Category Archives: Labor & workforce

Tobacco Commission Needs Huge Makeover

tobacco leafBy Peter Galuszka

One more glaring example of mass corruption in Virginia is the grandly named Virginia Tobacco Indemnification and Community Revitalization Commission formed 14 years ago to dole out Virginia’s share of a $206 billion settlement among 45 other states with cigarette makers.

I’ve been writing for years about how millions of dollars are doled out with little oversight to economic development projects supposedly helpful to the former tobacco-growing parts of the state from the bright leaf belt around Dinwiddie out west to the burley leaf land of the mountains.

There have been no-strings giveaways to absentee tobacco quota holders, a board member sent to prison for siphoning off grant money and the shenanigans of the extended Kilgore family which is very politically powerful in those parts. The commission even figured in the McDonnell corruption trial starring the former and now convicted governor and back-slapping witnesses for the prosecution, entrepreneur and tobacco-believer Jonnie R. Williams Sr.

I revisit the issue in Sunday’s Washington Post and I ask the obvious question of why no one seems to watching the commission. I raise broader ones, too, such as why the commission  serves only people in the tobacco belt. That doesn’t seem fair since the Attorney General’s office represented all of the state in the 1998 Master Settlement Agreement against four major tobacco firms. People in Hampton Roads, Arlington, Onancock and Winchester should be benefit but get nothing from the settlement. They didn’t  because tobacco road legislators pulled a fast one back in 1999 when they set things up.

There needs to be a thorough disassembling of the commission’s current governance structure with many more people far from Tobacco Road included. There’s far too much family and friend back-scratching as it is. It is like watching a vintage episode of the Andy Griffith show but it really isn’t funny.

(Hat tip to James A. Bacon Jr. who spotted the commission as a great story back in the year 2000 when he was publisher of Virginia Business).

So, please read on.

Genius-Free Virginia

geniuses

by James A. Bacon

Economic development has become a game not just of recruiting corporate capital but of developing, recruiting and retaining human capital. Much has been written about the desirability of recruiting members of the “creative class,” the entrepreneurs, scientists, artists and educators who contribute disproportionately to entrepreneurship and economic growth. But how about the super creatives — the 1%, so to speak, of creativity? No one has tracked them…. until now.

The MacArthur Foundation has released data showing the origins and present whereabouts of 897 exceptionally creative individuals in the arts, sciences, humanities and public policy sphere recognized by the Foundation and bestowed with a no-strings-attached $625,000 stipend. The data show two things: (1) MacArthur geniuses are born disproportionately in California and the Northeastern U.S., and (2) they gravitate in huge numbers to California and, to a lesser extent, a sub-set of Northeastern states: New York, New Jersey and Massachusetts.

creativity_on_moveIt is discouraging to see that Virginia is arid ground for producing geniuses. We’ve fallen a long way since the days of the Founding Fathers! Only three MacArthur fellows were born in the state. The silver lining is that the state has enjoyed a net gain of 10 MacArthur fellows due to in-migration. We may not be producing geniuses but at least we’re attracting them. Still, the number residing here still is meager compared to many other states.

The MacArthur Foundation provided little analysis of what accounts for the birthing and migration of geniuses. Perhaps the paucity of super-creative people in Virginia and the South generally reflects a lower quality education system. One wonders, for example, if Virginia’s emphasis on Standards of Learning — elevating the academic performance of the entire student body to minimum standards, which puts the focus on weaker students — will do much of anything to elevate the number of super-achievers.

One also might ask what factors impel geniuses to move. They are far more likely (79%) to move from their state of birth than the general population (30%) or the college-educated population (40%). More than one-fifth of MacArthur geniuses came to the United States from abroad. Scientific geniuses migrate to centers of research excellence. Artistic geniuses migrate to cultural centers. Geniuses in the humanities migrate to communities with top universities. That explains the concentrations in California, New York and, to a lesser extent, Boston, and the exodus of geniuses from Pennsylvania, which creates geniuses aplenty but has trouble hanging onto them.

The handful of geniuses who live in Virginia, I suspect, are found mostly in Northern Virginia, in the orbit of Washington, D.C. Who knows, there may be one or two in Charlottesville. (If someone has the time, they can peruse the list of MacArthur fellows here to see where Virginia’s geniuses are located.) Among the MacArthur Foundation’s main areas of focus, one is “public issues.” Presumably, many of grantees in this field are located in Washington, D.C. (home to 32 geniuses) and the outlying regions of Maryland (15 geniuses) and Virginia (13 geniuses).

What hasn’t been demonstrated is whether the geography of geniuses impacts the economy. Richard Florida demonstrated a clear connection between the creative class and economic prosperity but no one yet has shown a connection between concentrations of MacArthur fellows and economic vitality. Perhaps that’s because no one has studied the issue.

There’s also one other possibility: Maybe the types of people recognized for creative genius reflect the values and worldview of the civic elite in Chicago, where the MacArthur Foundation is located. Are any of MacArthur’s fellows champions of traditional values, fiscal conservatism and free markets favored by the genius-free heartland? It’s worth a study.

Using Big Data to Put Veterans Back to Work

veteransby James A. Bacon

Unemployment among veterans in the United States is higher than that for the population at large. The problem is particularly acute among post 9/11 veterans, for whom the unemployment rate ran 9.0% in 2013 — nearly 50% higher than the 6.2% rate for all Americans, according to data from the U.S. Congress’ Joint Economic Commitee.

The silver lining for Virginians is that the unemployment rate for young vets in the Old Dominion was actually lower than the statewide average — only 4% compared to 5.4%.

Those figures alone are grounds for thinking that Virginia is more committed than many other states to promote veteran employment. In one example of that state’s commitment, the commonwealth helped pioneer a public-private open data collaborative, Veteran Talent, to shed light on veteran employment issues. The Virginia Employment Commission contributed data on unemployed veterans in each county by age, education attainment and the occupation code for the job they seek.

Veteran Talent, a project funded by the Duffield Family Foundation, mashed up data from numerous public and private sources, including U.S. Census data and job sites like Monster.com, to create a detailed national picture of how many unemployed veterans there are, where they are located, what job skills they possess and what skills employers are looking for. Not only will the searchable database suggest where veterans could be focusing their job searches geographically and where employers can identify pockets of potential employees, but it allows researchers to plumb the data for insight into the nature of the challenge.

“We need a clear understanding of the problem,” says Aneesh Chopra, co-founder of big-data and predictive-analytics firm Hunch Analytics and former chief technology officer in the Obama administration, who spear-headed the effort. We’ve had the data all along, he says, but it resided in numerous unconnected databases. By mashing up the data and making it accessible to the public, Veteran Talent allows people to spot patterns and make connections that would have been impossible before.

The Corporate Executive Board Talent Neuron used the database to examine how many veterans would qualify for entry-level technology jobs. In Virginia, for example, Talent Neuron found 681 technology jobs posted by employers committed to hiring veteran talent. Of those, about 190 are entry-level. The analysis also identified about 275 trainable, unemployed veterans in Virginia alone.

While unemployed veterans may not possess all the technology requirements needed to match those job requirements, they may meet some criteria. In other words, they have a shorter training bridge to cross than someone from the general population in order to qualify for an entry tech job. Says Chopra: “The current workforce system isn’t doing that.”

Research by John Parman, a College of William & Mary economics professor, found that unemployment rates for veterans varies in Virginia from below 2% in Alexandria and Stafford County to more than 11% in Bedford County and the City of Roanoke. Jurisdictions with more dynamic economies that experience more income mobility show lower veteran unemployment rates, while jurisdictions with less mobility show higher veteran unemployment rates. But veterans don’t seem to benefit as much from higher-mobility economies than the general population does.

“These findings … lead to important considerations when crafting policies targeted at solving veteran unemployment issues,” writes Parman. “Using non-veteran data to predict the experiences of veterans can be misleading and policies targeting reductions in general unemployment rates may have the unintended consequence of widening gaps between veteran and non-veteran outcomes.”

The Huge Controversy Over Gas Pipelines

atlantic coast pipeline demonstratorsBy Peter Galuszka

Just a few years ago, Gov. Terry McAuliffe seemed to be a reasonable advocate of a healthy mix of energy sources. He boosted renewables and opposed offshore oil and gas drilling. He was suspicious of dangerous, dirty coal.

Then he started to change. During the campaign last year, he suddenly found offshore drilling OK, which got the green community worried. But there’s no doubt about his shifts with his wholehearted approval of the 550-mile Atlantic Coast Pipeline proposed by Duke Energy, Piedmont Natural Gas and AGL Resources, along with Richmond-based Dominion, one of McAuliffe’s biggest campaign donors.

The $5 billion Atlantic Coast Pipeline is part of a new phenomenon – bringing natural gas from the booming Marcellus Shale fields of Pennsylvania, Ohio and northern West Virginia towards busy utility markets in the Upper South states of Virginia, North Carolina and parts ones even farther south. Utilities like gas because it is cheap, easy to use, releases about half the carbon dioxide as coal, which is notorious for labor fatalities, disease, injuries and global warming.

The Atlantic Coast Pipeline would originate at Clarksburg, W.Va. (one of my home towns) and shoot southeast over the Appalachians, reaching heights of 4,000 feet among rare mountain plants in the George Washington National Forest, and then scoot through Nelson, Buckingham Nottoway Counties to North Carolina. At the border, one leg would move east to Portsmouth and the Tidewater port complex perhaps for export (although no one has mentioned that yet). The main line would then jog into Carolina roughly following the path of Interstate 95.

It’s not the only pipeline McAuliffe likes. An even newer proposal is the Mountain Valley Pipeline that would originate in southern West Virginia and move south of Roanoke to Chatham County. It also faces strong local opposition.

atlantic_coast_pipeline mapThe proposals have blindsided many in the environmental community who have shifted some of their efforts from opposing coal and mountaintop removal to going after hydraulic fracking which uses chemicals under high pressure and horizontal drilling to get previously inaccessible gas from shale formations. The Marcellus formation in Pennsylvania, New York, Ohio and West Virginia, the birthplace of the American oil and gas industry, has been a treasure trove of new gas.

The fracked gas boom has been a huge benefit to the U.S. economy. It is making the country energy independent and has jump started older industries in steel, pipe making and the like. By replacing coal, it is making coal’s contribution to the national energy mix drop from about 50 percent to less than 40 percent and is cutting carbon dioxide emissions that help make for climate change.

That at least, is what the industry proponents will tell you and much of it is accurate. But there are big problems with natural gas (I’ll get to the pipelines later). Here’s Bill McKibben, a Middlebury College professor and nationally known environmentalist writing in Mother Jones:

Methane—CH4—is a rarer gas, but it’s even more effective at trapping heat. And methane is another word for natural gas. So: When you frack, some of that gas leaks out into the atmosphere. If enough of it leaks out before you can get it to a power plant and burn it, then it’s no better, in climate terms, than burning coal. If enough of it leaks, America’s substitution of gas for coal is in fact not slowing global warming.

Howarth’s (He is a biogeochemist) question, then, was: How much methane does escape? ‘It’s a hard physical task to keep it from leaking—that was my starting point,’ he says. ‘Gas is inherently slippery stuff. I’ve done a lot of gas chromatography over the years, where we compress hydrogen and other gases to run the equipment, and it’s just plain impossible to suppress all the leaks. And my wife, who was the supervisor of our little town here, figured out that 20 percent of the town’s water was leaking away through various holes. It turns out that’s true of most towns. That’s because fluids are hard to keep under control, and gases are leakier than water by a large margin.

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BRT to Nowhere?

West Broad Street: not exactly pedestrian friendly

West Broad Street: not exactly pedestrian friendly

by James A. Bacon

There’s a whole lot of fuzzy thinking going on. People in the Richmond area are so enamored with the prospect of building a Bus Rapid Transit route through the city that they are saying the most astonishing things.

Bus Rapid Transit can be a great idea if done correctly. But it must be done correctly, or it will create a long-term drain on public resources in the City of Richmond and, to a lesser extent, in Henrico County that neither locality can afford.

In the company of Governor Terry McAuliffe, Mayor Dwight Jones and other local luminaries, U.S. Transportation Secretary Anthony Foxx announced Saturday that Uncle Sam will provide a $24.9 million grant toward the cost of the $54 million project, which would run along Broad Street from Rocketts Landing to Willow Lawn. (See the Times-Dispatch story here.) Virginia, flush with transportation tax revenue from former Governor Bob McDonnell’s tax increase, will kick in $16.8 million toward the project, while Richmond and Henrico will contribute a total of $8 million. (If that adds up to $49.7 million on your calculator like it does on mine, that leaves more than $4 million unaccounted for.)

Local officials touted BRT as a jobs project. “We’re going to make jobs available to people,” said Jones. The bus would shave a quarter hour travel time along the 7.6-mile route, said Foxx. For a person in poverty or without a car, that could mean “the difference between getting a job or not.” Then came this from Rep. Bobby Scott, D-3rd: “BRT will allow thousands of people in the East End of Richmond to apply for jobs in the West End they wouldn’t even think about applying for before.”

Really? At the eastern terminus, the BRT system will be anchored in Rocketts Landing, an upscale, New Urbanist development along the James River — across the railroad tracks from Fulton Hill, home to thousands of poor and working-class African-Americans. Is this some kind of cruel joke? The lawyers, investment bankers and advertising executives living in Rocketts Landing are not the ones who need access to minimum-wage retail jobs in the Broad Street corridor west of town. For the people who need the jobs, it will be a long, long walk to the BRT station.

Moving west along the proposed route, there aren’t many poor people living in Shockoe Bottom, a commercial area lined by the upscale Tobacco Row condos and apartments on the one side and yuppified apartments for the creative class on the other. As the bus route proceeds through downtown, it does pass through the traditional African-American Jackson Ward neighborhood, but that is rapidly gentrifying as more affluent Richmonders seek proximity to the jobs and amenities of downtown. Further west, the route passes through VCU, but college students hardly constitute a downtrodden class (until they have to start paying back their student loans).

West of downtown, the BRT route skirts past the Carver neighborhood with a couple thousand African-Americans. BRT could provide them better access. But the route then passes Scott’s Addition, an old industrial park that traditionally has had little residential, although it is gentrifying now with the addition of apartments and condos designed for middle-class tastes. Near the western terminus at Willow Lawn, the neighborhoods are middle-class.

For the most part, the only working poor of Richmond’s East End whom the BRT will benefit are those who take a local bus downtown and then change routes. That shaving 15 minutes off their travel time makes the difference between those people having jobs and not having jobs, however, is not a proposition that BRT backers have proved.

The other question that no one seems willing to address — at least not in public speeches — is what happens when the poor East Enders get off the bus on the West side of town. On the plus side, they can walk to their destination on sidewalks — yes, there are sidewalks on this part of Broad Street, unlike farther west. On the downside, the sidewalks are not the kind that actually invite people to walk on them, as can be see in the Google Street View atop this post. The Broad Street stroad is designed for cars, not walking. The sidewalks abut right up to streets with cars traveling 35 miles per hour or faster. Crossing the street can be challenging. Visually, the landscape is barren and inhospitable.

Even more grievous is the fact that Richmond and Henrico need to zone for higher-density, mixed-use, pedestrian-friendly development along the corridor. Zoning for greater density is the easy part. The hard part is coaxing property owners not to build a new generation of the same old low-rise schlock that aligns the corridor. Another issue that neither jurisdiction has answered — not in public statements, at least — how much it will cost to build “complete street” streetscapes that accommodate people and bicycles as well as cars and BRT buses.

I hope I’m wrong, but I can’t escape the feeling that the state, the feds and the localities have gotten ahead of themselves. They’ve got the money, so they’re going to build the project, regardless of whether they have put other elements of a corridor-revitalization plan in place. Current estimates say the BRT will cost $2.7 million a year in ongoing subsidies to operate. That could be a modest price to pay if the project stimulates a transformation of the Broad Street Corridor along the lines of Cleveland’s Healthline Bus Rapid Transit system, which has been cited as an example of what Richmond can accomplish. But that transformation will not occur in a vacuum. The job does not end with construction of the BRT line. It will take decades of follow-up to the community that arises along it.

A Better Route

Yeah, GRTC buses have bicycle racks now. But bus companies aren't pursuing disruptive innovation.

Yeah, GRTC buses have bicycle racks now. But bus companies aren’t pursuing disruptive innovation.

by James A. Bacon

The GRTC Transit System, like most municipal bus systems, provides a one-size-fits-all transportation service. Whatever the route, time of day and level of demand, GRTC runs a standard city bus capable of carrying nearly 60 seated and standing passengers along fixed routes. Everyone pays the same fare ($1.50 on local routes), regardless of time or distance traveled. We’ve all seen the big GRTC buses driving around with two or three passengers. We all know that, given the cost of paying a driver and operating a vehicle, many if not most bus routes operate at a loss. It would surprise few to hear that GRTC costs U.S., state and local taxpayers $33 million in subsidies to operate in fiscal year 2014.

Many people justify this significant subsidy on the grounds that buses provide a way for car-less poor people to get to their jobs. What the Richmond metropolitan region needs, they say, is more bus service so poor people can reach a broader range of job opportunities. Environmentalists also favor buses on the ground that they generate less pollution and carbon dioxide emissions than automobiles do. Local government officials in Henrico and Chesterfield counties tend to oppose the expansion of bus routes not on grounds of principle but on grounds of economy. Their argument: We just can’t afford it.

If we count on fiscally strapped local governments to loosen up the purse strings to pay GRTC to open new routes, we’ll be waiting a very long time. Maybe it’s time to start thinking differently: how to expand mass transit without GRTC. A free market in transportation services, I contend, would provide superior service to poor people. It would increase shared ridership and reduce pollution emissions. As a bonus, it would save taxpayers millions of dollars in subsidies.

Yes, mass transit in the United States is that bad. GRTC is reasonably well run by the standards of other government-owned monopoly transit systems. Government-owned monopolies worked adequately for decades when innovation in cars and buses was incremental in nature – installing seatbelts or switching from diesel to natural gas. But the traditional model is hopelessly inadequate when the transportation industry stands on the edge of the most momentous transformation since Henry Ford’s invention of the assembly line.

The information technology-communications revolution is sweeping through transportation, just as it is through consumer electronics, building automation, health care, manufacturing and every other sector of the economy. Thanks to smartphones, it is easier than ever for drivers and passengers to locate one another. Thanks to Big Data analytics, it is easier for transportation-service companies to predict where and when transportation demand will occur and to mobilize assets accordingly. New technology is inspiring new business models that literally no one was thinking about 10 years ago.

The heralds of this new wave are Uber and Lyft, Silicon Valley-funded companies that have started competing with taxicab services in many metropolitan regions across the country. These companies are targeting the high end of the transportation services market, charging premium rates for customers willing to pay for a limousine-like ride at a moment’s notice. Predictably, they are getting pushback here in Virginia from taxicab companies. The regulatory future is uncertain. But whatever happens to Uber and Lyft, the new technology is here to stay. Taxi companies are already adopting it themselves.

Bridj, a Boston-area company, charges $6 per ride in comfortable, Wi-Fi- equipped coaches to travel from suburban locations to downtown Cambridge and Boston. Thousands of riders, it appears, are willing to pay a premium price for a premium service that municipal bus companies can’t match with their one-size-fits-all mind-set. As this new industry continues to innovate, it’s just a matter of time before entrepreneurs use the same technologies to serve lower price points. In a free market, there are few barriers to entry; someone will figure out how to serve poor people and do it cheaper than the transit companies can.

Eventually, someone will devise a smartphone driver-rider matching service open to all comers. Anyone with decent credit and a good driving record will be able to fork out $32,000 for a 12-seat van and start his own jitney service. In developing countries around the world – even in countries where $32,000 is a lot of money – jitney service is affordable to poor city dwellers. Surely in America, where we have some of the richest poor people in the world, someone will figure out how to convey them to major employment centers.

The transportation revolution doesn’t end there. Automobile companies are rethinking the idea that everyone needs to own his or her own car. Some think that the future is transportation-as-a-service. Outside San Diego, Calif., real estate developer Rancho Mission Viejo is partnering with Daimler AG, owner of Mercedes Benz, to roll out a service that provides subscribers access to cars, scooters, buses, shuttle vans and car-pooling, primarily for use in its Ladera and Sendero communities. The aim isn’t to persuade residents to go totally car-free, just to go car-lite. The goal is to cut the cost of mobility – $9,000 yearly to own and operate the average car – in half.

Environmentalists and anti-poverty warriors will continue to pressure Henrico and Chesterfield officials to subsidize the expansion of GRTC into the two counties. Given the paucity of walkable, higher-density neighborhoods in suburban Richmond and the lack of congestion – it’s the least congested of America’s 51 largest metros – the economics for mass transit will always be difficult. Rather than throwing money at an antiquated business model, government officials should encourage the emerging free-market alternatives. Roll out the welcome mat to Uber and Lyft. Ask Bridj to check out our market. Sweep away barriers that prevent jitneys from going into business. Beg Daimler AG to bring its transportation-as-a-service to the Richmond region.

We have a choice: Embrace the transportation past or the transportation future. I’ll take the future.

This column was published originally in Henrico Monthly and Chesterfield Monthly this month.

A Surprising Source of Resilience in SW, Southside Virginia

start-upsBack on the subject of entrepreneurship and business start-ups in Virginia… The Virginia Performs website provides a useful overview of data that describes the climate for business growth in the state. With the caveat that the data is subject to reporting lags, hence a little of out date, the picture is a modestly favorable one. The Old Dominion excels in the percentage of technology firms and the percentage of fast-growth firms, and fares in line with national averages for patents per capita, venture capital, business start-ups and university spin-offs.

Perhaps the most surprising finding emerges from the regional breakdown of business start-ups per 10,000 population broken down by region, as seen in the chart above. After years of lagging statewide averages, Southside Virginia has come on strong in recent years, surpassing even Northern Virginia in 2012. Southwest Virginia has out-performed the state average in several recent years, although it dipped in 2012.

With the perception of “Virginiagal2,” who has been touting the entrepreneurial potential for areas outside Virginia’s urban crescent in the comments section of this blog, not many observers would have predicted this trend. Of course, one must be careful with the data. We don’t know, for instance, what proportion of these new businesses are comprised of home-based businesses and micro-businesses with limited growth prospects, and what number might have fast-growth potential. Regardless, the rate of business formation suggests a hidden resilience in the Southside and Southwest Virginia economies that may keep those regions economically afloat in the face of labor-market economies that favor the major metros.

– JAB

“The Economy of the Past Is Over.” But What Comes Next?

McAuliffeby James A. Bacon

So, Virginia faces a $2.4 billion projected budget shortfall, which Governor Terry McAuliffe blames largely on defense funding cuts mandated by sequestration. Surprise, surprise. We’ve seen this train wreck coming for years. Some (including multiple writers on this blog) have seen it more clearly and shouted about it more loudly than others. Now it’s here — the slowing economic growth, the stalled budget revenues and the general malaise. The question is, what do we do about it?

McAuliffe is making the right noises. As the Washington Post reports, the governor said the state needs to make a fundamental shift away from its reliance on federal spending. “It is obvious that the economy of the past — where we could simply take the economic benefits of the Department of Defense for granted — is over,” he said. “We need to move past this reliance — and build a new entrepreneurial, innovative and dynamic economy.”

Vague and platitudinous as the statement is, it has the virtue of being true. The hard part is figuring out how to move to that new entrepreneurial, innovative and dynamic economy. Part of the answer is not doing the same thing we’ve done before, only more of it.

McAuliffe can make a lasting mark on Virginia if he avoids that trap. But it will be difficult. When he solicits advice, whether in private conversations or through public mechanisms like study commissions, he’ll hear from the established special interests — not from startup entrepreneurs who are too busy building their businesses to participate in the public policy process. He’ll hear from the economic development lobby that we need to spend more money on corporate recruitment. He’ll hear from the convention & visitors lobby that we need to spend more money promoting tourism. He’ll hear from the agriculture lobby that we’ll need to spend more money on overseas trade missions. He’ll hear from incubators that we need to spend more money on incubators. He’ll hear from the public universities we need to spend more money on university R&D. He’ll hear from the chambers of commerce that government, not business, needs to spend more money on workforce development to give Virginians the skills they need in the marketplace.  McAuliffe will touch bases with all the stakeholders and he’ll hear the same thing they’ve been telling state government for decades: Give us more money!

In the early 2000s, back when I started Bacon’s Rebellion,  Governor Mark Warner initiated the state’s first economic development strategic plan. Before running for governor, Warner, a successful technology entrepreneur and venture capitalist, had traveled the state meeting with local business communities and setting up local venture funds. From first-hand experience, he understood the nexus between technology and entrepreneurial innovation. He appointed a highly capable attorney, Michael Schewel, as commerce secretary to oversee the study.

Schewel sought out new thinking, including the work, which was novel at the time, of economic geographer Richard Florida’s on the central role of the creative class. The final product of the study group included some interesting small-bore initiatives, strengthened business-university ties and represented genuine progress over previous thinking. But it conceptualized economic development along the lines of Virginia’s existing administrative organization and reflected the established institutional thinking of the “stakeholders.” Nothing really changed. If Warner and Schewel couldn’t push Virginia economic development into a fundamentally new direction, I fear, no one can. At least they tried. No one since then has made an effort to buck the conventional wisdom.

The most important thing we can do, as I blogged yesterday, is to think how to stimulate new business formation — especially of companies with high growth potential. We need more companies like Washington, D.C.-based SmartThings, an Internet-of-Things start-up which earlier this month sold out to Samsung for $200 million. SmartThings got its start literally two or three years ago with a Kickstarter fund raiser and $15 million in venture funding. That’s the kind of wealth creation we should be looking for.

One strategy would be to cull unnecessary regulation. Contrary to the views of some who frequent this blog, the state regulates many aspects of the economy to the detriment of innovation. Uber, Lyft and the taxicab sector is but one example of many that could be mentioned. Given time, I will detail others. But that is only a partial and incomplete solution. Perhaps more fundamentally, we need to build the kinds of communities where members of the creative class want to live. We need to recognize that economic development equals community development (smart growth). We also can work harder to help government do better those things that only government can do (smart cities).

The traditional pillars of economic development — industrial recruitment, tourism, agriculture — all have valuable contributions to make. But they are not sufficient by themselves to drive the economy forward. It is time for a stem-to-stern rethinking of how to move Virginia to the next level. If the budget crisis prompts that re-evaluation, it may prove more a blessing than a curse.

How Not to Shift From Coal

coal-plantBy Peter Galuszka

Coal is rightly the scourge of environmentalists. Economic pressure is on to shift to cleaner natural gas made plentiful by controversial hydraulic fracking. Political pressure is on to replace fossil fuels with renewables such as wind, solar and other methods.

In Virginia, Dominion, the state’s largest utility, relies for 46 percent of its generating capacity on coal and is moving in fits and starts to natural gas. It doesn’t get much from renewables. How much and how fast should it shift?

Yet out of Colorado comes a cautionary tale. According to The Washington Post, a family in the impoverished city of Pueblo is at odds running power. They only use a window air conditioner part of the time. They avoid using their oven in the summer. It uses electricity they not longer can afford because it overheats the house in summer.

For the family of Sharon Garcia, the problem is Black Hills Energy, which recently bought the local power company – Aquila, which got some of its power from a coal plant that was first built in 1897 with peaking extra power from Xcel, another utility.

Then, in 2008, Black Hills bought out Aquila and everything changed. Xcel decided it could make more money selling power at retail rates in Denver and not at wholesale rates to the utility serving Pueblo. In the midst of these events, a state law prompted Black Hills to shut down older coal plants for cleaner natural gas.

The state approved rate increases so Black Hills could build new infrastructure to handle natural gas and and rates when up significantly.

The problem is likely to be further complicated if the utilities move on the renewables, which, in the short term, are more expensive than either coal or gas.

This is not to say that companies should stick with coal forever, or natural gas. Renewables should still be the goal. But during the transition, green activists, many of them affluent, need to realize who pays the price. What’s a few dozen extra dollars for some is a tragedy for others.

Chart of the Day: Virginia’s Aging Population

aging

This graph comparing Virginia’s age between 1980 and 2013 comes from Luke Juday’s latest post over on the Stat Chat blog, published by the demographics shop the Weldon Cooper Center for Public Service. I urge you to check out the opening chart in his post to see an animation of the changes year by year. It’s fascinating to watch the bulging Baby Boomer generation crawling up the age ladder.

I would love to see a projection of Virginia’s demographic profile over the next 20 years. We would see the big Boomer blob move up, out of the workforce and into retirement age. The implications of that massive shift cannot be over-estimated. Virginia’s working-age population won’t be increasing in size — indeed, it probably will begin shrinking within a decade. Extrapolate that trend nationally, and you’ll understand why the Congressional Budget Office (CBO) maintains that the structural U.S. budget deficit — “only” $583 billion this year, according to the Obama administration’s updated forecast, will march relentlessly higher within a few years as the growing ranks of seniors put increasing stress on the Medicare, Medicaid and Social Security programs.

America still faces a Boomergeddon scenario, although we may have bought ourselves a few years’ grace. The CBO thinks that the slowdown in the growth rate of medical spending experienced since the 2007-2008 recession is a lasting phenomenon and will slightly bend the spending curve downward — enough to keep the Medicare Part A trust fund solvent through 2030. In February, the non-partisan budget shop had projected that the trust fund would run out of money in 2025, reports the Wall Street Journal.

The good news is that Congress has five more years to dither and procrastinate about reforming Medicare. The bad news is that Congress probably will take full advantage of that five years before making hard choices.

– JAB