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A Glimpse into the Byzantine World of Virginia Health Care

Murky

Murky

by James A. Bacon

To call the United States health care system Byzantine is to cast a slur upon the ancient empire of that name. A glimpse of the bizarre, Rube Goldberg-esque way in which the system functions in Virginia can be seen in today’s Richmond Times-Dispatch article about the state’s Certificate of Public Need (COPN) program.

A state working group is studying whether to scrap or modify the regulatory system, which requires hospitals and other health care providers to seek state approval for new or expanded medical-care facilities and the acquisition of expensive equipment. The system curtails competition by making it difficult for new enterprises to enter the marketplace, and it often ties regulatory approvals to promises to provide charity care.

In 2013, health care providers donated $1.34 billion worth of charity care to comply with the state-mandated obligations, the T-D quotes Peter Boswell, chief of Virginia’s Department of Health Office of Licensure and Certification, as saying. Statewide, 195 certificates of need are conditioned upon requirements of providers to administer free care. As an example of how that might work, the T-D says a cardiac catheterization lab might have a requirement to provide 3.8 percent charity care.

Don’t get me wrong. We need a mechanism for providing health care to poor people who fall between the cracks of government assistance, Obamacare and private insurance. This is just an insanely opaque way of going about it. That $1.34 billion is not subject to any form of market discipline or legislative review. State regulators cut deals with health care providers, and then it’s up to the providers to live up to their obligations. The state lacks the resources to audit compliance.

Assuming hospitals and other providers do comply, who ultimately pays? Do the $1.34 billion in payments come out of hospital profits? Or do hospitals simply pass on the cost by jacking up charges to paying customers? I doubt anyone really knows. If there’s one thing as opaque as the health care sector’s pricing system, it’s health care accounting.

Health care is an inherently complex business, involving trade-offs between price, quality, convenience and other factors that few consumers are equipped to make. That inherent complexity is compounded by layer upon layer of regulation, subsidy, cross-subsidy and other forms of complexity. I don’t see how it’s possible for anyone participating in the industry to make economically rational decisions. No wonder there is so much waste and inefficiency. No wonder costs are out of control. No wonder private health care insurance grows more unaffordable with each passing year. No wonder Congress felt compelled to enact health care “reform” (although the reform known as Obamacare makes the system even more bureaucratic, complex, opaque and uncompetitive).

Eliminating COPN in Virginia is not a silver bullet that will miraculously create a transparent, competitive market-based health care system. Other states have abolished COPN, and their systems are not notably lower cost or more efficient (that I know of). But it is one layer of anti-competitive complexity that Virginia legislators can strip out of the system, thereby making the state marginally less hostile to innovation and competition. Combined with other market-based reforms, it could make a difference.

If Virginia abolished COPN, what would happen to uninsured people who depend upon that $1.34 billion a year in uncompensated care? Aye, there’s the rub. Politically, it may be impossible to dismantle the program. Perhaps we are doomed to living (and dying) with an opaque, irrational and inefficient system.

The Ironies of Virginia’s Growing Diversity

Midlothian’s New Grand Mart taps state’s growing diversity

 By Peter Galuszka

Suddenly immigration is popping up as a major issue in Virginia and the nation.

Virginia Beach has been dubbed a “sanctuary city” for undocumented aliens by Fox News and conservative Websites. GOP presidential hopeful Donald Trump is scarfing up poll number hikes by calling Mexicans trying to enter the U.S. illegally “rapists” and proposing an expensive new wall project to block off the southern border. Pro-Confederate flag advocates are pushing back against anti-flag moves, but they can’t escape the reality they are conjuring up  old visions of white supremacy, not their version of respectable Southern “heritage.”

So, if you’d like to look at it, here’s a piece I wrote for The Washington Post in today’s newspaper. When I visited a new, international food store called New Grand Mart in Midlothian near Richmond, I was impressed by how large it was and how many people from diverse backgrounds were there.

Looking further, I found one study noting that Virginia is drawing new groups of higher-income residents of Asian and Hispanic descent. In the suburbs, African-Americans are doing well, too.

The Center for Opportunity Urbanism ranked 52 cities as offering the best opportunities for diverse groups. One might assume D.C. and Northern Virginia would rank well, and they do. More surprising was that Richmond and Virginia Beach rank in the top 10 in such areas as income and home ownership. True, mostly black inner city Richmond has a 26 percent poverty rate but it seems to be a different story elsewhere.

Stephen Farnsworth of the University of Mary Washington says that economic prosperity and jobs that had been concentrated in the D.C. area, much of it federal, has been spread elsewhere throughout the state. It may not be a coincidence that New Grand Mart was started in Northern Virginia by Korean-Americans who undertook research. It revealed that the Richmond area was a rich diversity market waiting to be tapped. They were impressed and expanded there.

Other areas that do well in the study are Atlanta, Raleigh, N.C. and ones in Texas, which show a trend of job creation in the South and Southwest outpacing economic centers in the Northeast, Midwest and in parts of the West. Another story in today’s Post shows that there are more mostly-black classrooms in Northern cities than in the South. The piece balances out the intense reevaluation of Southern history now underway. A lot of the bad stuff seems to have ended long ago, but somehow similar attitudes remain in cities like Detroit and New York.

This progress is indeed interesting since old-fashioned American xenophobia is rearing itself again.

In Virginia, the long-term political impact will be profound as newer groups prosper. They may not be as inclined as whites to embrace Virginia’s peculiar brand of exceptionalism, such as their emotional mythology of Robert E. Lee and Thomas Jefferson. Their interest in them might be more dispassionately historical.

And, as the numbers of wealthier people from diverse backgrounds grow, they may be less willing to keep their heads down when faced with immigrant bashing. That’s what people of Hispanic descent did in 2007 and 2008 when Prince Williams County went through an ugly phase of crackdowns on supposed illegals. They could strike back with their own political campaigns.

Whether they will be blue or red remains to be seen. It’s not a given that they’d be Democratic-leaning. Farnsworth notes, however, that as more diverse people move to metropolitan suburbs, whites in more rural, lower-income places may become more reactionary out of fear. Hard-working and better-educated newcomers might be out-classing them in job hunts, so they might vote for politicians warning of a yellow or brown peril.

In any case, New Grand Mart presages a very crucial and positive trend in Virginia. It shows the irony of the hard right echo chamber peddling stories designed to inflame hatred and racism, such as the one about Virginia Beach being a “sanctuary” for illegals. In fact, the city is attracting exactly the  well-educated and hard-working newcomers of diverse backgrounds upon whom it can rest its future.

But we’re in an age of bloated billionaires with helmet hairdos and no military experience claiming that former Republican presidential candidate John McCain, a shot-down Navy pilot who spent five years in a brutal North Vietnamese prison, is not a hero. If Virginia can ignore such time-wasters and embrace diversity, it will be a better place.

Dominion’s Curious Power Plan

The North Anna nuclear plant

The North Anna nuclear plant

Peter Galuszka

Dominion Virginia Power is taking a tepid approach towards planning its future generating units, as evidenced by its submission this week of its 2015 integrated resource plan to the State Corporation Commission.

As such, it claims it is in a “transitory” phase that will rely on natural gas as a “stop gap” measures as it waits to see what will happen with proposed U.S. Environmental Protection Agency rules on reducing carbon dioxide emissions.

To that end, it plans on building a new $1.3 billion natural gas plant in the Greensville County area and rely on shifting coal units at Chesterfield Power Station (the state’s largest single air polluter) to gas and also at a few other spots. The new gas plant will generate 1,600 megawatts.

The other news in the submission is that wind is out as far as Dominion is concerned. It has dumped a small prototype project off of Virginia Beach claiming that cost estimates came in at double the original $230 million or so for 12 megawatts of power.

Solar gets more respect – such as adding up to 4,000 of solar-based megawatts for about $4.3 billion.

What’s truly puzzling is that Dominion apparently says that a third nuclear unit at North Anna would run $7.2 billion. It is the first time, I’ve ever seen any figure from them and it seems very much low-balled. The Sierras Club puts its price as higher than $10 billion.

A case in point is Southern Company’s Vogtle plant in Georgia, which is adding two nukes to two existing ones. It has had cost overruns of about $4billion. The early estimates were about $7 billion each for the two reactor units. So, what will North Anna Three really cost?

And, by the way, for all penny-pinching conservatives out there who believe that government handouts are totally wrong, they only give you a fraction of the story. The federal government is putting up $6.5 billion on loan guarantees for the project. This would be on top of the billions over billions of dollars the feds have put into nuke power since the days of the Manhattan Project. One hears much whining on this blog about how it is utterly foolish to subsidize renewables in any way.

A couple of last points.

Dominion is hot-to-trot to build its controversial $5 billion Atlantic Coast Pipeline. Yet the new Greensville gas plant can easily be served by the existing Transco pipeline. If that’s true, why is it so urgent for an entirely new pipeline that will run past in the general area? Dominion insists this is not the case, but I can’t get the idea out of my head that ACP gas is for exports. If so, why are we mucking up bucolic Nelson County so some multi-nationals can scarf up some bucks or Euros or yuan or yen so Mumbai had have more power?

Also, I haven’t gone through the Dominion report line by line, but it seems that it is devoid of any emotional hysteria that one often sees from opponents of renewable power.

If so, then why was it so absolutely urgent in the last General Assembly for Dominion to ram through a bill that relieves them from SCC audits for five years? I still cannot figure what that was all about.

Industrial groups, supported by Dominion, made a boogy man of the EPA’s Clean Power Plan, which, in truth, is just a draft. We should know later this year what the real rules will be.

Where’s the hysteria now? And remember, folks, when you read this, remember that I am free of any monetary sponsorship by Dominion.

Does the Gig Economy Need Fixing?

warnerby James A. Bacon

Senator Mark Warner, D-Virginia, has latched onto a fascinating issue: the “disaggregation of the workplace.” That’s wonk talk for the Uber-ization of the United States economy, in which an increasing percentage of the population engages in contingency work outside the highly regulated setting of full-time employment. Warner rightly calls this trend “the most radical transformation of the American workplace in the past 30 years,” and he thinks that people in Washington need to start talking about it.

Warner’s right about one thing: The rise of the contingency workforce is indeed rewriting the social contract between employer and employee. But I’m not so sure it’s a good idea for the politicians to get involved. I’d like to see evidence that contingency employment is broken before Congress tries to fix it.

In the gig economy, also called the sharing economy, workers engage in a contractual relationship with customers to provide services — the conveyance of passengers in Uber cars, or completion of a writing contract, or fulfillment of an IT task. The advantage is an unprecedented degree of flexibility. Workers are free to take on as much work as they can find, or as little as they want. They are more geographically mobile, not tied to one particular location. They can set their own hours. They can pick and choose whom they want to work with, and if they don’t like a relationship, they are free to leave it.

The downside is that there are no government-mandated employment benefits or protections. Free-lancers don’t get company-provided pensions or health-care benefits. They don’t get unemployment benefits, worker’s compensation or disability. “If there is no safety net,” says Warner in the USA Today interview seen here, “someone can hit a rough patch and have no alternative but to fall back on government assistance programs.”

Warner does not necessarily advocate extending the old workforce model to the contingency workforce. He wants to start thinking about how to improve the new model. Washington, he says, needs to look at things like hour banks (a currency exchange in which the unit of exchange is a person-hour of time) or opt-ins (I’m not sure what he’s referring to) or models emerging in Europe.

Contigency workers already have the option to purchase health and disability insurance on the open market, and they have the option to put money into IRAs. It’s not always easy finding the money to divert to those self-insurance programs, however, so not everyone chooses to take advantage of them. Paternalists no doubt fret that current arrangements that leave “too much” discretion to workers and that bad decisions might result in people relying upon the federal safety net.

As a contingency worker myself, living off Bacon’s Rebellion sponsorships and free-lance work, I value the freedom I have to work at home, meet with a driveway paving contractor (as I did today), pick up my kid from school (as I will do later), zip over to the neighborhood pool to swim a few laps (which I’ll do if I have enough time), and prepare dinner for when my wife gets home from her 8-to-7 job. If that freedom means working nights and weekends to get the job done, that’s my decision. I like this way of life.

I’m all in favor of expanding peoples’ choices, something that the private sector is particularly adept at doing. I would bitterly oppose legislation in which Congressmen or bureaucrats decide that they know what’s best for me and tell me how I need to allocate my income. Unfortunately, I’ve never known Congress to look at a “problem” and fail to find a “solution.” Right now, I’m not convinced there’s a problem that needs fixing, and, despite Warner’s perspicacity in spotting a new trend, I’m not sure I want Congress monkeying around with it.

New Film Documents Horrors of Coal Mining

blood on the moutain posterBy Peter Galuszka

Several years in the making, “Blood on the Mountain” has finally premiered in New York City. The documentary examines the cycle of exploitation of people and environment by West Virginia’s coal industry highlighting Massey Energy, a coal firm that was based in Richmond.

The final cut of the film was released publicly May 26 at Anthology Film Archives as part of the “Workers Unite! Film Festival” funded in part by the Fund for Creative Communities, the Manhattan Community Arts Fund and the New York State Council of the Arts.

Directed by Mari-Lynn Evans and Jordan Freeman, the film shows that how for more than a century, coal companies and politicians kept coal workers laboring in unsafe conditions that killed thousands while ravaging the state’s mountain environment.

As Bruce Stanley, a lawyer from Mingo County, W.Va. who is interviewed in the film and has fought Donald L. Blankenship, the notorious former head of Massey Energy, says, there isn’t a “War on Coal,” it is a “war waged by coal on West Virginia.”

When hundreds of striking workers protested onerous and deadly working conditions in the early 1920s, they were met with machine guns and combat aircraft in a war that West Virginia officials kept out of history books. They didn’t teach it when I was in grade school there in the 1960s. I learned about the war in the 1990s.

The cycle of coal mine deaths,environmental disaster and regional poverty continues to this day. In 2010, safety cutbacks at a Massey Energy mine led to the deaths of 29 miners in the worst such disaster in 40 years. Mountains in Central Appalachia, including southwest Virginia, continue to be ravaged by extreme strip mining.

As Jeff Biggers said in a review of the movie in the Huffington Post:

“Thanks to its historical perspective, Blood on the Mountains keeps hope alive in the coalfields — and in the more defining mountains, the mountain state vs. the “extraction state” — and reminds viewers of the inspiring continuum of the extraordinary Blair Mountain miners’ uprising in 1921, the victory of Miners for Democracy leader Arnold Miller as the UMWA president in the 1970s, and today’s fearless campaigns against mountaintop-removal mining.”

The movie (here is the trailer) is a personal mission for me. In 2013, after my book “Thunder on the Mountain, Death at Massey and the Dirty Secrets Behind Big Coal,” was published by St. Martin’s Press, Mari-Lynn Evans called me and said she liked the book and wanted me to work with her on the movie project. She is from a small town in West Virginia a little south of where I spent several years as a child and thought some of my observations in the book rang true.

I drove out to Beckley, W.Va. for several hours of on-camera interviews. Over the next two years, I watched early versions, gave my criticisms and ideas and acted as a kind of consultant. Mari-Lynn’s production company is in Akron and I visited other production facilities in New York near the Brooklyn Navy Yard.

Interesting work if you can get it. My only forays into film making before had been with my high school film club where he videographed a coffin being lowered into a grave (in West Virginia no less). I was greatly impressed when I saw the movie at its New York premiere.

Mari-Lynn and Jordan have been filming in the region for years. They collaborated on “The Appalachians,” an award-winning three-part documentary that was aired on PBS a few years ago and on “Coal Country” which dealt with mountaintop removal strip mining.

They and writer Phyllis Geller spent months detailing how coal companies bought up land on the cheap from unwitting residents, hired miners and other workers while intimidating them and abusing them, divided communities and plundered some very beautiful mountains.

Upper Big Branch is just a continuation of the mine disasters that have killed thousands. The worst was Monongah in 1907 with a death toll of at least 362; Eccles in 1914 with 183 dead; and Farmington in 1968 with 78 dead (just a county over from where I used to live).

By 2008 while Blankenship was CEO of Massey, some 52 miners were killed. Then came Upper Big Branch with 29 dead in 2010.

At least 700 were killed by silicosis in the 1930s after Union Carbine dug a tunnel at Hawks Nest. Many were buried in unmarked graves.

While state regulation has been lame, scores West Virginia politicians have been found guilty of taking bribes, including ex-Gov. Arch Moore.

The movie is strong stuff. I’ll let you know where it will be available. A new and expanded paperback version of my book is available from West Virginia University Press.

Blankenship is scheduled to go on trial on federal charges related to Upper Big Branch on July 13.

One More Time Now… Devolve Transportation Funding to the States

Graphic credit: Wall Street Journal

Graphic credit: Wall Street Journal

by James A. Bacon

Congress is floundering over what to do about the Highway Trust Fund, which collects the federal gasoline tax and plows it back to the states to finance a smorgasbord of transportation projects. The original justification for the gas tax was to build the Interstate Highway System, but the program has morphed over the years into a  piggy bank for all manner of Interstate, highway, transit and miscellaneous projects that must be supplemented with General Fund appropriations. Congress persons are loathe to relinquish the perk of doling out money to constituents, but fiscal pressures make it impractical to continue the General Fund subsidies, while raising the gas tax is a political killer. What’s a Congress person to do? What he or she does best — dither.

Meanwhile, in the wake of Amtrak’s deadly derailment last week, we hear the usual wailing and gnashing of teeth that America isn’t investing enough in infrastructure.

The idea that the United States is significantly under-investing in infrastructure is nonsense — the kind of special pleading you hear from big construction and engineering firms who grow fat on infrastructure spending. Among the G-7 countries (Japan, Germany, France, the United Kingdom, Italy, Canada and the U.S.), the total capital stock of the U.S. (transportation and other infrastructure) is the third highest, equivalent to 52% of the Gross Domestic Product, as seen in the graphic above, published today in the Wall Street Journal. While Japan is off-the-charts higher, that country arguably has way over-invested in transportation, creating a system that it cannot afford to maintain over the long run.

infastructure_quality

Graphic credit: Wall Street Journal

Likewise, the quality of infrastructure (the general state of repair) is also in the middle of the pack, as seen at left.

The problem isn’t the level of spending, it’s the mis-allocation of spending. As WSJ columnist Greg IP writes (sounding a long-time theme here at Bacon’s Rebellion), the economic Return on Investment of federally funded projects varies widely; indeed  the feds have no mechanism for ascertaining ROI. “It’s nobody’s job in Washington to figure out which roads or bridges we should invest in,” Ip quotes Aaron Klein with the Bipartisan Policy Center as saying.

pavement_life_cycle2It’s time for Congress to get out of the business of building new transportation infrastructure. Having constructed the Interstate Highway System, Uncle Sam should commit to maintaining it and devolve responsibility for other projects to the states. That means adjusting the gas tax to whatever level it takes to maintain that system at an optimal level, and no higher. By optimum, I mean at a reasonably high state of quality and repair and with sufficient spending to undertake deep repairs at the most economically advantageous point on the life-cycle curve. Presumably, that level would require a much lower federal gas tax than the one in place now. A reduction in the federal gas tax would free the states to increase their own gas taxes by a like amount, more, or less, depending upon their circumstances.

A bedrock principle for maintaining an optimum level of infrastructure investment is to put each component — roads, highways, mass transit, ports, airports, railroads — on a user-pays basis. When users pay for the transportation amenities they want, they are more careful about what they ask for. Any other system results in a political free-for-all in which every interest group seeks to get its favored projects funded at the expense of everyone else, in which case ideology and politics prevail over economic rationality.

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.

Blankenship’s Incriminating Tapes

don-blankenship By Peter Galuszka

It may sound like something out of the Nixon White House, but embattled coal baron Donald L. Blankenship regularly taped conversations in his office, giving federal prosecutors powerful new ammunition as he approaches criminal trial in July.

According to Bloomberg News, the former head of Massey Energy taped up to 1,900 conversations that often go to the heart of the case against him. Blankenship was indicted last Nov. 13 on several felony charges that he violated safety standards and securities laws in the run up to the April 5, 2010 blast at the Upper Big Branch mine in West Virginia that killed 29 miners.

The revelation of the tapes came about in a circuitous way. The tapes were given to federal prosecutors in 2011 by officials of Alpha Natural Resources, which bought Richmond-based Massey Energy in 2011 for $7.1 billion.

After reaching a non-prosecution deal with federal prosecutors, Alpha hired a powerful New York law firm to investigate Massey for any possible violations.

Alpha, based in Bristol, was required as part of a non-prosecution order it signed to surrender all evidence, including the tapes.

Earlier this year, Alpha declined to continue paying Blankenship’s legal bills since he was under criminal indictment. Blankenship, claiming Alpha was required to indemnify, him, sued Alpha in a Delaware court. The existence of the tapes was revealed in that venue.

According to court documents filed in Delaware, Blankenship seemed to know that his disregard and hardball management practices could hurt him.

The tapes show Blankenship’s disdain for the U.S. Mine Safety and Health Administration (MSHA), which regulates mines but also reveal Blankenship knew Massey’s practices were risky.

According to testimony, a tape has Blankenship stating, “Sometimes, I’m torn up with what I see about the craziness we do. Maybe if it weren’t for MSHA, we’d blow ourselves up. I don’t know.”

“I know MSHA is bad, but I tell you what, we do some dumb things. I don’t know what we’d do if we didn’t have them,” Blankenship said on tape in the Delaware case.

So far, little has been revealed about what evidence the U.S. Attorney’s Office in Charleston, W.Va. has against Blankenship. Irene Berger, a U.S. District Judge in Beckley, W.Va., issued a massive gag order forbidding lawyers and even family members of the 29 mine victims from discussing the case, now scheduled for July 13 in Beckely.

The gag rules were order modified after the Charleston Gazette and the Wall Street Journal among other news outlets challenged them before the U.S. Fourth Circuit Court of Appeals in Richmond.

In some cases, apparently, the tapes cut both ways. In Delaware, Blankenship’s lawyers played a tape from 2009 which has Blankenship urging executives to tighten up on safety. “I don’t want to go to 100 funerals,” he is quoted as saying. He allegedly told Baxter Phillips Jr., then Massey’s president, that if there were a fatal disaster, “You may be the one who goes to jail.”

According to Bloomberg, Alpha initiated the internal probe after reaching a non-prosecution deal with federal prosecutors. It hired Cleary Gottleib Steen & Hamilton of New York to handle it.

Since Alpha refused to continue paying Blankenship’s legal bills, Blankenship reportedly has paid his lawyers $1 million himself.

The writer is the author of “Thunder on the Mountain, Death at Massey and the Dirty Secrets Behind Big Coal,” 2012, St. Martin’s Press. Paperback , West Virginia University Press, 2014.

McDonnells May Have Shot at Appeal

mcd convictedBy Peter Galuszka

Robert F. McDonnell, the only Virginia governor ever to be found guilty of corruption, may actually have a good shot at having his convictions reversed on appeal, according to some legal experts.

I have the story in this week’s Style Weekly.

The issue, which has been tossed around many times, involves how broadly or narrowly “honest services fraud” can be interpreted. The key points are whether or not McDonnell and his co-convict and wife Maureen did deny the public the “intangible right” of honest services by taking something of value in exchange for an action.

A further complication is that if they did, in fact, take an action in exchange for something, was it an “official” action? It tends to worry lawyers from such law schools as Harvard, the University of Virginia and the College of William & Mary.

Among some of their worries are that if McDonnell took money from star prosecution witness Jonnie R. Williams but took no specific action for the vitamin salesman, how is that different from a president granting a donor an ambassadorship.

Another concern that “honest services” statutes can be so “vaguely worded” that they could allow prosecutors to carve out a new crime that the defendants might not know they are committing.

I covered most of the six-week-long trial for Bloomberg News last summer and there is no question in my mind that the McDonnells’ behavior was shameful. U.S. District Judge James Spencer tended to go with a broad interpretation of the law.

We’ll see when arguments for McDonnell’s appeal start May 12 at the U.S. Fourth Circuit Court of Appeals in Richmond. I’ll keep my own legal opinions to myself for the moment.

How to Reform Virginia’s Conservation Tax Credit

This map, taken from the Virginia Department of Conservation and Recreation website, shows the fragmented distribution of conservation easements on Virginia's upper peninsula.

This map, taken from the Virginia Department of Conservation and Recreation website, shows the fragmented distribution of conservation easements on Virginia’s upper peninsula.

by James A. Bacon

The state of Virginia spends $100 million a year in the form of tax expenditures to place conservation easements on land parcels around the state. Could the state get more for its investment? Amy Murphy, an environmental studies major at the University of Richmond, thinks so. In a paper presented to the  Climate Change and Resiliency Update Commission Tuesday, she recommended three changes t0 make the law more effective, including a restructuring of the tax credit to favor easements that offered greater environmental benefits.

Murphy’s paper on conservation easement reform was one of 11 prepared under the tutelage of biology professor Peter D. Smallwood and journalism professor Stephen D. Nash that were packaged for consideration by the climate change commission. Each paper focused on a practical, small-bore proposal for helping Virginia ecosystems adapt to warming temperatures. While climate change was the unifying theme, it struck me that many of the proposals make sense whether you believe in catastrophic global warming or not.

Murphy’s paper, in particular, addressed concerns that I have long harbored about Virginia’s conservation easement program. On the plus side, the program provides a way to protect Virginia lands from development that is far cheaper than purchasing the land outright. Landowners receive a tax credit worth 40% of the fair market of the value of the land, with deductions up to $100,000 for the year of donation and 10 subsequent years. In effect, taxpayers pay 40 cents on the dollar to protect land from development beyond its current use, typically agriculture or forestry. Not a bad deal.

The problem is that not all land is equally worth conserving. Some lands harbor endangered species and biological diversity; others don’t. Some easements abut other easements, creating larger bodies of protected habitat; others are tiny islands, creating fragments of little ecological value. The state caps the easement credits at $100 million per year but has no system for prioritizing one easement over another.

Murphy proposes creating a statewide plan, to be administered by the Department of Conservation and Natural Resources, to rank and prioritize land based on conservation value. Factors to be considered would include biodiversity, land resilience, land cover, proximity to existing lands and threat of development. Parcels would be scored. Parcels with high scores (of greater conservation value) would receive higher tax credits, while lower-scoring parcels would receive lower credits.

“Ideally, implementing these changes will result in obtaining easements on more land of high ecological importance without altering the total amount of tax credits given annually,” she writes.

A second tweak to the program would address problems created by freezing an easement in judicial stone. Static easements that prescribe specific responsibilities and expectations of future land owners can become outdated over the decades, limiting adaptation to changes in scientific knowledge and climate conditions. Murphy recommends that Virginia require the inclusion of “adaptive management plans” in easement terms. “These plans should require that the landowner manages the land in a manner consistent with preserving the conservation purpose of the easement rather than require specific management techniques.”

Finally, Murphy recommends setting up a system for monitoring easements to ensure that the terms are being adhered to. In Maine, which requires monitoring, 90% of the easements were in compliance — which implies that 10% were not. There is a cost to monitoring, she acknowledges, but the burden “may have a positive influence as [it] may force landowners to limit their holdings so they can provide proper stewardship to them. This may cause a selective pressure away from low value easements.”

Bacon’s bottom line: Virginia’s conservation easement program is a valuable tool for protecting the natural environment. It’s also a great tax break for landowners, some of whom may be motivated to participate for less-than-altruistic motives. Murphy’s recommendations would ensure that this significant state investment yields maximum benefits.