Category Archives: Finance

The Parental Backlash Against SOL Tests

SOL LogoBy Peter Galuszka

Although their numbers are small, more Virginia parents are refusing to have their children take the state’s Standards of Learning tests, saying that test preparation takes away from true education.

In the 2013 -14 school year, 681 SOL tests were coded as parent refusals out of the nearly three million given, with Northern Virginia, Prince William County in particular, having the highest number.

Some parents are annoyed that teachers in public schools spend so much time teaching how to take the SOLs, which are used to measure a child’s educational standing and also rate how well school districts are performing.

“Students can spend up to one-third of their time of the school year preparing for the tests and that is wrong,” says Gabriel Reich, an associate professor of teaching and learning at Virginia Commonwealth University. Last year, he refused to allow his fifth-grade daughter to take the tests.

It isn’t really clear if parents and their children have the legal right to take the tests or not. If parents refuse, the child gets a “zero.” That might go against the school’s overall rating.

How it affects the student isn’t clear. Continual refusals could keep children out of special programs, such as ones for gifted students. But students from private schools, where SOLs are not usually taken, regularly transfer to public schools with little problem.

In different parts of the state, parents have formed grass roots groups to educate and support parents who have concerns that the mania for standardized testing is hurting true education.

Throughout the state, ad hoc groups are forming where parents can meet and plan refusals. In Richmond, RVA Opt Out meets every third Monday evening of the month and has tripled its attendance in the past several years.

Confronting standardized testing is in part a reaction of politicians who insist that standardized testing is a primary – if not the only – way to make sure that students are being educated properly. Such tests have been around for years but got a strong boost in former President George W. Bush’s “No Child Left Behind” program of 2002.

Standardized testing has also been used as a weapon against teachers’ unions. Some politicians have suggested that data from SOLs and other tests be collated and configured to give individual teachers ratings that could be made public – something teachers associations bitterly oppose.

What’s more, SOL and other similar data have been used for purposes that have little to do with education. Realtors often collect schools’ performance data to push home sales in certain neighborhoods to give for sale prospects snob appeal.

Critics say that multiple-choice testing doesn’t always reflect a student’s ability to think or show what he or she really understands. It also doesn’t reflect creativity to draw, paint or perform or write music.

The anti-testing movement is growing nationally. In one case in New York state, about 1.1 million children in grades three through eight typically take reading and math tests. Last year, about 67,000 children skipped the tests.

The push-back is growing.

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.

Beware the Bonds

junk_bondsSweet Briar College had many problems, most notably a high tuition and shrinking enrollment, but the kiss of death was a high debt load. The small women’s college, which announced its intention to close earlier this year, had issued millions of dollars in bonds to pay for such projects as a Village Green that provided eco-friendly residential facilities. The announced closure of the college may have been accelerated by a potential default on $25 million in two outstanding bond issues, reports the News & Advance.

The warning bells had been sounding for more than ten years. But in 20o8 the board of directors approved an $11 million bond issue to build the $3 million Village Green as  well as a new fitness and athletics center.

Last November, S&P  revised its outlook on the BBB rating of the college’s 2006 bond issue from stable to negative. “The negative outlook was a result of numerous factors, including Sweet Briar’s enrollment challenges and high tuition discount rate,” wrote reporter Sherese Gore. “S&P warned of a potential lowering of its rating on the 2006 bonds during the two-year outlook period if there were further declines in enrollment and increased operating deficits.”

Bacon’s bottom line: The big question that bond rating agencies are asking about college finances these days is how well are student enrollments holding up? For most colleges and universities, tuition and fees paid by students is the dominant source of revenue. The cost has gotten so high that many families are balking, and enrollments are eroding at many institutions. The loss of revenue is all the more acute for colleges that have loaded up on debt. The obligation to hold debt obligations sacrosanct accentuates budget cuts to programs. If the quality of education or the residential experience is compromised, colleges run the risk of further enrollment declines, setting off a vicious cycle.

The United States hasn’t appeared to have learned anything from the 2007 real estate crash, which was driven by excessive indebtedness. Federal government borrowing has reached record levels, both in absolute numbers and as a percentage of the GDP. Exploiting near-zero interest rates, businesses are leveraging their balance sheets, taking on debt to increase their return-on-equity numbers while using cash flow to purchase shares. Even households, chastened by the recession and real estate crash, are beginning to take on more debt, although they haven’t matched the excesses of the 2000s. Scarily, China, Japan, France, Spain, Italy and other major economies have been every bit as undisciplined as the U.S. There will be a global debt reckoning.

There is no way of knowing when that day will come. But when it does, the fear-of-debt contagion will spread with frightening rapidity as confidence unravels, transmitted through the international economy in ways that no one today can predict. Survivors of the shake-out will be those who maintain tight financial discipline. For those of us concerned about public policy, that means paying close attention to the finances of state and local governments, industrial development authorities and colleges and universities.

– JAB

Dave Brat’s Bizarre Statements

 By Peter Galuszka

Almost a year ago, Dave Brat, an obscure economics professor at Randolph- Macon College, made national headlines when he defeated Eric Cantor, the powerful House Majority Leader, in the 7th District Brat Republican primary.

Brat’s victory was regarded as a sensation since it showed how the GOP was splintered between Main Street traditionalists such as Cantor and radically conservative, Tea Party favorites such as Brat. His ascendance has fueled the polarization that has seized national politics and prevented much from being accomplished in Congress.

So, nearly a year later, what has Brat actually done? From reading headlines, not much, except for making a number of bizarre and often false statements.
A few examples:

  • When the House Education and Workforce Committee was working on reauthorizing a law that spends about $14 billion to teach low-income students, Brat said such funding may not be necessary because: “Socrates trained Plato in on a rock and the Plato trained Aristotle roughly speaking on a rock. So, huge funding is not necessary to achieve the greatest minds and the greatest intellects in history.”
  • Brat says that the Affordable Care Act (Obamacare) is a step towards making the country be more like North Korea. He compares North and South Korea this way:  “. . . it’s the same culture, it’s the same people, look at a map at night, half the, one of the countries is not lit, there’s no lights, and the bottom free-market country, all Koreans is lit up. See you make your bet on which country you want to be, right? You want to go to the free market.” One problem with his argument:  Free market South Korea has had a single payer, government-subsidized health care system for 40 years. The conservative blog, BearingDrift, called him out on that one.
  • Politifact, the journalism group that tests the veracity of politicians’ statements, has been very busy with Brat. They have rated as “false” or “mostly false” such statements that repealing Obamacare would save the nation more than $3 trillion and that President Obama has issued 468,500 pages of regulations in the Federal Register. In the former case, Brat’s team used an old government report that estimated mandatory federal spending provisions for the ACA. In the latter case, Politifact found that there were actually more pages issued than Brat said, but they were not all regulations. They included notices about agency meetings and public comment periods. What’s more, during a comparable period under former President George W. Bush, the Federal Register had 465,948 pages, Politifact found. There were some cases, however, where Politifact verified what Brat said.
  • Last fall, after Obama issued an executive order that would protect up to five million undocumented aliens from arrest and deportation, Brat vowed that “not one thin dime” of public money should go to support Obama’s plan. He vowed to defund U.S. Citizen and Immigration Services but then was told he couldn’t do so because the agency was self-funded by fees from immigration applications. He then said he would examine how it spent its money.

The odd thing about Brat is that he has a doctorate in economics and has been a professor. Why is he making such bizarre, misleading and downright false statements?

Beware Stalling Growth in Northern Virginia

northern virginia mapBy Peter Galuszka

For at least a half a century, Fairfax County, Alexandria and Arlington County have been a growth engine that that has reshaped how things are in the Greater Washington area as well as the Old Dominion.

But now, apparently for the first time ever, these Northern Virginia localities have stopped growing, according to an intriguing article in The Washington Post.

In 2013, the county saw 4,673 arrivals but in 2014 saw 7,518 departures. For the same time period, Alexandria saw 493 arrivals and then 887 departures. Arlington County showed 2,004 arrivals in 2013 followed by 1,520 departures last year.

The chief reason appears to be sequestration and the reduction of federal spending. According to a George Mason University study, federal spending in the area was $11 billion less  last year than in 2010. From 2013 to 2014, the area lost 10,800 federal jobs and more private sectors ones that worked on government contracts. Many of the cuts are in defense which is being squeezed after the wars in Afghanistan and Iraq.

The most dramatic cuts appear to be in Fairfax which saw a huge burst of growth in 1970 when it had 450,000 people but has been slowing for the most part ever since. It still grew to 1.14 million people, but the negative growth last year is a vitally important trend.

Another reason for the drop offs is that residents are tired of the high cost and transit frustrations that living in Northern Virginia brings.

To be sure, Loudoun County still grew from 2013 to 2014, but the growth slowed last year from 8,904 newcomers in 2013 to 8,021 last year.

My takeaways are these:

  • The slowing growth in NOVA will likely put the brakes on Virginia’s move from being a “red” to a “blue” state. In 2010, Fairfax had become more diverse and older, with the county’s racial and ethnic minority population growing by 43 percent. This has been part of the reason why Virginia went for Barack Obama in the last two elections and has Democrats in the U.S. Senate and as governor. Will this trend change?
  • Economically, this is bad news for the rest of Virginia since NOVA is the economic engine for the state and pumps in plenty of tax revenues that end up being used in other regions. Usually, when people talk about Virginia out-migration, they mean people moving from the declining furniture and tobacco areas of Southside or the southwestern coalfields.
  • A shift in land use patterns and development is inevitable. The continued strong growth of an outer county like Loudoun suggests that suburban and exurban land use patterns, many of them wasteful, will continue there. The danger is that inner localities such as Fairfax, Arlington and Alexandria, will be stuck with more lower-income residents and deteriorating neighborhoods. The result will be that localities won’t have as much tax money to pay for better roads, schools and other services.
  • Virginia Republicans pay lip service to the evils of government spending and have championed sequestration. Well, look what a fine mess they have gotten us into.

The rest of the Washington area is seeing slowing growth, but appears to be better off. The District’s in-migration was cut in half from 2013 to 2014 but it is still on the plus side. Ditto Montgomery and Prince George’s Counties.

NOVA has benefited enormously from both federal spending and the rise of telecommunications and Web-based businesses. It is uncertain where federal spending might go and maybe increased private sector investment could mitigate the decline. Another bad sign came in 2012 when ExxonMobil announced it was moving its headquarters from Fairfax to Houston.

In any event, this is very bad news for NOVA.

Amateur Hour at the General Assembly

virginia_state_capitol502By Peter Galuszka

If you are an ordinary Virginian with deep concerns about how the General Assembly passes laws that impact you greatly, you are pretty much out of luck.

That’s the conclusion of a study by Transparency Virginia, an informal coalition of non-profit public interest groups in a report released this week. Their findings  came after members studied how the 2015 General Assembly operated.

Among their points:

  • Notice of committee hearings was so short in some instances that public participation was nearly impossible.
  • Scores of bills were never given hearings.
  • In the House of Delegates, committees and subcommittees did not bother to record votes on 76 percent of the bills they killed.

“Despite a House rule that all bills shall be considered, not all are. Despite a Senate rule that recorded votes are required, not all are,” states the 21-page report, whose main author is Megan Rhyne, executive director of the Virginia Coalition for Open Government. Transparency Virginia is made up of 30 groups, including the American Civil Liberties Union, NARAL Pro-Choice Virginia, the the Virginia Education Association and the League of Women Voters in Virginia.

The scathing report underscores just how amateurish the General Assembly can be. It only meets for only 45 days in odd-numbered years and 60 days in even-numbered years. The pay is pin money. Delegates make only $17,640 a year and senators earn $18,000 annually.

It is not surprising then that a part-time group of 100 delegates and 40 senators can’t seem to handle their 101 committees and subcommittees that determine whether the consideration of thousands bills proceeds fairly and efficiently.

“A Senate committee chair did not take comment on any bills on the agenda except for the testimony from the guests of two senators who were presenting bills,” the report states. In other cases, legislators were criticized by colleagues for having too many witnesses. Some cut off ongoing debate by motioning to table bills. Bills were “left in committee” never to be considered.

The Virginia Freedom of Information Act requires that open public meetings be announced three working days in advance. A General Assembly session is considered one, long open session. But the FOIA is often subverted by sly legislators who manipulate the agendas of committees or subcommittees or general sessions.

Agendas of the General Assembly are not covered by the FOIA because there is too much work to cram in 45 or 60 days. In the case of local and state governments, similar meetings are, presumably because they meet more regularly. House and Senate rules do not stipulate how much notice needs to be given before a committee or subcommittee session. So, crucial meetings that could kill a bill are sometimes announced suddenly.

The setup favors professional lobbyists who stand guard in the Capitol ready to swoop in to give testimony and peddle influence, alerted by such tools as “Lobbyist-in-a-Box” that tracks the status of bills as they proceed through the legislature. When something important is up, their beepers go off while non-lobbyist citizens with serious interests in bills may be hours away by car.

The report states: “While most of Virginia’s lobbyists and advocates are never more than a few minutes from the statehouse halls, citizens and groups without an advocacy presence may need to travel long distances.” Some may need to reschedule work or family obligations, yet they may get only two hours’ notice of an important meeting. That’s not enough time if they live more than a two-hour drive from Richmond.

The report didn’t address ethics, but this system it portrays obviously favors lobbyists who benefit from Virginia’s historically light-touch approach when it comes to limited gifts. That issue will be addressed today when the General Assembly meets to consider Gov. Terry McAuliffe’s insistence that a new ethics bill address the problem of allowing consecutive gifts of less than $100 to delegates or senators.

The only long-term solution is for Virginia to consider creating a legislature that works for longer periods, is better paid, more professional and must adhere to tighter rules on bill passage. True, some 24 states have a system somewhat like Virginia and only New York, Pennsylvania and California have truly professional legislatures.

The current system was created back in Virginia was more rural and less sophisticated. But it has grown tremendously in population and importance. It’s a travesty that Virginia is stuck with amateur hour when it comes to considering legislation crucial to its citizens’ well-being.

Pulp and Circumstance in Chesterfield

Gov. Terry McAuliffe talks with Jerry Peng of Tranlin

Gov. Terry McAuliffe talks with Jerry Peng of Tranlin

By Peter Galuszka

Jim Bacon has a fascinating cover story about the future of Short Pump in the latest Henrico Monthly magazine.

Not to be outdone, I humbly point out that I have a cover story in the Chesterfield Monthly, a sister publication.

I explain how Chesterfield County, the state and other officials landed Shandong Tranlin, an advanced paper mill in the eastern part of Chesterfield. At $2 billion, it’s the biggest Chinese greenfield project ever planned in this country.

The story actually starts when Jerry Peng, a Chinese businessman who happened to go to the Darden School at the University of Virginia, went to the U.S. to look for a place for a new type of paper plant. After becoming frustrated looking on the U.S. West Coast, he plugged his Hoo connections in Virginia and “Project Cavalier” was born.

In less than two years, Virginia and Chesterfield landed the plum. It will employ 2,000 within a few years. It is a story about how county, state and private industry worked quickly and well together. The whirlwind of negotiations credits both former Gov. Robert F. McDonnell, current Gov. Terry McAuliffe and their staff.

The pulp mill is expected to be less polluting because it does not use trees for pulp but uses leftover farmfield waste such as wheat and corn stalk. There is little air pollution because most processes involve steam. There is no extremely toxic dioxin produced because there is no bleaching of paper product. Leftovers are then collected into a “black liquor” that supposedly can be used as a less polluting farm fertilizer which may be used by Virginia farmers that now use polluting fertilizers harmful to the Chesapeake Bay.

It just so happened that Chesterfield had all the right ingredients – proximity to farm field waste; ample highway and rail connections, a large, skilled workforce; deepwater access, lots of process water from the James River and plenty of locally-available power.

It’s is part of a switch in economic policy by the Middle Kingdom. After three decades of drawing in foreign investment, Beijing is now looking for advanced industrial countries. That is why a Chinese firm spent $4 billion to buy Smithfield Foods. Now, there’s Shandong Tranlin.

I do have my doubts about the much-touted environmental benefits of the project, having been to China and seen the enormous industrial pollution there. Air quality in Beijing or Shanghai is routinely many times the highest permissible levels in the West. But plenty of people seem to think that Shandong Tranlin is on to something.

Let’s hope so.

(Note: the Henrico and Chesterfield Monthly are doing some interesting new journalism in the area. Watch for them.)

NRDC Says Clean Power Plan Benefits Virginia

coal plant burnsBy Peter Galuszka

In a sweeping contradiction of the positions of Dominion Virginia Power and assorted politicians and regulators, the Natural  Resources Defense Council has issued a report saying that Virginia will benefit by following a proposed federal plan to cut carbon dioxide.

The U.S. Environmental Protection Administration has put forth a proposed plan for comment that would cut carbon dioxide pollution intensity — measured in pounds per megawatt hour of electricity– in the state by 38 percent by 2030.

The draft plan brought on protests from Dominion, the State Corporation Commission, Gov. Terry McAuliffe, The Virginia Department of Environmental Quality and many legislators who say compliance with the plan would cost ratepayers an extra $5 billion to $6 billion in rate hikes and force the closure of some coal-fired plants.

The situation was considered so dire that Dominion convinced the General Assembly to pass a bill letting it freeze its rate base and avoid audits by the SCC for five years.

Reading the NRDC document is like reading an instruction manual from another planet. The key point:

“The Commonwealth is already 80 percent on the way toward achieving the EPA Clean Power Plan’s carbon reduction for the state,” it says. The remaining 20 percent goal could be reached by pressing on with renewable energy and energy efficiency while developing a robust new work force that would total about 5,600 “and the state’s households and businesses would save $1 billion on their electric bills by 2020.”

One reason for the progress in achieving the goal is that Dominion has converted coal plants to natural gas or had announced plans to shut down some aging coal plants .

The NDRC notes that the Clean Power Plan does not specifically target coal-fired plants or other fossil fuel units and leaves it to the utilities to choose how they want to achieve the goals. Among ways to do this are to make coal plants more efficient, use natural gas plants more effectively by switching them on before coal plants and increasing renewables and efficiency.

Deutsche Bank reports that by 2016, solar power (which only just beginning to be tapped) will be cheaper than the average retail power, the report says.

The NRDC report brings up another topic that rarely is discussed in Virginia. Switching to cleaner power can “usher in climate and health benefits worth an estimated $55 billion to $93 billion by 2030. This could prevent from 2,700 to 6,600 premature deaths — a topic rarely broached in Richmond.

As for concerns of base loaded reliability, the report says that PJM, the regional grid to which Virginia belongs, can kick in during a major and unexpected plant outage with 3,350 megawatts of backup electricity.

Another interesting fact: NDRC reports that coal’s share of Virginia’s generation is now only about 20 percent. Dominion had reported it as being up to 49 percent of its mix a few years back. It is hard to understand given that Dominion has been shutting down coal-plants that are 50 or 60 years old. Opponents of the EPA’s new rules claim the plants are being shut down because of EPA’s “War on Coal” but simple age is the more logical reason.

In any event, it is amazing that hardly any of the points raised by NRDC were part of the harried discussion against the proposed Clean Power Plan and Dominion’s almost hysterical need for rate freezes and freedom from audits so it could have time assessing just how damaging the proposed Clean Power Plan would be.

What’s needed is an honest and transparent discussion and review of what the plan really is, how much it will really cost and how its goals can be achieved. That debate cannot be held captive by bankrolled legislators and regulators bullied by utilities.

Double Take: Politically Motivated Pensions Investments Do What?

Say_whatState pension plans that manage their own U.S. equity investments tilt their portfolios to stocks located within their state. Amazingly enough, the in-state stocks tend to outperform the overall stock holdings “by a wide margin,” conclude the authors of “The In-State Equity Bias of State Pension Plans,” published by the National Bureau of Economic Research. The reason, they suggest, is that investing in companies close to home confers an informational advantage.

The Virginia Retirement System is one of the 27 pension plans included in the study. The paper did not break out the VRS’s performance, so there is no way for readers to know if the pension system hewed to the general rule or was an exception from it.

Not so surprising: The authors found evidence of political influence in the stock-selection process. But get this — “these politically motivated within-state holdings yield excess returns for the pension fund.” The authors concluded that their results are “broadly consistent with the importance of networking in fund management.”

My naive faith in the corruption of the system is shaken.Whatever happened to good old-fashioned cronyism, payola and screwing the public?

– JAB

A New, Improved Ken Cuccinelli?

ken-cuccinelliBy Peter Galuszka

Is one-time conservative firebrand Ken Cuccinelli undergoing a makeover?

The hard line former Virginia attorney general who lost a bitter gubernatorial race to Terry McAuliffe in 2013 is now helping run an oyster farm and sounding warning alarms about a rising police state.

This is remarkable switch from the man who battled a climatologist in court over global warming; tried to prevent children of illegal immigrants born in this country from getting automatic citizenship; schemed to shut down legal abortion clinics; tried to keep legal protection away from state gay employees; and wanted to arm Medicaid investigators with handguns.

Yet on March 31, Cuccinelli was the co-author with Claire Guthrie Gastanaga, executive director of the American Civil Liberties Union of Virginia of an opinion column in the Richmond Times Dispatch. Their piece pushes bipartisan bills passed by the General Assembly that would limit the use of drones and electronic devices to read and record car license plate numbers called license plate readers or LPRs.

Cuccinelli and Gastanaga say that McAuliffe may amend the bills in ways that would expand police powers instead of protect privacy. “The governor’s proposed amendments to the LPR bills gut privacy protections secured by the legislation,” they write. The governor’s amendments would extend the time police could keep data collected from surveillance devices and let police collect and save crime-related data from drones used during flights that don’t involve law enforcement, they claim.

When not protecting Virginians from Big Brother, Cuccinelli’s been busy oyster farming. He has helped start a farm for the tasty mollusks on the historic Chesapeake Bay island of Tangier. According to an article in The Washington Post, Cuccinelli got involved when he was practicing law in Prince William County after he left office.

He would visit the business and get roped into working at odd jobs. He apparently enjoyed the physical labor and the idea that oysters are entirely self-sustaining and help cleanse bay water.

Environmentalists scoff at the idea, noting that as attorney general, Cuccinelli spent several years investigating Michael Mann, a former University of Virginia climatologist who noted that humans were responsible for the generation of more carbon dioxide emissions and that has brought on climate change.

Some have pointed out that if Cuccinelli had had his way, he would have helped quash climate science, generated even more global warming and sped up the inundation of Tangier Island by rising water levels.

It will be interesting to see if Cuccinelli intends to rebrand himself for future political campaigns and how he tries to reinvent himself.