Category Archives: Regulation

Another Example of Good Intentions Gone Wrong

Jennifer Doleac

Jennifer Doleac

by James A. Bacon

Last year Governor Terry McAuliffe signed an executive order to “ban the box” prohibiting employers from asking job seekers about their criminal history at the initial job stage. The goal was to “remove unnecessary obstacles” to felons seeking employment after incarceration. How could one object? Once felons have paid their debt to society, we should ease their transition back into the workforce, right?

It turns out that things don’t always work the way we expect them to. From the Daily Progress:

Research published recently by Jennifer Doleac, an assistant professor of public policy and economics at the University of Virginia, found that ban the box policies actually lowered the probability of employment by 5.1 percent for young, low-skilled black men and 2.9 percent for young, low-skilled Hispanic men.

According to Doleac, who conducted the study with the University of Oregon’s Benjamin Hansen, the lowered chance for employment comes from the unwillingness by employers to take chances on hiring someone without knowledge of their potential criminal history.

“Simply taking away information about whether someone has a record doesn’t stop employers from caring about someone’s criminal background,” Doleac said. “It just leaves them to guess based on the remaining information they do have.”

All too often, that “remaining information” is age, race, ethnicity and socioeconomic background. (Hat tip: John Butcher)

Bacon’s bottom line: Society is extraordinarily complex. Political ideologies (both on the left and the right) provide simplified models for how society works. Often those simplified models overlook important linkages and feedback loops that lead to very different results than anticipated. Individuals and private entities can quickly alter their behavior to adjust to reality; government adjusts much more slowly, if at all.

Will McAuliffe rescind his “ban the box” order? I’m not betting on it. The social engineer’s response to problems created by a law or regulation is to “fix” the emergent problem by enacting more laws and regulations… thus creating new problems. 

It’s fine to try new ideas, but we have to pay attention to whether they work or not. If they don’t, we need to reconsider them. Good intentions are not enough.

Yeah, It’s Probably a Good Idea to Update Your Zoning Code Every Half Century or So

Pouring whale oil. At long last, Henrico zoning code will leave the 19th century behind.

Pouring whale oil. At long last, Henrico’s zoning code will leave the 19th century behind.

News flash: Henrico County officials see the need to bring the county zoning code into the 21st century.  Although the zoning code has been amended 240 times, it was adopted in 1960 and has never seen a systematic overhaul since.

The code, Randy Silber, deputy county manager for community development, tells the Richmond Times-Dispatch, is “over 55 years old. It’s antiquated. … There’s disconnect in the uses in the zoning ordinance and the economic development that is being put before us.”

Regulations governing sperm whale oil and poison manufacturing remain on the books, notes Silber. The code also refers to bone distilleries. “I don’t even know what that is,” he says.

The 1960 zoning code shaped the “suburban sprawl” model that propelled Henrico County growth in the 56 years since. But the model has run its course, having saddled the county with vast expanses of low-density land use patterns that are costly to maintain and are beset by intractable road congestion issues. Moreover, businesses are reversing a decades-long migration from the central city to the suburbs as Millennials and Empty Nesters seek walkable, mixed-use communities found in the urban core, along with easy access to the city’s museums, festivals and cultural events. To avoid the same kind of hollowing out that central cities experienced a half century ago, Henrico must create walkable, urban places as well.

While Henrico has permitted a few such places, growth continues to be dominated by old-fashioned sprawl. An outdated zoning code is, in effect, mandating the county’s premature obsolescence.

The fact that county professionals see the need for change is encouraging — although the examples cited in the Times-Dispatch article suggest that they may be in more of a mind to tinker with the code than to embrace an alternative paradigm for development and re-development. It’s also unclear whether the citizenry, which is terrified of any change that might affect their homes’ property values, sees the need for change. But at least it’s a start.

The Land of the Semi-Free and Home of the Brave

Image credit: Cato Institute

Image credit: Cato Institute

The Cato Institute, a libertarian think tank, has compiled a basket of some 200 metrics of fiscal, regulatory and personal freedom policies to produce an index of “Freedom in the Fifty States.”

If you lean libertarian, as I do, then a Virginia score of 21 is not terribly impressive. Could be worse, but not nothing to brag about. The state fares best by fiscal measures, 12th in the country, and worst on personal measures, 34th. Our regulatory score, 23rd, is in the middle of the pack.

If there’s any consolation, the overall score has improved three notches since 2012. Fascinating: In the four years between Republican Governor Bob McDonnell and Democratic Governor Terry McAuliffe, Virginia has become more libertarian…. at least by Cato’s reckoning.

If you don’t like Cato’s scoring methodology, a customization feature allows you to personalize your own.

Hat tip: Tim Wise

— JAB

With Health Care Premiums Up 14%, Virginia Should Act

Lasik eye surgery . Eww, it looks gross. But it's cheap, it's safe and it's unregulated and unsubsidized.

Lasik eye surgery . Eww, it looks gross. But it’s cheap, it’s safe and it’s unregulated and unsubsidized.

by James A. Bacon

Insurance companies participating in Virginia’s Affordable Care Act health exchanges are asking to increase rates by an average of 14% next year. In making presentations to the State Corporation Commission yesterday, they said the increases reflect (1) general health care inflation that affects everyone, and (2) and an imbalance in sick versus healthy participants in the plans.

Under state law, the SCC is required to review and approve premium rates for all types of health plans, reports Katie Demeria with the Richmond Times-Dispatch. If an insurance company’s rate filing has met the state’s minimum loss ratio requirements and all assumptions are defensible from an actuarial perspective, it is virtually impossible to turn down the rate-hike request.

“Some of these rate increases are more than what people would want and, in some cases, could be more than what some people would bear,” said Commissioner Mark Christie. “But we also have an obligation to ensure that these companies remain in business so that the can pay the claims they’re obligated to pay by the people who pay their premiums.”

Bacon’s bottom line: There is not much that the Commonwealth can do about the imbalance between sick and healthy participants. The Affordable Care Act (widely known as Obamacare) anticipated the problem by taxing people who fail to enroll. The incentive, as stiff as it is, is not sufficient to induce as many healthy people to enroll as are needed. This design flaw in the federal legislation is beyond the power of Virginia lawmakers to fix.

But the General Assembly does influence how health care markets operate in Virginia, and lawmakers can affect the general cost of delivering health care. Not only do legislators have a political responsibility, they have a moral responsibility to create the conditions for Virginia health care markets to become more affordable and accessible.

Existing state-level laws and regulations muck up the efficient functioning of health care in many ways. First and foremost is the Certificate of Public Need (COPN) law that thwarts competition from newcomers and ossifies the existing delivery system in place. Legislators are on top of that one, and they’re not letting go.

But there are many other areas that need reform. The most glaring is state-mandated benefits for small-group insurance policies. Employers big enough to self-insure can structure their policies packages any way they want. Small employers who have to band together to create a viable risk pool don’t have that option. Insurers must package some 30 state-mandated benefits into their policies, whether those benefits are desired or not. These include everything from “newborn children” to “reconstructive breast surgery” and “colorectal cancer screenings.”

While any one of these benefits may not seem unreasonable in itself, the collective package severely limits the ability of insurers to offer affordable, trimmed-down plans. For example, one plan that I think would sell well (because I would buy it) would have two main features: (1) negotiated rates so I don’t have to pay the outrageous nominal fees that hospitals and doctors charge, and (2) catastrophic coverage if medical bills exceed, say, $20,000 in a year. In other words, I would pay all bills out of pocket up to $20,000 but at negotiated, discounted rates, and I would be protected from catastrophic loss. Such a plan, as I understand it, is illegal. That’s why you cannot find it in the Virginia marketplace.

A third way the state could help is increase price transparency so patients can exert consumer pressure on health providers for discretionary procedures. Consumer pressure has kept down the cost of Lasik eye surgery and cosmetic surgery, which are not regulated or funded by government. Consumers could exert downward pressure on many other procedures as well if they had easy access to the price data.

There’s much more, but those are the big three. As a nation and a state, we can continue to fixate on the zero-sum question of “who pays?” — transferring wealth from Peter to Paul — or the win-win question of how we make the system function better for everyone. The wealth-redistribution approach has not worked well for anyone. It’s time to try win-win.

Republicans and Leftists Are Outraged, Outraged, I Tell You

Nishizaki Sakurako and Bando Kotji in "Yoshino Mountain"by James A. Bacon

Here’s what I missed in yesterday’s quickie post about Governor Terry McAuliffe’s plan to convene a clean energy task force: Both Republicans and leftist environmental groups are attacking the move, though for opposite reasons.

Republican legislators see the initiative as an end run around the state budget, which specifically prohibits any spending on the federal Clean Power Plan for reducing CO2 emissions from electric power plants while it is being challenged in the U.S. Supreme Court. Normally, such accusations strike me as political blather, but Brian Coy, a spokesman for the governor’s office, confirmed that that was precisely the motive. Here’s how the Washington Post summed up his statement: “The governor did not create the work group to assuage environmental groups but rather as a way to dodge the Republican-controlled General Assembly.”

House Speaker William J. Howell, R-Stafford, was not pleased: As quoted by the Richmond Times-Dispatch, he said: “This order is another deliberate attempt to circumvent the legislature and the will of Virginia voters.  The governor is developing a troubling tendency to prefer Washington-style executive action instead of the dialogue and collaboration that Virginians expect and deserve.”

Meanwhile, McAuliffe’s initiative was belittled from the left, who cited his support for the Atlantic Coast Pipeline and Mountain Valley Pipeline, which would supply natural gas to Virginia and other Southeastern markets, as evidence that he is not serious about combating climate change. A joint statement by the Virginia Student Environmental Coalition, the Chesapeake Climate Action Network, and Virginia Organizing called McAuliffe’s initiative “a minor environmental policy” dwarfed by the harm of natural gas transportation and combustion.

The kinds words came from mainstream environmental groups who have been working through the administration to implement the strictest of the Clean Power Plan alternatives available to the state.

The governor is trying to reconcile his desire to combat climate change with his priority of creating jobs. Thus, he defends construction of two natural gas pipelines through the state on the grounds that they will create economic opportunity for the Tidewater region of the state, which is effectively precluded from competing for important categories of industrial expansion due to an insufficient supply of natural gas. At the same time, he has supported the federal Clean Power Plan (CPP), which seeks to curtail CO2 emissions from Virginia power plants. If the CPP passes legal muster, the Department of Environmental Quality (DEQ) will be charged from choosing from one of four broad approaches for the state to implement the plan. Environmentalists favor the option that would curtail CO2 emissions the most, although industry consumer groups worry the approach would drive up electric rates. McAuliffe has not yet endorsed an option.

Bacon’s bottom line: I’m still not sure what the fuss is all about. McAuliffe has already enacted a series of measures driving state government to pursue energy efficiency goals and to purchase solar energy. There is not much else that he can legally do. This new working group can recommend anything it wants, but it won’t have power to spend a dime. Meanwhile, the big action revolves around the Clean Power Plan. If the Supreme Court upholds its constitutionality, the focus turns to the already-instated DEQ working group to recommend how to implement it. If the Supremes nix the CPP, regulatory decision-making effectively reverts to the State Corporation Commission, which responds to legislative guidance enacted into law, not to gubernatorial directives.

I regard this whole hoo-ha as political theater — a kabuki production in which the actors rigidly play out their assigned roles.

Sierra Club’s Coal Ash Gambit

Coal ash pond at the Chesapeake Energy Center

Coal ash pond at the Chesapeake Energy Center

by James A. Bacon

The Sierra Club has filed a lawsuit charging that coal ash stored at Dominion Virginia Power’s shuttered coal plant in Chesapeake is leaking arsenic into the Elizabeth River. The environmental organization wants the U.S. courts to compel Dominion to scrap plans for burying the coal ash in place at four power stations around the state and to truck the material to lined landfills instead.

Earlier today, attorneys for the environmental group began presenting their case in the Richmond courtroom of U.S. District Court Judge John A. Gibney, advancing the argument that unsafe levels of arsenic found in sediment samples originated from underground water that migrated through the coal ash pits.

“These discharges of arsenic will continue indefinitely with no end in sight,” said Deborah Murray, the attorney representing the Sierra Club. “The only way to stop the pollution is to remove the ash to a lined landfill.”

Dominion countered that the Sierra Club’s arguments are totally unproven. The organization cherry picked “snippets” from the voluminous testing data filed with Virginia’s Department of Environmental Quality (DEQ), wore “blinders” to the mountain of evidence showing that water quality complies with the law, and offered a “tortured interpretation” of how the arsenic got from the coal ash to the surrounding waters, argued Dabney Carr for Dominion.

DEQ has consistently found Dominion to be in compliance over four decades, said Carr. “The goal of this suit is to overturn DEQ’s decision,” he added, addressing the judge. “The Sierra Club is asking you to substitute your judgment for the DEQ’s judgment.”

Dominion has been accumulating coal ash, the mineral residue from coal combustion, at the Chesapeake Energy Center for decades. Like other utilities, the company mixed it with water to keep the dust down and stored the material in lagoons. After years of study, the Environmental Protection Agency issued new standards last year for cleaning up coal ash. The first step is to de-water the ash, treat the water, and discharge it into rivers and streams. For the most part, Dominion has reached agreement with DEQ and environmental groups on how to do that.

The second step is to store the coal ash in a place where it will not continue to contaminate water supplies. Dominion proposes to consolidate the residue and cap it with an impermeable lining to prevent the infiltration of rain water. DEQ is studying those permits now.

Contending that a cap does nothing to stop the infiltration of groundwater, environmental groups have pushed Dominion to truck the material to lined landfills — a project that Dominion estimates would cost $3 billion. While some environmental groups focus their efforts on DEQ, the Sierra Club is going the federal route. The organization believes the lawsuit against Dominion is the first challenge of its kind to the Clean Water Act. If the group wins the case, it will set a precedent not only for all four of Dominion’s coal ash sites but for power companies across the country.

While the implications are national, the facts of the case are highly localized. And, as was clear from Murray’s presentation, Sierra Club’s case is circumstantial.

The Chesapeake facility sits upon land comprised of loose and sandy soils that allow water to travel through easily. The coal ash ranges from 15 to 30 feet thick, and the bottom of the pile varies in elevation from 16 feet above sea level to six feet below. A liner was placed between the disposal site and the ground but it is leaking, Murray said.

However, when asked by Judge Gibney how she knew the liner was leaking, she had no persuasive response.

The key evidence presented for the accumulation of arsenic came from a 2010 report commissioned by Dominion that analyzed sediment “cores” — cylindrical-shaped samples of creek and river bottom — to determine if there was “natural attenuation” of arsenic. (Natural attenuation is when nature takes care of the problem, in this case by binding the arsenic with iron to form a harmless substance.) Five of the samples at a depth of zero to three inches contained arsenic in excess of the permitted level of 36 micrograms per liter.

The Sierra Club cherry picked these data points from mountains of data collected from samples taken twice a year over decades, countered Carr. All tests of surface water, as opposed to sediment, have indicated arsenic levels at concentrations well below drinking water standards. Every water sample — 73 taken over the past thirteen years — were well below Virginia and EPA water quality standards for arsenic. Said Carr: “There is no evidence of arsenic in the surface waters.”

Where did the arsenic in the sediment come from if not from the nearby coal ash pits? Dozens of other industries release discharges in the Elizabeth River, said Carr, and some are known to release arsenic. The Sierra Club has offered no proof that the arsenic levels in found in the sediment differs from those elsewhere in the river. The group has conducted none of its own research and offers no additional evidence. It relied entirely upon data that DEQ used to find Dominion in compliance with the Clean Water Act — “the very same data and information DEQ has relied upon to conclude that Dominion is in compliance with its permit at CEC (the Chesapeake Energy Center).”

Maryland Drops Coal Ash Appeal

The coal ash ponds at Possum Point

The coal ash ponds at Possum Point

The state of Maryland has dropped its appeal of permits granted to Dominion Virginia Power for discharging treated water from its Possum Point Power Station coal ash ponds into Quantico Creek and the Potomac River.

“Maryland is supportive of recent agreements in Virginia to increase wastewater treatment protections and monitoring protocols,” Ben Grumbles, Maryland’s secretary of the environment, said in a statement. “We are engaged in and encouraged by the ongoing discussions with Virginia and Dominion to do even more testing for fish tissue, water quality and sediment in the river beyond the current testing and monitoring in current or soon-to-be-proposed permits.”

Jay Apperson, a spokesman for the department, cited Dominion’s commitments to enhanced treatment of the water drawn from coal ash ponds and to specifications that meet or exceed Maryland’s water quality standards, reports the Richmond Times-Dispatch. He continued:

Moreover, Virginia DEQ has pledged to draft a stringent and comprehensive solid waste permit for the Dominion facility that incorporates all federal requirements. Virginia DEQ has further discussed its intent to engage Maryland during this permitting process as groundwater monitoring and surface water monitoring safeguards are included to protect Quantico Creek and the Potomac River.

The only group persisting in an appeal of the coal ash water-discharge permits is the Potomac Riverkeeper Network.

Bacon’s bottom line: The big remaining issue is how Dominion will dispose of the coal ash itself. Dominion has applied for permits to consolidate the material in capped pits on-site, asserting that the alternative preferred by environmentalists — trucking it to lined landfills — would cost $3 billion more. The statements from Maryland’s Department of the Environment suggests that Maryland has taken part in intensive, behind-the-scenes negotiations with Virginia DEQ, as Virginia regulators decide whether to grant the solid waste permits or not.

— JAB