Author Archives: Steve Haner

Oh, The Tangled Webs We Weave

Before President Frank Underwood there was P.M. Francis Urquhart. He was not amused by amateurs.

Let’s not and say we did.

If I had a dollar for every time I said that to some over-enthusiastic campaign worker for my candidate or some other one with some wild idea to screw with the other side….

Perhaps GOP Congressman Scott Taylor should have used the phrase, or my other favorite:  Don’t do anything you don’t want to read about in the newspaper.

Now we are being subjected to a daily barrage of stories about how the Second District representative’s campaign staff circulated the petitions to get independent challenger Shaun Brown on the November ballot.  After Brown lost the Democratic nomination and went away mad, it was logical to keep her candidacy alive as a thorn in the side of Democratic nominee Elaine Luria.

Some Taylor fan passed Brown’s petitions around the office of fellow Republican and Virginia Beach Sheriff Ken Stolle gathering a large number of signatures, earning this story in today’s Richmond Times-Dispatch.

My personal practice has always been to sign most candidates’ petitions, if I’m a qualified voter in the correct district.  It is not a pledge to vote for that person.  I’ve signed for many a Democrat, independent or Green.  Having been the person circulating the petitions I know it is a hard process, and as a believer in our election system I support people’s efforts to run.

There is also a long history of both parties’ finding and encouraging independent candidates intended to split the opponent’s vote.  Everybody does it, but usually with plausible deniability.  Well, that’s out the window in this case.

If the petitions for Luria were signed by enough properly-registered voters in that district, even if they were active Republicans, serving sheriff’s deputies, or known cranks, she might remain on the ballot.  If not one actual Democrat signed, it matters not.

If those circulating the petitions witnessed and attested to the signatures of false names, or the names of deceased persons, or filled in names themselves, they should face the full consequences under the law – which are considerable.  Doing that will have brought dishonor on themselves, their candidate and the process itself.

Whether all of this will hurt Taylor and boost Luria come November is impossible to say now, but it is the kind of distraction which is never good for any campaign.  At some point well before this got out of hand somebody in authority should have sat back, laughed, and said – let’s not actually do this, folks.  And if the decision was to go forward anyway, the mantra should have been – break absolutely no rules and smile and deny nothing when caught.

The Truth Is Out There (To Be Revealed Friday)

So it’s going to be politics, not economics. Perhaps it was inevitable.

On Friday Governor Ralph Northam and Secretary of Finance Aubrey Layne will be presenting to the House and Senate money committees, part of their report looking back (at the completed fiscal year), but the key parts of their message looking forward. Both are expected to put some flesh on the bare-bones announcement made last Friday about how the Governor wants Virginia to respond to the opportunities created by federal tax reform.

The announcement was telegraphed by the left-leaning Commonwealth Institute for Fiscal Analysis, which endorsed converting Virginia’s Earned Income Tax Credit into a fully refundable version, putting cash in people’s pockets, discussed in a previous Bacon’s Rebellion post.  The political angle was described well this morning by the Democrats’ Virginia media strategist Jeff Schapiro, also of the Richmond Times-Dispatch, who tagged the EITC proposal as aimed at the 2019 legislative elections.

Finally you can see the strategy in the Governor’s own guest column today, this from the Roanoke Times.

“The recent federal tax changes have benefited mainly higher earner. These tax policy changes from Washington will result in additional revenues to Virginia. We can use this opportunity to invest in those who need it most— hard working Virginians. We can do this by making Virginia’s existing earned income tax credit refundable, ensuring that 600,000 working Virginians, including thousands of veteran and military families, can get the full tax benefit for which they qualify.”

What the Governor and Secretary Layne know that we don’t yet is, well, everything. The state commissioned a detailed study of the state-level financial impact of the various federal tax rules changes. That was the apparent basis for the Governor’s announcement Friday that about $500 million plus in new state revenue will result, half of which he wants to use to finance the EITC refunds and half of which he wants to keep in the General Fund.

Secretary Layne assured Bacon’s Rebellion after that press conference that the full report from the consultant will be released and available online Friday after the Governor speaks. Until that report is picked apart, anybody who hasn’t read it is just speculating. I won’t join in that yet.

Probably the best analysis of the issues – written without access to the new report on the numbers – was released this week by Jared Walczak of the Tax Foundation. Come Friday it should be clear where that $500 million estimate came from, which tax provisions produced additional revenue and which taxpayers may pay more in the long run.  And it may be clear whether that windfall results from full conformity to the myriad federal changes, no conformity to the federal changes, or from cherry-picking which provisions to accept or reject – meaning a different combination produces a different revenue result.

There has been no mention so far, but expect news on Friday, about the potential state revenue boost from requiring more out-of-state retailers to collect and remit sales tax on goods they ship to Virginia customers.  And until Friday we really won’t know the size of any surplus from fiscal year 2018, or the status of the reserve funds. Those are also key parts of this coming tax debate.

This is the best opportunity in a generation Virginia has seen for some intelligent tax reform, something positioning our economy for this century. And tax reform does not mean cut my taxes and raise somebody else’s. As previously noted the EITC is an effective anti-poverty program, and Virginia’s income tax is arguably regressive, hitting lower income workers harder than it should. But that is just one element of what needs to be a long conversation that ranges over the whole tax code, one that has been stymied for decades because of the various political risks.

Trailing Spouse Benefit Proving of Minimal Impact

Results of the first 40 months paying unemployment benefits to military spouses leaving Virginia jobs due to family transfer. Source: VEC

Virginia’s unemployment insurance (UI) trust fund continues to show improved balances despite dropping tax rates, reflecting a strengthening economy.   The most recent semi-annual report, released at a legislative meeting yesterday, projects half as many initial claims during 2018 as there were five years ago: 134,000 this year versus the earlier 276,000.

It the trend holds that would be a 45-year low, the Daily Press reported, quoting Virginia Employment Commissioner Ellen Marie Hess.

The trust fund balance probably peaked at $1.35 billion June 30, with slight declines expected in coming months.  With the lower unemployment and higher workforce participation rates, the system is working as designed.   More than 68 percent of the almost 215,000 Virginia employers paying into the fund pay at the lowest possible tax rate, which works out to $88 per employee.

The tax rates go up with a history of layoffs or other successful claims and are higher on new employers or employers based outside of Virginia.  In general Virginia has some of the lowest taxes in the region, in part because it also has less generous payments.

The various charts track many other signs of economic improvement:  More employers registered with the system, fewer of them paying elevated taxes due to past layoffs, lower general unemployment rates, and a labor force participation rate (66.2 percent) higher than the national average.

The report also tracks the impact of a controversial recent change in the system, allowing unemployment benefit payments to the spouses of military personnel who get reassigned outside Virginia.  Prior to 2015 that was considered a voluntary termination, not a layoff, and thus not eligible for benefits.

Over the first 40 months 766 people have claimed benefits costing about $2.3 million.

Business groups, including the Virginia Chamber of Commerce, opposed giving this benefit to so-called “trailing spouses” because of fear it would be a major drain on the fund.  The employer ultimately responsible for the move, the Department of Defense, pays zero into the state UI fund, but taxes are collected from whatever employer had the departing spouse on the payroll.

So far, the number of claimants has been so small there has been no measurable effect on the fund balance or tax rates. The military spouse benefit was passed with a sunset clause and has two more years to run before the General Assembly must end or extend it.  It was advocated as another way to demonstrate Virginia’s commitment to the military, for economic as much as patriotic reasons.

Having the benefit may give Virginia some positive points should there ever be another round of base closures, but if there is and Virginia is on the losing end, the number of claims under this provision would spike.

Love Is A Juicy Tomato, A Ripe Melon

“We as a country have fallen out of love with healthy fruits and vegetables.”

Dominic Barrett said that while sitting at a picnic table a few feet from an acre of healthy fruits and vegetables, a new urban garden in the heart of Northside Richmond created by Shalom Farms.  The location is in my neighborhood beside my normal walking path.  Looking for a story I asked Barrett to meet me there and talk.

Turns out the story is there is no big story, and it’s told from time to time.  This is another example of Richmonders (Virginians, Americans) seeing a problem and doing something about it.  No fuss, no muss, no parade permits, no angry tweets.  The non-profit farm was stared a decade ago as a United Methodist urban mission, has spun off and is now approaching $1 million in annual budget, its staff supplemented by thousands of volunteer hours.

Dominic Barrett, Executive Director Shalom Farms

While official statistics indicate that only one in ten of us eats enough healthy fruits and vegetables, Barrett and his group have plenty of customers for their produce.  Nobody has fallen out of love with fresh-picked tomatoes or corn. Shalom Farms sells product at discounted prices from a “Grown to Go” truck which stops at 11 locations in the city (the stop I saw was bustling), through Richmond Healthy Corner Stores, and give much of it away through a network of other distribution points.

They measure their 2017 output as about 550,000 “servings.”  They also offer food preparation classes, have visitors out to their larger 12-acre farm off Virginia 288 in Powhatan County, and for a few people offer a personalized prescription produce plan to restore health.  A key partner is Health Brigade, formally known as the Fan Free Clinic.

Click on Image for Annual Report

The stories about “food deserts” often fail to mention that decades ago home or neighborhood vegetable gardens or fruit trees were common, even in the city, supplementing purchased food.  This time of year, people were awash with produce grown, given or traded.  At least some of the bounty was then canned or preserved in some other way.  Modern distractions, growing incomes, sprawling supermarkets – all have had a hand in the decline of home gardens.

And of course, as Barrett lists as his biggest lesson from his time in the work, farming is hard and risky.  Why risk a failure from weather or insects when stores have abundant supplies?  But big stores are rare in parts of the city, while cheap and attractive unhealthy food choices are everywhere.  Barrett reported that the group has strong relationships with grocery chains in the area, who do not see Shalom as competition.

The farm on the Westwood Tract inside the city has generated no controversy, Barrett reported.  Five acres are rented from Union Theological Seminary and sit on the edge of a large park-like expanse which is actually at risk for future development.  Many neighbors would prefer the farm to 300 more apartments.

Shalom Farms follows organic practices and has been certified as a natural grower but has not taken the steps (which can be expensive) for official organic certification.  Nor does it preach the Gospel of Organic that discourages people from commercially-grown or even canned or frozen vegetables or fruits.   Fresh is great, local is great, but it’s all better than most prepared foods, so enjoy.

There are aspects of the nutrition challenge Shalom Farms leaves to others, despite what Barrett called “the temptation to be all things.”  The mission is not to rekindle the practice of home gardening, or to feed mass numbers of people.  Like millions of other Americans, they do what they can for those they can reach.  As I said, no big story, nothing new here, but a welcome reminder that more good is being done daily than most realize, and we don’t celebrate that enough.

Specific Updates: Lobbyists, Lottery, Tuition

A few updates, clearing the decks before I disappear next week (I’m not quite as dedicated as Bacon, although I will take the laptop to Duck.)  My son who blogs on University of Virginia sports is going to give me some tips.  (StLouisHoo or something like that…)

Specifics on Who is Not Specific

The Virginia Public Access Project (VPAP) has once again demonstrated the power of a good chart (see above), this one tracking the number of 2018 disclosure forms filed by lobbyists which list bill numbers, and frankly it is a lower percentage than even I realized.   Absent any corrective action by the existing oversight committee or legislators, who are probably not motivated to require more disclosure, the number of disclosure forms listing bills by number will drop further.  No consequence, no change.

If the situation changed, you can see on VPAP the potential for a real tracking system where you could see which companies or associations weighed in on which bills.

Specifics on Who Plays the Lottery

Source: Virginia Lottery

A request for additional information on lottery spending or lottery frequency by income category, following my earlier report, drew a response from the Virginia Lottery that the information is not available.  Perhaps it is a question they do not want to ask or a survey crosstab they do not want to see.

My query did produce some additional data on who plays which games.  It was interesting that those with the lowest level of education, the 12 percent of respondents who didn’t finish high school, are least likely to play and of course least likely to have much discretionary income.  (They are underrepresented in the sample, however.)  People with a high school diploma but no college are the heaviest players of daily games and scratch games, which as noted earlier produce the most revenue.

Additional data was sent on the purchase of lottery tickets by automatic debits or charges, called a subscription in their terminology.  That approach to playing is most popular in the more economically healthy and urban regions of the commonwealth.

Source: Virginia Lottery

They did push back a bit on my assertion that the purchase of U.S. Treasury investments to cover deferred future payouts is another way the house wins, and correctly pointed out the state lottery doesn’t gain any benefit from that.  Yes, in that case I was using the term “the house” to mean government in general, including the federal government, which most certainly benefits from this steady market for these securities.

Specifics on Higher Education Inflation

You read it first on Bacon’s Rebellion a few weeks ago, but the large increase in the tuition and fees bills for this coming term at the state’s public colleges and community colleges is now fully detailed in the official release from the State Council of Higher Education.  The Richmond Times-Dispatch coverage is here.

Somebody Must Think We’re Stupid

David Poole and his team at VPAP have provided another illustration of how the reporting requirements placed on lobbyists at the state Capitol are intentionally vague and useless.  The chart above deals with the reports on lobbyist compensation.

This is usually the figure at the heart of the occasional stories about the amount spent by an individual company, or the gross amount spent on lobbying by all who file these forms.  But in practice almost nobody reports in full what they are paid, and they of course do things other than lobbying with their time.  So they pro-rate their fee and salary and report only a portion of it.

Who draws the line?  Who picks the formula for pro-rating the time? The lobbyist or the principal do so for themselves and are never asked to report their rationale.  That’s why comparisons are impossible – some report 5 percent and some 100.  Partly there is the natural reluctance everybody has to reveal their income, but there is also a reluctance to stand out as a big spender on charts like those produced by VPAP or in a news story.

A Peek Inside the Process

Years ago, one of the best lobbyists I ever worked with, a fine lawyer, instructed me that only the time I spent talking or writing to a legislative or executive branch official about a specific bill or vote was lobbying.  The time I spent researching the issue, drafting legislation or talking points, driving to the meeting, sitting in the anteroom – none of those hours, the bulk of the time, constituted lobbying.  The ten or fifteen minutes in the room, that was the only actual lobbying.

This all flows back to the very narrow definition of lobbying in Virginia law, which does not get into indirect lobbying or grassroots lobbying or lobbying preparation, all things that come up when companies are deciding what is and isn’t lobbying for federal tax compliance purposes.  This situation is too ridiculous to be accident or oversight, and extremely convenient for both the lobbyists and the lobbied.

Compensation is not that relevant.  What matters far more, the real glaring gap in the reports, are the details about what specific subject matters, bills, budget amendments, gubernatorial appointments or procurement decisions are being influenced.   The shameful gaps in the reports include loopholes that allow expensive dinners, gifts or entertainment to be given with no recipients named, or money to shuffle between various entities under the guise of some unregistered coalition.

Also, the full extent of grassroots or indirect efforts needs to be revealed.  More and more issues now spark television, direct mail, phone bank and other campaign style communications efforts, and every dime spent on those should be just as transparent as if they were being spent on a candidate.

One area where compensation should be reported in full is when the client is the government.  Beyond that, we need to focus on those other more important failings in the current non-disclosure disclosure regime, although this contribution by VPAP is useful in demonstrating that somebody out there thinks we’re stupid.

Will Dominion Appeal Latest Loss At SCC?

Daily Press photo of Yorktown Power Station

Michael Martz has a good report in this morning’s Times-Dispatch on the State Corporation Commission’s opinion trimming Dominion Energy Virginia’s proposed transmission charge.  The SCC ordered the proposed Rider T going into effect next month reduced to reflect the lower federal income tax rates.  It also rejected the utility’s argument that a payment it was receiving from the PJM regional transmission entity was a generation cost it should be allowed to book against base rates instead of against Rider T.  Booking it against base rates would in effect make it profit.

The payments are made because PJM asked Dominion to continue operating its Yorktown plant for reliability reasons.  The SCC wrote: “Legally, these payments are part of the PJM Transmission Tariff, which explicitly states that — in this particular instance — the generator is providing a “transmission service” for which PJM is assessing “an additional transmission charge” of $12.7 million. Accordingly, the Commission finds that both (1) the charges assessed, and (2) the payments made, by PJM under the PJM Transmission Tariff for this transmission service shall be reflected in the Subsection A 4 revenue requirement.”

As the biggest beneficiary of that increased reliability, Dominion is actually providing about half of the money to PJM which is then repaid to Dominion.  How does it collect its share?  In Rider T.  These are all transmission dollars.

The adjustments ordered by the SCC will save more than $2 per month on the mythical 1,000 kwh residential customer bill.  The question now is, will Dominion appeal the decision to the friendly Supreme Court of Virginia?  In its final written arguments to the Commission it pointed to the legislative provision (which of course it wrote) that these costs are on their face “reasonable and prudent.”  Reading the SCC opinion (not yet up on its website) it is obviously laying the groundwork for its argument in any possible appeal.

If the appeal is filed it will have little to do with this issue and a great deal to do with the battles to come over Dominion’s massive grid investment plan, just getting underway.   The tax issue involved more money, but the argument over the payment from PJM for maintaining operations at the Yorktown power plant goes right to the heart of the legislative declaration of “reasonable and prudent” and the utility’s game of moving costs back and forth between base rates and rate adjustment clauses when it improves its bottom line.

Previous Bacon’s Rebellion posts on this issue can be found here and here.

Sport of Kings Needs Peasants Playing Slots

Horse Race Slot Machine Circa 1937 (Not What’s Coming Now)

The Sport of Kings apparently cannot survive today unless between races the peasants are pumping their copper into slots.

“The new law acknowledges what several other horse racing states already have concluded: that the new economic realities to sustain a viable horse racing industry require an alternative form of gaming to offset the high cost of live racing,” writes industry advocate Jeb Hannum in today’s Richmond Times-Dispatch.

The column hit print two days after a Virginia Racing Commission (VRC) public hearing on implementing the proposal approved by the 2018 General Assembly to allow up to 3,000 “historical horse racing” machines.  No machine was on display during the meeting, and the commission apparently wants to see one before making some decisions. 

“I want to see one of those machines sitting right down here. I want someone to explain exactly how that machine works. And why it’s not a slot machine,” said Commissioner I. Clinton Miller. “I want to be able to look people in the face and say ‘This is different. This is not Charles Town. This is not Las Vegas.’”

Looks like a slot machine to me.

Taxable Wager Data from VRC Annual Report

All of this is rehash but Bacon’s Rebellion adds value. Pari-mutuel gambling has been legal in Virginia less than 25 years, making it slightly younger than the far larger and more ubiquitous state lottery. According to the VRC annual report, total wagering (the licensed kind) since 1996 is slightly under $3 billion, far less than the $37 billion taken in by the state lottery.

The placement of Colonial Downs in New Kent, instead of far more populous Northern Virginia or vacation destination Hampton Roads, ranks as the one of the dumbest economic development decision of the age. Revenue was anemic and declined rapidly after the recession of 2008.

Colonial Downs closed the track and eight off-track betting facilities in 2014, and only limited racing has taken place at other locations, detailed in the report.   Virginia Equine Alliance, Hannum’s group, has since opened three satellite wagering facilities of its own with three more planned.

Those spread the revenue to localities. Before its collapse Colonial Downs was sharing revenue with nine localities, peaking at about $1.4 million in 2006 and 2007. Last year six localities received almost $400,000 in revenue, most of it for New Kent. The localities attending the hearing Tuesday clearly want plenty of local machines.

But technology is changing. Starting in 2004 “advance deposit wagering” by internet or telephone was allowed and almost $800 million in bets were placed that way through 2017, the largest source of revenue since the track closed. Four different websites are linked to the VEA website, with this as a fair example. With the Virginia Lottery happily taking bets via subscriptions online, that will be next for horse-race gambling.

Two more interesting links for background: the key roll calls in the House of Delegates and State Senate on House Bill 1609, which authorized the expansion into machine gambling. They too were placing a bet that Virginia’s voters are less antagonistic to gaming by machine than in the past.

Working? A Republican Anti-Poverty Plan Works?

Source: IRS.gov

“The federal EITC, together with the Child Tax Credit, lifted nearly 200,000 Virginians out of poverty each year from 2011 to 2013, including nearly 100,000 children.”

Lifted out of poverty.  Let that sink in a minute.  The writer of that sentence is admitting that the federal Earned Income Tax Credit lifts people out of poverty.  And it wasn’t even part of President Lyndon Johnsons’ Great Society but was enacted in the era of GOP Presidents Richard Nixon and Gerald Ford.

I lifted the sentence out of a report on the website of the Commonwealth Institute for Fiscal Analysis, which was called to my attention by a piece  distributed this morning by Virginia Mercury.  The people at the Commonwealth Institute also recognize that Virginia is poised for a long-needed discussion on tax policy, thanks to the opportunity provided by the major changes at the federal level.   It would be a perfect time to discuss again a refundable state version of the EITC, which the state has resisted because of the cost.

The federal EITC is refundable, meaning if the taxpayer has not paid in as much in taxes as the credit, the unused balance of the credit is paid out in cash just like a refund.  Virginia’s EITC is just a credit, and if the credit is larger than the tax owed the tax bill goes to zero but there is no cash-back refund.

The 2018 General Assembly defeated the most recent effort to convert the credit, House Bill 716.  The fiscal impact statement put on an incredibly high quarter-billion dollar price tag, which I suspect is wrong.  If it is not inflated, Virginia should be ashamed it is taking that much tax away from low-income families.

The Commonwealth Institute report noted that just over 80 percent of eligible Virginia taxpayers are claiming the federal credit, meaning almost 20 percent are ignoring it.  Even without converting it, it probably makes sense to get more people to file.  The size of the credit is tied to income and family size, and it’s possible many of the people taking a pass wouldn’t have much of a credit anyway.

When it suits some advocates for low-income programs, they ignore the real value of existing efforts that do provide cash or services to that population.  Note that the child tax credit is also mentioned as important, and other programs not listed keep people above abject poverty abound, supplemented by private efforts. Do the poor have it easy in this country?  Hardly.  But the entire picture needs to be seen.

As Virginia stumbles quietly toward a tax debate over whether and how to conform to the new IRS rules, a state refundable EITC deserves to be one of the big ideas.

Lobbyist Forms Not Mentioned At Council Meeting

A Peek Inside the Process

The state’s Conflicts of Interest and Ethics Advisory Council met Tuesday making no mention of  my column published in July 21’s Richmond Times-Dispatch, pressing for specific bill numbers, budget item numbers and other details on the state’s lobbyist disclosure forms.  I had been told in advance the issue wouldn’t be added to the agenda.

In fact the council’s meeting lasted less than 30 minutes, had no business items, and the only vote was on previous meeting minutes.  Those minutes reveal that the June meeting’s big decision was to approve a staff suggestion to add student loan balances among debts disclosed by public officials.

I don’t want anybody to think I’m making up the complaint that the forms disclose nothing at all, despite a direction to be as specific as possible, so I pulled a few examples at random.  Who owns up to working on which of the 3,722 individual pieces of legislation at the 2018 session?   

As previously noted on July 9 most of the filings lack specifics and the Conflict of Interest and Ethics Advisory Council has sent signals this is acceptable with its published examples.

Loudoun County Chamber of Commerce: “Business Issues.”  Well, that narrows it down to 600 or so bills.

Virginia Chamber of Commerce: “Executive and Legislative Actions and Procurement Transactions.”  I looked at this a few times before I realized it simply repeated back the phrase from the question.    

Mecklenburg County: “Matters involving issues affecting local government.”

Fairfax County Water Authority: “Matters of interest to the Fairfax County Water Authority, including but not limited to, issues arising under the Virginia Water and Waste Authorities Act.”  But not limited to. 

Norfolk Southern Corporation: “All matters affecting Norfolk Southern Corporation.”

City of Norfolk: “Local government.”

Virginia League of Conservation Voters: “Matters related to land conservation, land use, energy issues, and transportation financing.” Continue reading