Bacon's Rebellion

Gov. Timothy M. Kaine didn’t offer much new data in his presentation Monday to Virginia’s House and Senate money committees about Virginia’s deteriorating fiscal picture, but he did have one thing to say that will shape how the budget debate unfolds: He won’t ask to increase any General Fund taxes.

“We will continue to manage through the national economic decline without increasing the general-fund tax burden on Virginia residents,” Kaine said, as quoted by the Times-Dispatch.

Kaine’s unwillingness to try raising General Fund taxes comes in marked contrast to his effort, defeated earlier this summer, to jack up taxes to pay for transportation projects. As a consequence, the debate over how to respond to a revenue shortfall that could exceed $1 billion in the current, two-year budget, will be framed around which programs to cut. Kaine offered few specifics, but did say that programs spared in previous cost-cutting rounds, such as K-12 education, may not escape unscathed.

The two-year budget passed earlier this year included 2.2 percent increase in General Fund spending for fiscal 2009 and another 6.8 percent increase in fiscal 2010. But revenues are falling short of even those modest expectations for this year, and there is little optimism that 2009 will shape up much better.

Republicans are engaging in a round of “I told you so.” Republicans did indeed warn earlier this year that revenues were slowing and that Kaine’s attempt to create new spending programs, such as the pre-school initiative, were ill advised. But that line of logic will take them only so far. After raising a much-justified ruckus early in the year, they did not dispute updated economic forecasts made in February, and they passed Kaine’s revised budget.

Of greater interest to me is the analysis of House Appropriations Committee Chairman Lacey E. Putney, I-Bedford, who framed today’s fiscal crisis in the context of the budgetary debate that has raged since the last economic downturn:

“In 2004, then-Gov. [Mark R.] Warner stated that the tax increase approved by the General Assembly would align our longer-term revenue and spending requirements. Clearly, this did not work. The fact that state spending continues to grow faster than revenue growth is not indicative of the need for more revenue, rather the need for spending reform.”

I quite agree: The immediate problem is a revenue shortfall resulting from an economic slowdown (or outright recession), but long-term the problem has been increases in state spending that have significantly outpaced growth in inflation and population.

Virginia Democrats seem to be resigned to an ever-expanding state budget. Republicans, to their credit, are not. But the Elephant Clan has yet to (a) say which core services they are willing to cut, (b) outline strategies for delivering those services more efficiently, or (c) articulate market-based alternatives to government programs.

Russia’s incursion into Georgia is one of the most dangerous turning points in recent years. In my view, it could lead to far more serious consequences for the U.S. than anything like Iraq and Afghanistan.

President George Bush and his successor must make it absolutely plain to Vladimir Putin that such aggression won’t be tolerated. Negotiations are, of course, in order, but my view as a long-time Russia-watcher is that we must play the threat-of-force card since it seems to be the only thing some of them understand.

That said, I found it especially interesting just how obsolete Russian weapons were during the conflict.

First, some caveats. I know this is supposed to be a Virginia blog and that some fellow bloggers will take my head off for straying off topic. Virginia, however, is where the Pentagon and the CIA are located, plus many military and naval bases. Also, Virginia is the No.2 defense industry state. What happens next is of utmost importance to the Old Dominion.

Besides noting the vigor and recklessness of the Russian incursion, some observers have picked up that the Russia strikes in the Georgian provinces of Abkhazia and South Ossetia and in Georgia proper raise big questions about their military equipment. That intrigues me since the Soviet/Russian defense industry was one thing I paid a lot of attention do when I was a BusinessWeek correspondent in Moscow from 1986-1989 and again from 1993 to 1996.

Aircraft, tanks and assault rifles were some of the few products they seemed to make well. I saw them up close and personal on several occasions, including the Uzbek border where I watched Soviet troops withdraw from Afghanistan in 1989. Four years later, much of the fighting during an anti-Yeltsin coup in Moscow happened just outside my office and apartment where my wife and two children huddled in a bathtub. I’ve waited at armed checkpoints in Azerbaijan and although I was never in Chechnya, I knew a lot of people who were.

On a lighter note, I was once invited to a weapons demonstration by Russian export companies in the city of Vladimir. After a lunch of vodka and heavy appetizers, we went to exhibits where pretty young Russian models displayed mortar tubes and rocket propelled grenades along with lots of leg and cleavage. Then we went out to a firing range and were allowed to shoot any weapon we wanted, including machine guns, despite our somewhat inebriated state. I chose an evil-looking submachine gun, called a “bez-shum” (without noise) because it had a long silencer on its barrel. It made flitting sounds as I squeezed the trigger.

Yet, according to observers such as the Moscow Times, Russian weaponery showed its age in Georgia. The tanks were old T-72s produced in the 1970s to counter NATO armor on the plains of Western Europe. The primary aircraft were close-support Sukhoi-25s, dubbed “Frogfoot” by NATO, which were first used 25 years ago in Afghanistan.

Georgia fielded some of the same weapons, but, according to the Moscow Times, they had been upgraded with night-vision capabilities, unlike the Russian ones. Presumably a bit of the technical upgrades came with help from U.S. and Israeli advisors in Georgia. The Georgians had help with electronic warfare and general training as well, presumably from the same Israeli and U.S. sources. “The Russian forces had to operate in an environment of technically inferiority,” the Moscow Times quoted Konstantin Makiyenko, deputy director of the Center for Analysis of Strategies and Technologies as saying.

Despite the Georgian’s technical superiority, however, Russia prevailed through brute strength of numbers. Georgian President Mikhail Saakashvili made a bad move by provoking the fight by sending 7,500 Georgia troops into the contested and heavily-Russian province of South Ossetia that has been fought over since the Soviet Union fell in 1991 and Georgia became independent. Unfortunately for the Georgians, the initiative failed and the Russians responded in force.

Despite Russia’s victory, the conflict revealed shortcomings in Russian tactics along with the aforementioned ones in weaponery. For example, Russian air forces could not prevent the shelling of a convoy and the wounding of a top commander, despite Georgia’s smaller forces, the Moscow Times says.

Old guns and tanks result, of course, from the economic mayhem that befell the Soviet Union after the 1991 breakup. The military and civilian economies had been merged in ways hard to imagine in the West. But Russia is now awash in oil money. One wonders if the poor showing in Georgia and Putin’s belligerence will spark a major arms buildup in Russia, not to mention more aggressive moves in spots around Russia’s border. If so, the U.S., and by extension, Virginia, had better be ready.

Peter Galuszka

There are a surprising number of “Jim Bacons” in the world. Besides me, there is my father, of course. There is the Hollywood reporter, now retired, who went by the byline of James Bacon. There also was the deceased premier of the Australian state of Tasmania. And last but not least, there is my West Coast alter ego, the proprietor of Mighty Big Media.

The “other” Jim Bacon is politically conscious, too, although his leanings may be harder to classify than mine. In a pandering effort to “titillate” my readers during the summer doldrums, I’m posting one of his political statements on Bacon’s Rebellion. You’ll probably find “Two Huge Boobs” to be more edifying than anything I write.

Now comes the news that Virginia is facing a $1 billion budget shortfall in the two-year budget that commenced a month and a half ago.

Oops. How did that happen?

Let’s dial back the time machine to Jan. 31, when the Washington Post reported, “House Republican leaders warned Thursday that there may be a shortfall of as much as $1 billion in Gov. Timothy M. Kaine’s 2009-10 budget, and they demanded that he quickly revise revenue projections.”

Well, with mounting evidence of a slowing economy, Kaine did ratchet back his revenue growth forecasts, and Republicans signed on to the revised budget after pushing for a reserve fund and trimming some of the governor’s spending initiatives. But it looks like they didn’t crank down spending enough. Here we are, not two months into the fiscal ’09 budget, and we’re already in a big, steaming mess of trouble.

Along these lines, while writing a short story for R’Biz recently, I ran across an interesting statistic. The good news (for we Richmonders) was that, according to the latest Bureau of Labor Statistics data, the Richmond regional economy had experienced a net gain of 3,900 jobs over the previous 12 months. The bad news was, they were all government jobs, split fairly evenly between state and local government. That’s really bad news for the rest of the state, which is paying for those state government jobs through taxes.

Could that data be correct? I wondered. After all the angst and pain over budget cuts this spring, was the state government in Richmond still padding payroll? To be sure, I checked the state department of human resource management website, and what did I find?

Between January and June 2008, the state increased the number of non-university job rolls by 662 jobs. That doesn’t match up with the BLS numbers exactly, but it is consistent with the fact that government jobs are growing.

However, the really big jump in jobs occurred among public university employees: up more than 5,000! That’s 15 percent. That makes public higher education, not government, the real growth industry in Virginia. Of course, it’s easy to grow if you can jack up charges and fees with impunity. (See “Tuitions Gone Wild.”) Is there any way to persuade universities to restructure, re-engineer processes or otherwise find ways to boost productivity and drive down costs? Can Gov. Kaine and the General Assembly ever get a handle on increasing payroll and costs until they tame higher ed?

The governor will provide more authoritative information than the patch-work data I can glean from the Internet. We should hear more Monday on how bad the situation is and what can be done about it.

(By the way folks, I’m leaving tomorrow on another long weekend jaunt. Off to Cincinnati. I won’t be blogging again until Tuesday.)

Breaking news. Eugene Trani has announced that he will step down from his position as president of Virginia Commonwealth University on July 1, 2009, a year earlier than previously planned. Recovering from quintuple coronary bypass surgery, Trani made the decision over the weekend, reports the Times-Dispatch. He will remain employed with the university as a professor.

The decision comes at a time the university is under fire for the handling of the Rodney Monroe degree scandal and the university’s relationship with tobacco giant Philip Morris USA. VCU Rector Thomas G. Rosenthal insisted that the decision was entirely health related and had nothing to do with the recent controversies. “Zip, zero, zilch.”

No surprise. As I asked about three weeks ago, “Has Trani Stayed On Too Long?“

Update: In a press conference today, Trani reiterated that he was retiring early for personal reasons related to poor health. He did add one interesting, if cryptic, note: “If I have one regret about what’s gone on this summer, it is there is an air of fear and intimidation at VCU. That’s not the VCU I know.”

It’s not clear from his statement who he believed was intimidating whom. But Trani’s detractors have often accused him, or his administration, of intimidating dissenters. If he was thinking otherwise, I would like to know.

Don Harrison is one of my favorite bloggers because of posts like this, where he takes the measure of Karl Rove’s Richmond bashing and finds it…pretty fair:

Some may judge a city’s size by its population or its land mass, others may use a different barometer — one that measures small-minded attitudes and the institutional aversion to inclusion, fairness and common sense. If we use this last standard, we should not be too harsh on Mr. Rove for calling it like he sees it. If we stack Richmond up against some of the cities that the man affectionately nicknamed “Turd Blossom” mentioned on “Face The Nation,” we are clearly not ready for prime time.

And that’s just the warm-up.

It’s like a scene out of “Girls Gone Wild,” except instead of pretty co-eds misbehaving, it’s the college administrators. As a result of this year’s tuition and fee increases, Virginia undergraduate students can expect to pay on average 7.3% more in 2008-09 than they did the prior year. That translates into an additional burden of $499 more per student, according to the State Council for Higher Education in Virginia (SCHEV).

The latest round of hikes perpetuates a decade-long trend of saddling students and their parents with ever-escalating bills for higher education. After adjusted for inflation, the annual average increase for in-state undergraduate tuition and mandatory fees is 3.1 percent at four-year institutions over the past decade, calculates SCHEV in its report, “2008-09 Tuition and Fees at Virginia’s State-Supported Colleges and Universities.“

Eleven institutions complied with the requirements of of the General Assembly’s Tuition Moderation Incentive Fund, restraining their tuition hikes in order to qualify for $17.5 million to be shared by qualifying schools. But six of the largest universities — Virginia Commonwealth University, the University of Virginia, the College of William and Mary, Virginia Tech, George Mason University and the Virginia Community College System — opted out.

The tuition-moderation fund will provide participating schools a total of $17.5 million for limiting in-state undergraduate tuition and instruction-related fee increases to no more than 4 percent in 2008-09.By contrast, Virginia Tech is goosing its tuition, fees and charges upward by 9.4 percent, W&M by 8.7 percent and UVa by 7.3 percent.

The usual response of universities is that they jack up their fees to compensate for cuts in state assistance. There is something to that argument — but it’s only part of the explanation. This year, the General Assembly boosted state aid by 2 percent. Inflation over the past year has run about 5 percent. Clearly, the legislative assistance was inadequate to cover the higher costs. But, as has been the pattern for just about forever, the six largest universities hiked tuition and fees significantly faster than the inflation rate.

Bacon’s bottom line: Tuitions and fees at Virginia’s most prestigious public institutions are out of control. Boy, am I glad two of my three children have graduated. Only one to go. But I shudder to think what a university education will cost in another eight years.