ashes to ashes, deduction to deduction. You have to be as dead as Terry Kilgore’s political career to get into space with this proposed legislation.

Low budget cosmonaut. I know what you are thinking, “A tax deduction is all well and good but how much will it cost to actually launch my cremated butt into orbit?” A company named Celestis is already slinging people’s particles into the firmament. Their price list allows for a final road trip at the affordable cost of between $2,995 and $12,500. The higher price allows for the extra costs of launching into “deep space”. For anybody considering this, please make it a point to wave to Terry Kilgore when you actually arrive in deep space.

Thinking outside the urn. Terry Kilgore might be on to something here. Start with space ashes but then move to living people. Pop them into a rocket and sell space sight-seeing tours. Go into orbit and look down at the traffic chaos in Virginia caused by the General Assembly. Virginia’s space port could even offer volume discounts for groups. I wonder what Wallops Island would charge the taxpayers of Virginia for 140 one way seats into deep space?

Hat tip. Greg Letiecq at Black Velvet Bruce Li.

By … Groveton

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Posted in Economic development, Entitlements, Politics, Technology, Transportation, Uncategorized

Tagged spaceport, Wallops Island

The Wonk Salon, November 21, 2011

Posted on November 21, 2011 by James A. Bacon| Comments Off

U.S. Industries Need a “Competitiveness Audit”
Progressive Policy Institute
Local, state and federal government need a “competitiveness audit” of American industries to guide the allocation of economic development resources. Target those industries that have a chance of becoming economically competitive and write off the losers.

New Technologies More Effective than Compact Development at Cutting Greenhouse Gases
Reason Foundation
If your goal is to reduce greenhouse gas emissions, new technologies such as hydrogen fuel cells and plug-in electric cars paired with electricity from hydro-power would accomplish the goal far more cost effectively than mandating more compact development.

South Carolina Colleges Too Expensive, Graduation Rates Too Low
South Carolina Policy Council
Everybody’s applying a critical eye now to state systems of higher education, even South Carolina. The interests of individual institutions outweigh those of the state.

Time to Focus on Community College Graduation Rates
Center for an Urban Future
Community colleges are a key vehicle for upward social mobility, but New York’s are falling short of the potential. Increasing the graduation rate by 10 percentage points could give a $71 million one-year boost to the state and students.

How to Make College More Affordable: Expand Tax Credits
Third Way
College is increasingly unaffordable. So let’s do more of what caused the problem in the first place — increase tuition subsidies, this time through a consolidation and expansion of tax credits.

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Posted in 2011, Economic development, Economy, Education (higher ed), Environment, Land use, Transportation, Wonk Salon

The Wonk Salon, November 17, 2011

Posted on November 17, 2011 by James A. Bacon| 1 Comment

Students without Borders
Thomas Jefferson Institute for Public Policy
Providing education in virtual classrooms costs 65% of what it does in traditional bricks-and-mortar classrooms. But Virginia’s education funding formulas get in the way of more widespread adoption. Chris Braunlich has a plan.

By 2030, K-12 Education Will Be Privatized
Hoover Institution
Eventually, the United State will emulate the example of South Korea, Japan, India and Sweden, which encourage vigorous private-sector competition in educational services and achieve far better results.

What a Broadband Boost Would Mean for Rural New England
Maine Heritage Policy Center
A seven percentage-point increase in broadband adoption in Maine, New Hampshire and Vermont would increase annual economic output by $1.4 billion, create or save $27,221 jobs, and boost annual income by $1 billion.

Income Segregation Has Grown Since 1970
US2010 Project
Not only are the rich getting richer, they’re living in places where they don’t have to mix with the hoi polloi.

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Posted in 2011, Economic development, Education (K-12), Technology, Wonk Salon

IG of the Day: Innovation in the 5th Federal Reserve District

Posted on November 17, 2011 by James A. Bacon| 1 Comment

Source: Federal Reserve Bank of Richmond. (Click on map for more legible image.)

The U.S. Economic Development Administration measures a region’s innovation performance relative to that of the nation based on component indices of human capital, economic dynamics, productivity and employment and economic well being. The first two measures are inputs to innovation, the second two are outputs that reflect the results.

The Washington-Baltimore area is the largest cluster of innovation in the district, followed by the North Carolina research triangle. The one other standout is Montgomery County, Va., home to Virginia Tech. (For the second time today, eat your hearts out, Wahoos! And I say that as a Wahoo myself.)

The rest of the region, including Richmond, Hampton Roads and Charlottesville, perform slightly below the national average for innovation.

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Posted in 2011, Economic development, Economy

The Wonk Salon, November 16, 2011

Posted on November 16, 2011 by James A. Bacon| Comments Off

“No Excuses” Charter School Experience Can Be Transplanted to Public Schools
National Bureau of Economic Research
The implementation of five core principles of the “No Excuses” charter school movement — increased instructional time, building human capital, differentiating between students, using data to inform instruction, and setting high expectations — has been implemented with positive results in nine low-performing schools in Houston.

Public Health Challenges of Prisoner Reentry
Rand Corporation
Prisoners are sicker than the general population, with more infectious diseases, mental health issues and substance abuse problems. As states release an increasing number of convicts into the community, it’s time for communities to start planning now.

Rebooting Economic Development in Nevada
Brookings Institution
The real estate boom didn’t end so well for Nevada. Time to try something new. Brookings thinks that Nevada’s economic development program needs a top-to-bottom overhaul.

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