Building a Better Business Climate

Governor Terry McAuliffe wasn’t the only one to welcome Virginia’s No. 7 status in CNBC’s 2017 “Best States for Business” ranking.

“Good news? Of course it is!” wrote Chris Saxman,  executive director of Virginia FREE in an email blast yesterday. “Better is better and moving back into the Top Ten is important for a number of reasons especially since Virginia’s rankings have fallen recently. “

But there was cause for concern, Saxman warned. Virginia’s ranking for the “cost of doing business” category was a crummy 35th.

“Virginia FREE has pointed this glaring problem out in previous commentaries. We also have urged legislators and candidates talk with local business owners in their districts to discover what drives business costs and how state government can mitigate those costs,” he wrote.

Legislators need to work with policy experts in chambers of commerce “to see all sides of the policy changes that are necessary,” Saxman urged. Tackling undue regulatory burdens would help address the poor Cost of Doing Business, he suggested. “However,” he added, “Virginia should get these reforms done correctly and that takes time.”

That’s a key point I made in my previous post about the best-state-for-business ranking. Improving the business climate takes time. It takes dozens of incremental, often obscure reforms. And it takes more than the superman exertions of a single governor. Ideally, if the reforms are to last, they should arise from bipartisan consensus. In an era of polarized politics, consensus may be harder to achieve than ever — but it’s more necessary than ever.

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9 responses to “Building a Better Business Climate”

  1. LarrytheG Avatar

    I had forgotten about Virginia Free.. how about a guest editorial to catch us up on them and what they’ve been up to lately?

  2. Steve Haner Avatar
    Steve Haner

    That’s what this is, isn’t it? The business climate blog? Tax policy, transportation policy, energy infrastructure and cost, regulation, education quality and cost at all levels, government efficiency or waste — all are elements of the “business climate.” When I worked at the VA Chamber a regular statement of mine was that the weather is out of our control but the business climate is what we make it. That is still an overall goal of mine.

    A big part of the dip in the CNBC rankings was the impact of the shrinking federal spending a few years ago, still a risk factor. (But if there is a surge in defense spending I doubt Virginia will complain.) I also think the failure to respond to the transportation challenges was a factor, now addressed. But there are intangibles in their calculations and they tweak their numbers. The real impact of that report, missed by the MSM, is it takes that issue off the front burner for November – the state is back in the top ten and trending in the right direction again. Good for incumbents all around.

  3. LarrytheG Avatar

    It would be a nice change for Virginia to wean itself off of Federal-deficit financed Defense spending….

    Don’t know about the latest metrics but apparently not included in this “Business Climate” report:

    2) Virginia (that’ a number 2 ranking for Fed dollars):

    > Amt. per capita net of income taxes: $14,201
    > Population: 8,001,024
    > Pct. of U.S. population: 2.59%
    > Amt. per capita: $17,008
    > Pct. of U.S. funds per person: 4.21%

    Virginia received more than $136 billion in federal funds in 2010. This state received more than 12% of the total Department of Defense procurement spending — the second-highest proportion in the country, behind California. The state received the highest per capita procurement funding and the third-highest per capita federal expenditures for salaries and wages. The state’s proximity to the capital is a factor in the high government expenditures. Despite receiving the second-most federal funds per capita, Virginia was very low in terms of the grant funding it received.”

    keep in mind – Virginia is benefitting at the direct expense to the Federal Deficit .. and the irony is that the current politics in Washington want to cut the MedicAid dollars and increase the Defense dollars…

    What should Virginia itself be doing to mitigate this and ween itself from the risky proposition that our economy continue to be reliant on Federal deficit spending.

    I would think most Fiscal Conservative and the business community would find our current reliance… at least.. uncomfortable .. and what kind of Business Climate rating and ranking ignores this risk?

  4. Steve Haner Avatar
    Steve Haner

    Right Larry, let them build and base the carriers and submarines somewhere else. The largest Navy base and the largest shipbuilder in the country are just as important as the services complex around DC. Jeez sometimes you worry me…….

    I prefer to think the defense budget is properly funded and it is the entitlement programs which are the funny money! 🙂

  5. LarrytheG Avatar

    Well geeze, they turned down 2 billion in Medicaid money… 30,000 jobs that actually did not come from general revenue deficit spending!

    who would turn down Fed money for ANY purpose? Virginia, that’s who!

    I’m also not advocating that we turn down the Defense money and jobs either – only that we recognize that we’re vulnerable to future cuts – … My understanding right now is that DOD is waving off more ships .. because of personnel costs.. and that, in fact, it’s personnel costs and benefits that is eating DOD alive and they want the flexibility to downsize “people” and use the money for more modern autonomous weaponry… less people-staffed weapons.. and more “drone”-type …which means someone somewhere is going to get contract to build that stuff.. instead of more traditional ships and the like.

    Are we positioned to compete for that evolving business and changes to the way DOD spends?

    In other words.. it’s not good enough to suck on the govt teat and just believe that in Va’s case.. it will always be there…

    Are we … “business friendly” to those companies , not here… that are going to be building drone-stuff for DOD?

  6. I mean everything is going to Texas like ExxonMobil from Fairfax and Toyota from California. California business is booming despite outright hostility to politically incorrect businesses. We just lost the FBI HDQ, in NoVA, assuming we could have had it over MD. I am not sure why we are less attractive but I sure got some ideas: uneven taxation.

    With VA, we would need to split the state into rural and NoVA/CoVA and then rate NoVA/CoVA (coastal VA) on those things (which may not look so good). What happens if we take the whole state ranking, taxes look fictitiously low, but if you say you are moving to NoVA, where the business may want to go, then the picture is less happy. We are a bifercated state, so treating VA as #10 based on state-wide averages may not be accurate.

  7. LarrytheG Avatar

    re: ” What happens if we take the whole state ranking, taxes look fictitiously low”

    Isn’t that probably true of most states that consist of urban and rural areas?

    We just don’t abandon the less prosperous of the state… that basically means abandoning people… and we simply don’t do that… no matter how tempting it might be… and really what exactly does it mean to “split” anyhow?

    The difference between 3rd world nations and first world nations is that we don’t abandon regions and their people … right?

    1. Larry I am not sure. I have long felt that Virginia shows up as a low tax state in the rankings, but in reality we have low tax rural area and high tax populated area. We have bifercated our tax hit more so than most states, and also our strategy is specifically dead aim our taxes at the more populated area of the state, almost like a punishment. What I am suggesting is other states use things like gasoline taxes and tolls, which tend to spread out the tax burden to out-of-staters. In Virginia, we tend to let out-of-staters “off the hook” and take dead aim at ourselves (NoVA). Part of the justification seems to be NoVA is infested with transplants.

      So when I see a good business friendly ranking state average, I try to ask if that ranking makes sense in our region, and I say maybe not. I do not feel too friendly.

  8. LarrytheG Avatar

    @Tbill – this rural versus urban argument occurs in various forms in most states that have urban and rural.

    In this blog – it’s a continuing theme by several that the rural areas are “sucking NoVa dry” or some variation of that thought. You hear it a LOT with respect to the LCI and roads!

    We hear sentiment that we need to stop “subsidizing” rural schools and roads – and other services…

    My point is – that Nationally, we do not do that with states – and down at the county level – the county does not abandon it’s rural areas either.. Schools ad public safety and other services and infrastructure are provided uniformly across the region.

    I’m on board with taxing out-of-state folks.. that’s why I DO support higher gas taxes AND sales taxes especially in the areas of the state that attract out-of-state – supplemental sales taxes, meals taxes, hotel/loding taxes, airport taxes, etc… essentially consumption taxes…

    But the idea that we’d “cut loose” the areas that are economically weak … essentially means – the people who live in those areas.. that need education, transportation and health care.. .. so that sentiment is not about cutting “regions” loose.. it means people… and to my way of thinking – one of the essential tenants of governance is that we do provide essential services and infrastructure to everyone and we work to get them educated so they CAN move to areas where there are jobs – join the labor force.. and contribute to the productivity needed for a more robust economy.

    The only places where I don’t see this done is essentially in 3rd world countries where the govt has a minimal function and presence – especially in their rural areas.

    I guess I could be persuaded otherwise with some good counter-arguments but they would have to overcome the idea of what basic governance is really about at least in my own mind.

    So is “governance” essentially a “liberal” concept of taxing people to provide services and infrastructure for all irrespective of how much each person actually does contribute? 😉

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