Category Archives: Finance

Why We’re Being Railroaded On “STEM”

 csx engineBy Peter Galuszka

When it comes to education, a constant mantra chanted by the Virginia chattering class is “STEM.”

How many times have you heard that our students are far behind in “STEM” (Science Technology Engineering and Mathematics)? We have to drain funding from more traditional areas of study (that actually might make them better human beings like literature, art or history) and give it to STEM. The two types of popular STEM are, of course, computer science (we’re all “illiterate” claims one journalist-turned computer science advocate) and biotechnology.

But how important is STEM, really? And if Virginia joins the STEM parade and puts all of its eggs in that basket, will the jobs actually be there?

The fact of the matter is that we don’t know what jobs will be around in the future and like the famous generals planning for the last war, we may be stuck planning for the digital explosion of Bill Gates and Steve Jobs that is like, so, 25 years ago.

To get an idea where markets may be, look at today’s news. Canadian Pacific is making a play for CSX railroad (headquartered in Richmond not that long ago) because of the unexpected explosion in fracked oil.

CP handles a lot of freight in the western part of Canada and U.S. where some of the most impressive new fracked shale oil are, namely the Bakken fields of North Dakota and Alberta. CP wants access to eastern U.S. refineries and transshipping points, such as a transloading spot at the mouth of the York River. CSX is stuck with dirty old coal where production and exports are down, although it has an extensive rail network in the Old Dominion.

The combined market value of the two firms is $62 billion — a far bigger potential deal than the $26 billion Warren Buffett paid for Burlington Northern Sante Fe in 2010. There are problems, to be sure. CSX isn’t interested and the Surface Transportation Board, a federal entity, nixed a matchup of Canadian National and Burlington a little while back.

But this isn’t really the point. The point is that the Old Steel Rail pushed by new sources of oil and to some extent natural gas has surprisingly turned domestic economics upside down. Many of the new oil fields are in places where there are not pipelines, so rail is the only answer. In 2008, according to the Wall Street Journal, six or so American railroads generated $25.8 million in hauling crude oil. Last year that shot up to $2.15 billion.

So, what does that mean for students? A lot actually, especially when we blather on about old-style STEM that might have them inventing yet another cell-phone app that has a half-life of maybe a few months. Doesn’t matter, every Virginia legislator, economic development official and education advocate seems to be hypnotized by the STEM genie.

A piece I just did for the up-and-coming Chesterfield Observer on vocation education in that county:

“The recent push to educate students in so-called STEM (Science, Technology, Engineering and Mathematics) may be case in point. The goal is to churn out bright, highly trained young people able to compete in the global economy with their counterparts from foreign lands.

“A subset of this area of concentration is computer science, which goes beyond knowing the basics and gets into the nitty-gritty of learning code and writing computer languages. By some accounts, such skills will be necessary to fill more than 2 million jobs expected to become open in the state by 2020.

“Critics question, however, if overspecialization in technology at earlier ages prevents students from exploring studies such as art and literature that might make them better rounded adults. And, specialization often assumes that jobs will be waiting after high school and college when they might not be.

“Peter Cappelli, a professor of management at the Wharton School of the University of Pennsylvania, has written about such problems of academic overspecialization in national publications such as The Wall Street Journal. He recently responded to questions from the Chesterfield Observer via email.”

“Not many science grads are getting jobs in their field,” Cappelli says. “The evidence suggests that about two thirds of the IT (information technology) grads got jobs in their fields, about the same for engineering. There is no guarantee in those fields. It’s all about hitting the appropriate subspecialty that happens to be hot. There are still lots of unemployed engineers and IT people.”

So there you have it. In my opinion, the over-emphasis on STEM training has the unfortunate effect of producing young adults who have one goal in mind – getting a job and making money, not helping humankind. And, if you insist on STEM, why not branch into something where there are actually jobs namely petroleum engineering, geology and transportation engineering.

I’ll leave the dangers of added petroleum cargoes in trains to another post.

Petersburg’s Renaissance

PetersburgBy Peter Galuszka

Petersburg has been a special place for me.

Years ago, when I’d pass through, I always felt I were driving onto the set of a 1950s or 1960s movie set in the South such as “Cape Fear” starring Gregory Peck and Robert Mitchum. A somnambulant ease pervades the place as does the down-home friendliness you don’t get in pretentious Richmond 30 miles to the north up Interstate 95.

I got to know Petersburg a lot better when my two daughters went going to high school there at the Appomattox Regional Governors School for the Arts and Technology. Drawing from localities from Richmond to Isle of Wight and Franklin, the school body was bright, diverse and creative.

Driving my children if they missed the bus from Chesterfield was a pain but the effort was worth it since they had some fine teachers and avoided the White Toast trap of entitlement one gets into in more affluent suburban schools.

That’s when I was introduced to Petersburg’s nascent arts community. I went to plenty of “Fridays for the Arts” celebration and hung out at Sycamore Street with the kids.

Returning again recently, I found that the arts scene is really taking off. They  seem to be at a sustainable critical mass.

It is due primarily to the city’s policy of remaking itself by setting up an arts district that is nationally recognized as historic and offering tax credits and abatements for newcomers to renovate properties they buy from the city. The big expansion at the Fort Lee military base in 2005 really helped (although it’s due for a cut).

I wrote about it in a cover story in Style Weekly. The heroes and heroines are far-sighted city officials, arts willing to risk a lot remaking some truly historic buildings and the next wave, restaurants that aren’t owned by franchises, coming in.

Not everything is wonderful. Petersburg still has a weak public school system and a poverty rate of 28 percent, a point higher than Richmond’s. But it also doesn’t have the in-fighting among powerful interest groups that far bigger Richmond does. There’s no endless debate over building a baseball stadium in Shockoe Bottom (to line pockets of developers) or keeping it at the Boulevard.

There’s no high level brinksmanship about where to put a Children’s Hospital.

In Richmond, you see, ball fans and sick children are the last ones to be worried about. What matters is Mayor Dwight Jones, Bill Goodwin, Michael Rao, the Timmons Group and the editors of the Richmond Times Dispatch. They are important and you are not.

You don’t get that in Petersburg. The little city (population 32,000) that has a historical richness than rivals Richmond’s doesn’t think it is better than anyone else.

It’s Oh, So Richmond!

By Peter Galuszka

cantorWhen I looked at my Richmond Times Dispatch, I was stunned. I couldn’t find a story that their wunderkind Congressman, Eric Cantor, the kind of Republican they love, had gotten a big deal job with Moelis & Co., a New York boutique investment bank.

There was the story in the Wall Street Journal and the Washington Post. Finally, the RTD straggled  on with brief piece at 6:22 a.m. on its Website.

Maybe it’s embarrassment. Cantor, the former House Majority Leader, could do no wrong with his Main Street Republican friends or the editors of the local newspaper. His wife, Diana, was on the board when the newspaper was owned by Media General. Then came his stunning defeat in a June primary to unknown David Brat, who ran a mash-up of a Tea Party and Libertarian insurgency.

Moelis says it is hiring Cantor “for his judgment and experience” and ability to open doors, says the Journal. He’ll live in Virginia and have offices in Washington and New York.

Well, that was quick! Or maybe not. Cantor has raised $1.4 million from the financial services sector, as well as lots from managed care. His sense of entitlement is astounding. First, he thought he didn’t have to bother with the home folks in the Seventh District any more, costing him the election. They he arranged (with Gov. Terry McAuliffe’s help) a special election.

Doing so would get his replacement in office faster and thus Virginia can keep its seats on some important committees. But it also frees Cantor to take his plum job.

You didn’t read it in the RTD first! Somethings will never change.

One Very Sad Day In Court

maureen_and_bob(1)By Peter Galuszka

One literally could have heard a pin drop in U.S. District Court in Richmond today.

William Burck, lawyer for  Maureen McDonnell, said in his opening argument in a trial that Virginia’s Former First Lady who has been indicted no 14 corruption charges along with her former governor husband was “collateral damage” in a deeply troubled marriage. She had developed a “crush” on the businessman who had given her and her husband more than $150,000 in loans, gifts and cash.

“Their marriage had broken down,” Burck said. “They were barely on speaking terms,” Burck said. Ms. McDonnell was angry and frustrated that her husband had been working 16-hour days in public service for 20 plus years and had little to show for it. They had five children. Big debt. Bob wasn’t paying attention to her.

As John L. Brownlee, McDonnell’s lawyer, said, McDonnell’s hard public service work “took a toll on his family and a terrible toll on his wife. He was not nearly as successful as a husband. He tried to keep from the public the most painful aspects of his marriage. He never humiliated her. He never scorned her.”

In pops Jonnie R. Williams Sr., a smooth-talking entrepreneur pushing a new anti-aging cream made in part from tobacco plants (although his firm, Star Scientific, had lost a couple hundred million over the previous decade.) Brownlee described the star witness for the prosecution as a “master manipulator.”

“This marriage broke apart and an outsider, another man, would invade and poison their marriage,” Brownlee said.

At one point, Maureen was said to have “hated” Bob who wrote a lengthy email to her trying to reconcile. In fact, Brownlee said, the Governor will read the email when he goes on the jury stand during the trial that is expected to last at least five weeks. When McDonnell sent the email, however, “that evening, Maureen was distracted by other interests.”

One could get snarky about this seemingly over-the-top soap opera. But no one in the courtroom seemed to be smirking. It is strange enough to be at a trial like this in a place like Virginia that considers itself above the petty corruption that plagues other states. It is even stranger to hear such excruciatingly personal and painful things about the state’s top former executive and his wife.

It could be that a “throw Maureen under the bus” strategy may work to get both of them off. After all, she wasn’t a public official and could do what she wanted as far as gifts. The prosecution’s opening statement drew a rather detailed and concise outline of just what and when the McDonnells solicited Williams’ largesse, right down to the “thank you” emails when money arrived in the bank to Maureen’s cell phone snap shot of Bob wearing slick, wraparound sunglasses while driving Williams’ Ferrari.

Giving the McDonnell’s the benefit of the doubt, I have to say I’ve heard this kind of story before among long-married couples suffering through middle age as their children are ready to fly away. Their stories may not be dramatic but I’ve got to admit that Bob McDonnell never seemed to exhibit such grabby behavior before.

This raises another tough question. What should “public service” be and how much should it take from one’s private life. More importantly, why can’t it support men and women who pursue it? Should it be only for the rich?

McDonnell slogged through relatively low-paying jobs like the General Assembly, Attorney General and Governor. He had five kids and a wife who seemed very freaked out by being First Lady – a role she apparently never wanted. She came from a Northern Virginia civil service family that didn’t exactly have a grand disposable income.

Consider two other Virginia governors –former and current. Mark Warner, now U.S. Senator, is rich from his telecommunications investments made years ago. At one point he was said to be worth a couple hundred million dollars. Gov. Terry McAuliffe, another former businessman, is likewise wealthy but probably not as rich as Warner.

Should these people be in office because they are rich? Should public service be available only to those with great portfolios? What would Thomas Jefferson say?

The McDonnell Trial Gets Underway

mcdonnells arraignedBy Peter Galuszka

This morning marks the start of the long-awaited corruption trial for Robert F. McDonnell and his wife Maureen, the first ever involving the governor of a state that fancies itself above petty corruption.

McDonnell, a Republican, faces 14 felony counts in federal court including wire fraud and lying on a federal loan application. This morning’s session at U.D. District Court before Judge James Spencer will involve jury selection. The trial is expected to last six weeks.

It promises to be a cross between a soap opera and a reality show with overtones of a Greek tragedy. Involved are strong personalities, a classic triangle (the governor, his wife and Jonnie Williams, a businessman who is the feds star witness) and lots of big, big Virginia names. The lawyers’ list reads like the wine list at a five-star restaurant.

There will be lots of politics and lots of venality, such as why Ms. McDonnell insisted on Williams supplying luxury trinkets and money, whether the First Family, regarded as a fine example of Virginia public service, was living far beyond their means and why the state’s squeaky-clean image is a myth.

A few more takeaways:

  • This is a federal case, not a state one. There is no way the case could ever have gone anywhere in state court – the laws are nonexistent. That doesn’t mean there isn’t a federal case and, traditionally, federal courts are used to go after local politicians and business people. Remember that it was the feds who nailed Al Capone in federal court, not Chicago or Illinois state courts. Just arguing that state law doesn’t go that far is irrelevant.
  • It’s going to get very ugly. Much of the melodrama takes place in the governors’ Capitol Hill house ruled by Ms. McDonnell and from which the case originally stemmed. It had to do with an executive chef who was accused of theft and was tried. He blew the whistle on the relationship between McDonnells, the gifts and Williams. Now, we find that the defense may subpoena the housekeeper for previous Democratic Govs. Tim Kaine and Mark Warner, both now U.S. Senators. It could be an episode of “Housewives of the Executive Mansion.” Stay tuned.
  • There’s no getting around the politics. I have to admit that it seemed very curious last year that the McDonnell case seemed to spring up from nowhere in the governor’s last year in office (he can’t succeed himself). It happened during a bitter gubernatorial race between hard-right Republican Kenneth Cuccinelli and Democratic fundraiser Terry McAuliffe. There were media leaks galore last summer which made for great, gossipy reading but one did wonder about the propriety of it all.
  • Suppose the McDonnells are acquitted? If so, what was all the Sound and Fury about? Blogger Paul Goldman, former head of the state Democratic Party, believes an acquittal could bring calls for the resignation of U.S. Atty. Gen Eric Holder. Sounds extreme.

All in all, the trial represents a transitional phase for Virginia. Its old ways, conceited and quaint they may have been, have faded. Welcome to the 21st Century, y’all!

How Planners Can Rescue Virginia from the Fiscal Abyss

This is a copy of a speech that I presented to the Virginia Chapter of the American Planners Association Monday, with extemporaneous amendments and digressions deleted. — JAB

Thank you very much, it’s a pleasure to be here. Urban planning is a fascinating discipline. As my old friend Ed Risse likes to say, urban planning isn’t rocket science – it’s much more complex. Planners synthesize a wide variety of variables that interact in unpredictable, even chaotic, ways. In my estimation, you don’t get nearly enough respect and appreciation for what you do

OK, enough with the flattery. Let’s get down to business.

toastThis is you. You’re toast. Unless you change the way you do things, you and the local governments across Virginia you represent are totally cooked. … Here’s what I’m going to do today. I’m going to tell you why you’re toast. And then I’m going to tell you how to dig your government out of the fiscal abyss, earning you the love and admiration of your fellow citizens.

Why You’re Toast

old_people2Here’s the first reason you’re in trouble — old people. Or, more precisely, retired government old people. Virginia can’t seem to catch up to its pension obligations. The state says the Virginia Retirement System is on schedule to be fully funded by 2018-2020. But the state’s defines 80% funded as “fully funded,” which leaves a lot of wiggle room. The VRS also assumes that it can generate 7%-per-year annual returns on its $66 billion portfolio. For each 1% it falls short of that assumption, state and local government must make up the difference with $660 million. As long as the Federal Reserve Board pursues a near-zero interest rate policy, depressing investment returns everywhere, that will be exceedingly difficult. A lot of very smart people think 5% or 6% returns are more realistic. In all probability, pension obligations will continue to be a long-term burden on localities.

potholesSecond, the infrastructure Ponzi scheme — that’s Chuck Marohn’s coinage, not mine — is catching up with us. For decades, state and local government built roads and infrastructure, typically with federal assistance, proffers or impact fees with no thought to full life-cycle costs. State and local governments have assumed responsibility for maintaining and replacing this infrastructure. Well, the life cycle done cycled, and the bill is coming due. We’re finding that we built more infrastructure than we can afford to maintain at current tax rates, leaving very little for new construction.

accotinkThird, after years of delay, serious storm water regulations are kicking in. Local governments bear responsibility for fixing broken rivers and streams like Accotink Creek, showed here. (Yeah, that’s a creek. It’s having a bad day.) Best guess: These regs will cost Virginia another $15 billion. But no one really knows. And it may just be the tip of the iceberg. I recently talked to Ellen Dunham-Jones, author of “Retrofitting Suburbia,” and she noted that a lot of the storm water infrastructure that developers built in the ‘50s and ‘60s is crumbling. The developers are long gone. Someone’s going to have to fix that, too. Guess who?

property_taxMeanwhile, the largest source of discretionary local tax dollars – real estate property tax revenues – is stagnating. According to the Demand Institute, residential real estate prices in Virginia will increase only 7% through 2018 – the third worst performance of any state in the nation. Don’t count on magically rising property tax revenues to bail you out.

In fact, the tax situation is worse than it looks. Demand for commercial real estate is dismal, too. Consider what’s happening to the retail sector. We’re going from this…

shopping_centerTo this..

amazon_warehouse

Every Amazon.com distribution center represents dozens if not hundreds of chain stores closing. It means more vacant store fronts, more deserted malls, less new retail development. Continue reading

Boomer….Wha?

a-bomb peace signBy Peter Galuszka

Remember the federal deficit that lurked behind the corner? Where did it go?

Al Kamen of The Washington Post asks that question in a column today. He writes:

“Not long ago, the federal deficit was projected to destroy the country, our country’s future and just about everything else. The politicians and the news media regularly fretted about what to do. Budget battles shut down the entire government for a couple of weeks.”

He continues: “So, what happened? The simple answer, of course, is that the deficit is way down and, for now, is no longer a big problem.”

The Congressional Budget Office estimated last week that the deficit for f/y 2014 is $492 billion or 2.8 percent of GDP. That puts us back in the early years of the George W. Bush administration.

Hmm. Kinda of makes you wonder where all this out-of-control spending is coming from that the Tea Party types talk about so much.

It is off the media radar screen. The Post has a graphic showing that the words or mention of the “national debt,” federal debt” or “federal deficit,” reached a high around the first half of 2010. The conservative Washington Times the most at 18; The Post with 13; and the New York Times with 10. Now it’s around three.

This isn’t to say that federal spending doesn’t merit watching. But where is Jim Bacon when you need him?

RAM, Coal and Massive Hypocrisy

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

The Pikesville RAM clinic in 2011. Photo by Scott Elmquist

By Peter Galuszka

Sure it’s a photo op but more power to him.

Gov. Terry McAuliffe is freshly arrived from the cocktail and canape circuit in Europe on a trade mission and is quickly heading out to the rugged and impoverished coal country of Wise County.

There, he, Attorney General Mark Herring and Health and Human Resources Secretary William A. Hazel will participate in a free clinic to help the mountain poor get free health care. The political opportunity is simple: Many of the 1,000 or more who will be attending the Remote Area Medical clinic are exactly the kind of people getting screwed over by the General Assembly’s failure to expand Medicaid to 400,000 low income Virginians.

RAM makes its Wise run every summer and people line up often in the wee morning hours to get a free medical and dental checkup. For many, it’s the only health care they get all year unless it’s an emergency. Another problem: Distances are great in the remote mountains and hospitals can be an hour away.

Mind you, this is Coal Country, the supposedly rich area upon which Barack Obama is waging war and harming local people by not going along with coal executives’ demands on environmental disasters such as mountaintop removal, keeping deep mine safety standards light and avoiding carbon dioxide rules.

The big question, of course,  is why if the land is so rich in fossil fuel, are the people so poor and in need of free medical care? It’s been this way for 150 years. And now, coal’s demise got underway in Southwest Virginia in 1991 when employment peaked at about 11,000. It is now at 4,000 or less. It’s getting worse, not better.

In June 2011, by coincidence, I happened along a RAM free clinic in Pikesville, Ky., not that far from Wise when I was researching my book, “Thunder on the Mountain: Death at Massey and the Dirty Secrets Behind Big Coal.” My photographer Scott Elmquist and I spotted the clinic at a high school. There must have been hundreds of people there —  some of whom told me they had been waiting since 1:30 a.m. It was about 8:30 a.m.

Attending them were 120 medical and dental personnel from the U.S. Public Health Service. They were dressed in U.S. Navy black, grey and blue colored fatigues. The University of Louisville had sent in about 80 dental chairs.

Poverty in Pike County had been running about 27 percent, despite the much-touted riches of coal. Pike is Kentucky’s biggest coal producer.

One man I spoke with said he had a job as a security guard, but he doesn’t qualify for regular Medicaid and can’t afford a commercial plan. In other words, had I interviewed him more recently and had he been a Virginian, he would have been lost through the cracks of Medicaid expansion. Alas, he’s in luck. In 2013, Kentucky opted for a “marketplace” expansion system where federal funds would be used to help lower income buy health plans through private carriers.

Lucky the man isn’t from here. The marketplace plan is exactly the kind that McAuliffe has proposed and exactly the one that stubborn Republicans such as Bill Howell in the General Assembly are throttling. The feds would pick up the bill for expanding Medicaid to 400,000 needy Virginians, at least initially.

Yet another irony. Expanded medical benefits are available just across an invisible border in two states whose coalfield residents somehow never got the great benefits of King Coal.

More Defense Cuts Plague Virginia

Special deliveryBy Peter Galuszka

Virginia continues to see painful military spending cuts in the aftermath of the years’- long U.S. intervention in Iraq and Afghanistan.

Among the latest news is that the Army may cut 3,600 jobs at Ft. Lee, ironically the site of a recent and large expansion, by 2020. That could result in a decline of 9,000 residents near Petersburg which is close to  the base.

Plus, the Air Force plans on cutting 742 positions at its Air Combat Command headquarters at Langley Air Force Base in Hampton although some of the positions are already vacant and won’t be filled.

These are just some of the changes that are affecting Virginia, which is the No. 2 defense industry state after California. Many of the cuts involve active duty personnel whose vacancies are not being filled or are being asked to take early retirement.

Defense industry jobs are likewise taking cuts. A report by the National Association of Manufacturers states that in 2014, California will lose the most military-related jobs (148,400) followed by Virginia (114,900) and then Texas (109,000). Maryland will lose 40,200 jobs, the report says.

Many of the jobs are in heavy manufacturing, such as aerospace and ship building, and search and navigational services, but general business and other services will also be affected.

The news is especially hard on Petersburg and nearby Ft. Lee which just a few years ago enjoyed a major boost after a Base and Realignment and Closure round consolidated many multi-service logistics and supply functions. The influx of thousands of soldiers, contractors and their families boosted the city and surrounding areas.

Hampton, the location of Langley Air Force Base, doesn’t seem to be in store for such heavy impacts since the cuts involve some jobs already being lost to attrition. Other bases and areas hurt by the Air Force cuts include Washington, D.C.; San Antonio; Texas; Dayton, Ohio; and Belleville, Illinois.

Newport News Shipbuilding, now owned by Huntington Ingalls Industries, could lose a deal to build one submarine and might delay another to build as Ford class nuclear attack carrier, if automatic defense budget cuts return in 2016. Another potential hit: refueling the nuclear-powered carrier George Washington but may mothball the ship if the budget cuts kick in. About 24,000 people work at Newport News Shipbuilding, making it the largest private employer in the state.

Besides the Washington area, Hampton Roads is greatly dependent upon defense spending. Some 47 percent of the regional economy depends on it. Anticipating more defense cuts, former Gov. Robert F. McDonnell formed a commission to come up with ideas before he left office this year. One of them is to be pro-active and recommend cuts of its liking before the federal government acts.

One of its recommendations cuts both ways on environmental issues. It recommends against offshore oil and gas drilling in watery areas where the military trains, thus making them available over the long term. It likewise recommends against wind turbines in the same areas.

These are interesting, but very difficult choices.

McAuliffe Hits Private IT Outsourcing

mcauliffeBy Peter Galuszka

Just a decade ago, privatizing and out-sourcing traditionally government work was all the rage.

Virginia’s Democrats and Republicans alike saw a philosophical advantage in fending off Information Technology, road maintenance and other work to for-profit, private companies who supposedly – if you believed the hype then  –could always do things better, faster and more efficiently than state workers.

The concept of “government” workers always seemed to be negative. Not only would taxpayers have to pay their health and retirement benefits, they might try to join unions and make labor negotiations even more difficult. It didn’t wash with Virginia’s conceit of being an anti-labor, “right-to-work” state that promised to keep workers docile as the state tried to recruit outside firms.

Now, Gov. Terry McAuliffe is turning this concept on its head. He is ordering a review of state contracts, especially on out-sourced IT service work that he says may be inefficient and expensive. “I am concerned that state government is inappropriately dependent on expensive contract labor when traditionally appointed state employees can perform at a higher level at a lower cost.”

Now that’s a major turn-around, even for a Democrat. After all, it was fellow Democrat and former Gov. and now U.S. Senator Mark Warner, currently running for re-election, that worked the get the state to accept a $2.3 billion contract for defense contractor Northrop Grumman to take over and upgrade the state’s antiquated IT system in 2005.

That deal proved disastrous as the contractor’s performance issues brought on bouts of oversight and renegotiation. The state ended up extending its contract with Northrop Grumman by three years.

An underlying problem is that while the contract lasts until 2019, the state must make some decisions if it wants to continue with the outsourcing route or start relying on its own state workers.

Another problem is whether the state identifies independent contractors as such or employees of state organizations. About 1 percent of the state’s workers were misidentified as independents. Apparently, state workers have their Social Security and taxes withheld from paychecks. But are they really independents? Or is it just window dressing to play homage to some fad thought up by fiscal conservatives?

McAuliffe is right to start thinking in these terms. What he’s going to have to face, however, is the conventional wisdom in Virginia that “public” is always bad and “private, for-profit” is always good. For evidence of this hidebound view, just read this blog regularly.