Category Archives: General Assembly

When and Why Can the SCC Say No?

When the General Assembly and Governor pass a law that states a source of electricity – or even a specific power project – is in “the public interest,” what is the State Corporation Commission left to do?  Does that mean the SCC must approve the project even if it turns out to be unreasonable, imprudent or not needed?

Since 2007 the Assembly has designated several aspects of generation and transmission “in the public interest,” this year adding to the list up to 5,000 megawatts of renewable generation and a small and expensive demonstration project for off-shore wind for Dominion Energy Virginia.  Before going further on that wind project, Dominion filed a petition seeking a declaratory judgement on the question of prudence.  Just because one parent said yes, best to check with the other one.

The two SCC commissioners then turned the tables and asked all participants in the matter to give their legal opinion on seven specific questions.  Lawyers for the two major electricity providers, for environmental groups and for the Office of the Attorney General all took a crack at questions such as this one:

“6. Do the statutorily-mandated public interest findings under either Subsections A or E override a factual finding that the project’s: (a) capacity or energy are not needed for the utility to serve its customers; and/or (b) costs to customers are unreasonable or excessive in relation to capacity or energy available from other sources, including but not limited to sources of a type similar to the proposed project?”

Before Dominion dictated a new regulatory approach in 2007,and before Virginia legislators developed a taste for micromanaging the state’s energy economy, such questions never came up.  The SCC had unlimited authority to decide what was needed, prudent or reasonable, subject to appeal.

The briefs are all buried in this pile of documents and they were supplemented with oral arguments on Thursday, drawing a packed house.  There was agreement that a finding of public interest is distinct and does not override questions of prudence or reasonable cost, and the SCC can reject a project for those reasons.  But picking up a phrase used before, Joseph Reid III of McGuireWoods said Dominion views the legislative blessing as “a thumb on the scale” and that phrase in the law “strongly encourages a result.”

The petition dealing with the wind project is filed under a new process for testing prudency. “It would be illogical for the General Assembly to first declare solar or wind generation facilities to be in the public interest and provide for a prudency determination if the General Assembly meant for the terms to be treated synonymously. There would be no need for a prudency determination if such was the case,” wrote Assistant Attorney General Mitch Burton of the Consumer Counsel’s staff.

Burton also pointed to the part of the new bill dealing with putting residential power lines underground.  The General Assembly years ago deemed that underground program in the public interest, and directed the SCC to interpret the law liberally, yet the SCC scaled back the project based on cost.  This year the Assembly added a hard mandate that those costs had to be deemed reasonable,  but that implies SCC discretion remains in other areas.

At times the argument focused on the general issues, but at other times it focused on the project at hand – the 12 megawatt, two-turbine wind project planned for 27 miles off Virginia Beach and projected to cost $300 million.  Supporters of the project argued that the SCC should not reject it just because the tiny energy output is not needed.  Given this has been billed all along as a small demonstration project, not a major source of electricity, the question of need may not apply in its case.

But need will be a question in other cases, and projected demand growth is a major dispute in the pending Dominion integrated resource plan.  The rapid move to renewable sources may be accompanied by the early (and costly) retirement of existing fossil fuel generation. This part of the discussion produced the strongest disagreement among the parties.  They had different answers to part (a) of the question set out above.

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Legalized Medical and Recreational Marijuana Use Appear to Hurt Alcohol Sales

High times.  In a recent Bacon’s Rebellion column … Will Virginia Legalize Recreational Marijuana Use … I noted that well over 20% of Americans now live in states that have legalized the recreational use of marijuana.  In the column I wondered whether our General Assembly’s reluctance to address the question in a meaningful way might be attributable to Virginia’s unholy trinity of political corruption:

  1. Unlimited campaign contributions
  2. Opposition by well heeled vested interests (i.e., the alcohol manufacturing, distribution and retail industry)
  3. Essentially non-existent rules on the use of, or reporting on, campaign contributions

My hypothesis was that a river of money flows from Virginia’s alcohol industry into the pockets of our elected officials.  The alcohol industry is opposed to legalizing marijuana since legalization hurts alcohol sales.  Meanwhile, our elected officials want to keep the money flow going since it funds not only their re-election plans but also dinners at Bookbinders, golf outings, private clubs and all sorts of other goodies.  Therefore, legalization of marijuana is intentionally stalled in Virginia.  Virginia’s reputation as America’s Most Corrupt State is, in my opinion, well established.  However, the question of whether legalized marijuana use hurts alcohol sales needs to be further examined.

Paging Doctor Weed.  The best information about the impact of marijuana legalization on alcohol sales comes from studies of medical marijuana legalization.  Medical marijuana has been legalized for longer and in more states than recreational marijuana.  Some would say that medical marijuana is a poor proxy for recreational marijuana because medical marijuana is only used to combat disease and therefore is not a substitute for booze.  Yeah, right.  A university study using retail scanner data from 2006 – 2015 found that alcohol sales fell 15% in jurisdictions that legalized medical marijuana.  For the sake of emphasis – this was a study of legal medical marijuana on alcohol sales, not legalized recreational use of marijuana.

The Oregon Trail.  The relationship between legalized recreational marijuana and liquor sales has been studied in Oregon.  In that state, recreational marijuana use is legal at the state level but localities have the right to ban it in their jurisdictions.  A study comparing Oregon localities that allow marijuana sales vs those that don’t found the growth rate of liquor sales for the “booze only” places was faster than in the “booze and reef” areas.  Early days.  Only one year of data.

Miller Time.  A 10-K disclosure by the Molson-Coors company cites legalized cannabis sales as a potential risk to their business. “Although the ultimate impact is currently unknown, the emergence of legal cannabis in certain U.S. states and Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer. As a result, a shift in consumer preferences away from our products or beer or a decline in the consumption of our products could result in a material adverse effect on our business and financial results.”  Four months after citing the business risks of legalized marijuana Molson-Coors announced they are considering the sale of ganja infused beer in Canada.

Rocky Mountain High.  Earlier this year the Aspen Times reported that Aspen’s legal marijuana dispensaries outsold its liquor stores in 2017.  As far as anyone knows, this is the first time such a shift has happened.  I’ll wager it will be far from the last time.

— Don Rippert

Has NoVa Finally Woken Up?

VA-10.  State Senator Jennifer Wexton (D) hopes to unseat Congresswoman Barbara Comstock (R) in Virginia’s 10th Congressional District.  A typically gerrymandered Virginia district, the 10th stretches from inside the Capital Beltway to well west of Winchester.  As a resident of the 10th I watch the elections in that district closely.  This one is shaping up to be a doozy.  Far left Jennifer Wexton is running on an anti-Trump platform while trying to avoid taking a position on any issue relevant to the constituents she hopes to represent.  Meanwhile, Barbara Comstock is running as an embarrassed Republican who tries to avoid gazing east at the current occupant of the Oval Office.  Think Nelson Rockafeller in drag.  All in all I think Barbara Comstock has done a better job of explaining herself and focusing on issues that are relevant to her district.  One issue in particular stands out for me – the allegation that Wexton has sold out Northern Virginia during her time in the General Assembly.

Don’t get Wexton’ed.  Recent negative ads run by the National Republican Congressional Committee (presumably) on behalf of Barbara Comstock hit a point that hasn’t been hit before.  The ads call out Jennifer Wexton for her role in the General Assembly’s massive rip off of Northern Virginia.  The 30 second ads are punchy and direct.  One ad has a graphic that shows money raining out of NoVa into Richmond.  It cites high tolls and NoVa – only taxes.  Needless to say, Jennifer Wexton is the highlighted villain.  Another ad shows traffic jams and tolls in NoVa then cuts to a single car effortlessly driving down an otherwise empty road claiming, “The rest of the state rides for free.”  As far as I’m concerned, the ads are completely on target and finally call out the gutless NoVa politicians we have elected for selling out their constituents.

I wish I could drive I295.  For many people from Northern Virginia there certainly seems to be a vast sucking sound coming from the General Assembly in Richmond.  There also seems to be a two class system when it comes to a lot of things including transportation.  Take Richmond for example … the city, not the state government.  The OMB defines the greater Richmond area as comprising thirteen counties, including the principal cities of Richmond, Petersburg, Hopewell, and Colonial Heights. As of 2016, it had a population of 1,263,617.  Somehow, this qualifies the area for a 4 lane “beltway” called I295.  Meanwhile, the greater Washington area has a population of 6.1m as of 2016.  It also has a 4 lane beltway in NoVa.  An area with 4.7 times the population of Richmond somehow ends up with the same sized highway encircling it as Richmond gets?  And Jennifer Wexton thinks that’s all fine and dandy?  Comstock’s right – let’s not get Wexton’ed.

Thanks, Barbara.  Jennifer Wexton is hardly alone in selling out her constituents.  All 140 seats in the Virginia General Assembly are up for election in 2019 including every state politician claiming to represent Northern Virginia.  It’s high time that all of NoVa’s politicians are taken to task for selling out their constituents.  Hopefully these ads and others like them will continue to haunt the comfy re-election dreams of our political class in Northern Virginia.  If our politicians want to argue about their role in grifting NoVa the approach is easy … clearly and quantitatively document the amount of money taken by state and local government in NoVa and compare it to the amount of money spent by state and local government in NoVa.  Then … defend the difference.  I happen to know that a number of General Assembly members from NoVa read this blog (at least occasionally).  Any of you who read this – are you up for the challenge of demonstrating the fairness of your actions vis-a-vis inflows and outflows of money from NoVa?  I won’t hold my breath.

— Don Rippert

Decisions on a New House Plan May Start Today

The most recent proposed House of Delegates plan drafted to comply with a federal court order, linked to more information on VPAP. Source: VPAP

The House of Delegates Privileges and Elections Committee meets this afternoon to consider several competing proposals for a new House of Delegates district map, all having proponents who claim they will satisfy demands from a federal court.

Setting aside the politics and hypocrisy on both sides, when I see the Virginia Public Access Project’s displays and analyses on these various proposals I just marvel at the way technology has changed this process and appreciate the way VPAP has presented it to us all.

The game was far simpler before this detailed GIS mapping technology, overlain with all the demographic and political data.  I will never forget staying up almost all night in 1991 to prepare a Senate plan with nothing but paper precinct lists and an Excel spreadsheet.

As previously noted, and this opinion won’t be shared by all, this has gotten out of hand.  The 2011 redistricting map was certainly a gerrymander, as they all are now, but it contained neither the intent nor the effect of racial discrimination.  It met the legal standard as understood at the time, passed with commendable bipartisan (and biracial) support and was cleared by the Justice Department.  Nobody stood on the floor of the General Assembly and screamed “Jim Crow!”

The people now claiming harm are seeking partisan advantage, nothing else.

If the federal courts now read the Voting Rights Act a bit differently the proper remedy is to set the rules clearly in time for the 2021 mapping process and election.   To tweak a couple of dozen districts (perhaps hundreds of precincts) for just one election cycle, and then change them again two years later, is a remedy that creates more harm than benefit.

I say this now with the added experience of working in a poll and dealing with voter confusion over where they should be.  Jumbling precinct lines causes harm.  Period.

But among the benefits to one side might be a quick change in control of the House of Delegates, so we go through this exercise.  With the publication now of two Republican-sponsored plans along with a highly-partisan Democratic plan the Democrats and Governor Northam can either accepts something that meets the new rules or reject them all and send the matter to a court-appointed special master.

Their problem is that the special master’s first step, I suspect, will be to review the plans considered by the special session, and if one of them does the trick, recommend it to the judges.  Almost 30 years ago, working for the then-minority caucus, we were drawing plans we knew would be voted down but we hoped would be attractive to a court seeking alternatives.

With this new plan sponsored by Delegate Chris Jones that outcome might be more likely.  I’m sure it has been refined with careful consideration of the court’s order, and it apparently has some Democratic endorsements.   The end of this game may be in sight.  The General Assembly should solve this, not the court.

VA CPAs Say Conform, Hold Tax Funds for Later

The Virginia Society of Certified Public Accountants (VSCPA) Monday called on the 2019 Virginia General Assembly to conform Virginia tax with recent federal changes, to track and sequester the hundreds of millions of dollars in higher taxes thus generated and to hold those funds for a future tax reform effort.

Nobody knows these issues better than the people who prepare tax returns, and the CPAs cite continued uncertainty over the full impact of the federal changes, especially with several issues still awaiting guidance from the U.S. Internal Revenue Service.  The society’s position is detailed in a white paper.  It offers no firm advice on what policy changes should eventually be adopted.

“VSCPA leadership and the VSCPA Tax Advisory Committee considered and discussed numerous policy options in an effort to make a recommendation, considering extensive input from VSCPA members and tax professionals, and determined that there was no member consensus on any single policy prescription,” Vice President Emily Walker wrote in an accompanying news release.

The VSCPA has enhanced its clout on this issue by hiring former Senate Finance Committee Chairman Walter Stosch as an outside lobbyist.  Stosch’s message to conform in full and then hold the money for later decisions is likely to carry greatest weight with his former colleagues in the Senate.

On the same day the CPA’s position was announced the first piece of proposed conformity legislation was filed, a House bill seeking to allow one major deviation from conformity.  It would allow Virginians to take the standard deduction on their federal returns but still itemize deductions on their state returns.  The deductions they can take will be under the new federal rules, however.

In previous Republican-generated statements pledging to allow Virginians to keep state itemized deductions while taking the federal standard deduction, the question of which deductions – new or old — has not been addressed.  The new federal law places limits on state and local tax deductions, eliminates the moving expense deduction, and make many other changes.

Delegate Richard Bell (R-Staunton) is not on either the House Finance or Appropriations Committees and it is likely other bills will emerge, probably many of them, before the session starts in January.  To apply retroactively to tax year 2018 any bill will have to pass with 80 percent super-majorities in both chambers, requiring a bipartisan consensus.  A bill changing policy for tax year 2019 needs just the usual majorities plus the Governor’s signature.

Secretary of Finance Aubrey Layne was back discussing the issue before the House Appropriations Committee Monday, at the end of his regular presentation on the state’s finances.  A CPA himself, he probably helped influence that society position paper.  The Northam Administration is resisting efforts to make immediate tax policy changes in response to conformity but has not ruled out a tax reform effort next year.

That approach has its own challenges.  By the administration’s own estimates, conformity with no policy changes produces almost $600 million in additional revenue for tax year 2018 from individuals and businesses.  To hold the funds in reserve for a future tax policy debate would require great discipline on the part of the elected leaders.  And if done in special session next year that debate would take place during the run-up to what is likely to be a bitter primary and election season for both House and Senate.

Layne has access to the revenue model produced for the state by Chainbridge Solutions LLC and added a data tidbit yesterday:  While some people will see a tax increase if Virginia adopts full conformity, others will see a tax increase if the state does not.  The individual tax hike from non-conformity is more than $181 million.  That’s far less than the other way around but demonstrates the complexity of all this.

Speaking of complexity, an effort to explain this in easier-to-understand language led to the production of another white paper, this one mainly written by me and distributed Monday.  You can find it on the Thomas Jefferson Institute website here.

Will Virginia Legalize Recreational Marijuana Use?

High times today.  The marijuana legalization wave is beginning to wash over North America. Nine states (WA, OR, CA, NV, CO, MA, VT, ME and AK) along with the District of Columbia have legalized the recreational use of marijuana.  Well over 20% of Americans now live in states which have legalized recreational marijuana use. On Oct 17 of this year recreational marijuana use will be legalized across Canada. While the various provinces will regulate the sale and use of marijuana in their own unique ways, it will be legal across Canada.

Higher times to come. Several more states are slated to decide the question of legalized recreational marijuana use this November (or sooner)…

Michigan – Voter initiated measure to permit those over 21 to grow and possess personal use quantities of cannabis and related concentrates.  Statewide polling data from this spring shows 61% of voters intend to vote “yes” on the measure. While you may not be able to drink the water in Flint it looks like you’ll be legally able to use it in a bong come this November.

New Jersey – The New Jersey legislature is debating bills that would legalize recreational marijuana in the Garden State. Interestingly, some of these bills would also expunge the criminal records of anybody convicted in the past of marijuana-related crimes. Was I ever arrested for weed?  Fuhghetaboutit!

North Dakota – A voter – initiated referendum will appear on North Dakota ballots this November. Uniquely, the North Dakota initiative would set no limits on the amount of marijuana people can possess or cultivate. Perhaps a large stockpile is required to get through those long, dark winters.

New York – A recent state commissioned study on recreational marijuana legalization came out strongly in favor of making ganja legal. Gov Andrew Cuomo quickly sprang to action setting up a working group to write a marijuana legalization bill. Put New York in the “when, not if” column.  This should give new meaning to Billy Joel’s song “New York State of Mind” (which has the opening line, “Take a holiday from the neighborhood”).

Oklahoma – This June Oklahoma voters approved a broad medical marijuana usage law. Activists have collected a lot of signatures to get the question of legalized recreational marijuana on the Nov 6 ballot. Whether there are enough signatures or enough time to get the ballot question approved this year remains to be seen. Sadly, Merle Haggard died in 2016 before being able to revise the first line of his famous song Okie from Muskogee … “We don’t smoke marijuana in Muskogee”.  It seems that sooner, rather than later, people will be openly smoking marijuana in Muskogee.

Delaware – In June, a majority of House lawmakers voted in favor of legislation to legalize marijuana use and retail sales. However, because the legislation imposed new taxes and fees, state rules required it to receive super-majority support. Lawmakers are anticipated to take up similar legislation again next year. I’ll predict that by 2020 people will be legally getting small in the Small Wonder.

A spot of hemp, Mr. Jefferson? Five of the first six presidents of the U.S. were Virginians and there is evidence that all five of them smoked a little hootch from time to time. You can read the evidence from an unimpeachable source … High Times …  here.

Will River City go up in smoke? But what of modern Virginians and Virginia politicians? In a 2017 Quinnipiac poll Virginia voters supported allowing adults to legally posses and use small amounts of marijuana by 59 – 35 percent. So, the voters would like to see marijuana legalized in Virginia. But since when did the voters matter to Virginia’s political elite? They don’t listen to voters, they listen to dollars. The Virginia Public Access Project tallies up the following donation totals for “all years”:

Beverages – Alcohol Distributors / Brokers – $20,885,384
Retail Sales – General $10,113,070
Restaurants – $6,533,357
Beverages – Alcohol Manufacturers – $3,993,418

As point of reference, Dominion Energy donated $11,354,842 during the same period.  Meanwhile, PepsiCo, owner of Frito-Lay – the maker of Cheetos – only donated $82,385.

— Don Rippert

Limousine liberalism in Alexandria, Va

Stinking to high heaven.  The City of Alexandria spews an astonishing 11 million gallons of raw sewage into the Potomac River every year.  The overflows happen just about every time it rains.  This is the result of a combined sewer system that is designed to collect sewage and runoff in a single system.  When it rains, the runoff spikes and Alexandria’s treatment plant can’t handle the volume.  The excess of mixed runoff and sewage is intentionally overflowed into the Potomac River in four separate dumping locations.  This has been happening for 100 years.

Raising procrastination to an art form.  Many U.S. cities have combined sewer overflow (CSO) problems.  The environmental damage is well understood and the approach to solving the problem is well understood.  You basically build a great big underground holding tank to catch the excess sewage and runoff until the treatment plant can catch up to demand. Washington, D.C., Richmond and Lynchburg join Alexandria in needing to deal with their CSO problem.  The difference between Alexandria and the other three cities is that the other cities are well along in solving the problem while the well-heeled progressives in Alexandria were content to spew human waste into the Chesapeake Bay watershed without any more than a pretense of a plan to remedy the situation.  However, in a stunning stroke of clarity, the Virginia General Assembly changed all that.  They boxed Alexandria’s ears leaving the snowflakes in that city’s government with an epic case of tinnitus.

Our glorious General Assembly.  During the 2017 session the Virginia General Assembly essentially told Alexandria that “enough was enough.”  The legislature passed bills setting a fast-paced schedule for Alexandria to fix its disgusting sewer system.  The city has eight years to attend to a problem that should have been addressed a decade ago.  The Mayor and City Council members of Alexandria cried like babies after being told they needed to stop dumping raw sewage into the river.  Alexandria has a median household income of $89,200 and can afford an “Office for Women” along with hybrid buses that cost $750,000 apiece (twice the cost of a normal diesel bus and they idle all the time anyway).  However, they can’t fund a fix to dumping raw sewage?

Odd bedfellows. The Alexandria sewage affair made for some odd bedfellows.  Progressive Democratic state Senator Scott Surovell, D-Mount Vernon, launched a Twitter offensive against his lefty pals in Alexandria over the matter.  Of course Surovell represents the district immediately downriver from Alexandria!  Conservative Republican state senator Richard Stuart, R-Westmoreland, patroned the initial legislation, which was much more draconian than what was ultimately passed.  Stuart also represents a district downriver from Alexandria.  Support for the bill in both the House and Senate came primarily from Republicans while opposition was primarily from Democrats. Governor McAuliffe tried to elongate Alexandria’s schedule but was rebuffed by the General Assembly and ultimately signed the strict bill.

Update. After insisting that the city needed five years to study the matter Alexandria’s plan was written and approved within a year. After insisting that the eight-year schedule was an engineering impossibility the city now says the schedule is doable. Funny what happens when liberals are forced to do the things they insist everybody else must do.

Warning. Before any of you wizards in the peanut gallery start carping about my anti-liberal bias … remember this post.  I am anti-two-faced politicians who espouse a political philosophy like property rights or environmentalism but then backtrack on their supposed beliefs when it comes time to act.

Hero award: Scott Surovell.

— Don Rippert

Dominion Excess Profits Continued to Roll in 2017

Bill increases since 2007 by category. Source: SCC

During 2017 Dominion Energy Virginia earned $365 million in profits above the target return on equity the State Corporation Commission would likely have established, but of course the General Assembly regulates the utility now – not the SCC.

For the year Dominion Energy’s profit margin on its Virginia operations was just under 14%, well above what probably would have been an allowed target of less than 10%.  On the generation side of the house the margin was more than 19%, which would make most other manufacturers ecstatic (and, yes, Dominion manufactures electricity).  The margin on transmission was right on target.

The figures come from the annual update the SCC provides to the General Assembly on utility regulation since the landmark 2007 return to regulation, which was followed by the unprecedented 2015 law that suspended rate regulation, only to lead to the 2018 revolutionary regulatory revisions only now taking full shape.  (The adjectives are intended to be sarcasm and fully reflect the opinion of the author.)

Yes, the instability borders on insane. The 2018 bill calls for a full SCC review of rates and profits, the first “rate case” since 2015, in 2021 and these excess profits will be part of that review (along with this year and the two following). Do not bet your retirement funds on that happening without further changes to the law.  But in the interim, instead of a rate case we get this report.

A similar report last year detailed large excess profits for 2015 and 2016, the first two years covered by the General Assembly’s suspension of SCC authority. A portion of those profits, $200 million, is being returned to ratepayers as rate credits in 2018 and 2019, a concession Dominion Energy offered for all the other good and valuable considerations in the 2018 bill.  You got the first portion on your bills in July.

The 2017 SCC report predicted that the excess profits would continue to roll in, and the new numbers fit that prediction. Under the regulatory scheme Dominion wrote for itself last winter, there remains a chance ratepayers could receive some of that excess back in refunds, potentially more than $200 million. But the new law gives the utility a pass on paying refunds if the money is instead invested in its coming grid capital program or certain favored renewable energy projects.

The state’s other investor-owned power company, Appalachian Power, also earned profits above the likely target, with a profit margin of 11.3 percent. Its excess earnings were estimated at $32 million but APCo has one-fifth the number of customers, so keep that in mind when making comparisons to Dominion.

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Higher Ed’s Hidden Influence: Alumni Legislators

Fund-raising tip for public colleges and universities: Get more of your alumni elected to the General Assembly. Across the country, a higher number of graduates of public colleges and universities is associated with higher funding for a state’s public higher-ed system, finds a new study, “School Spirit: Legislator School Ties and State Funding for Higher Education.

“One additional legislator who attended the state’s public college or university is associated with a 0.5% increase in the total state funding for that state’s total higher education system, holding all else constant,” write Aaron K. Chatterji, Joowan Kim, and Ryan C. McDevitt in a paper published by the National Bureau of Economic Research.

For an average state, an elected representative is associated with an additional $4.9 million in annual state funding. For a specific institution, election of an alumnus is associated with $49 million increase in funding.

By the tenets of conventional political analysis, higher ed would be a weak player in the political system. In Virginia, public universities don’t organize political action committees, and they don’t raise money for political candidates. In marked contrast to real estate/construction, financial services, health care, law, energy, and other money powerhouses, higher ed does not even warrant a breakout listing in the Virginia Public Access Project data base of major campaign donors. Over the past 20 years, “professors/staff” of public colleges (a category that includes university foundations) have donated only $4.3 million to Virginia political campaigns (overwhelmingly to Democrats).

But public universities do tap alumni to advocate on their behalf. And, as it turns out, among the most effective of those alumni are state legislators, according to the Chatterji et al study.

One might suggest that the authors of the study developed a data set of 96,000 legislators for the years 2002 through 2014 and ran a complex statistical analysis to document the obvious. But what might seem “obvious” isn’t always true. And the magnitude of the effect is not always evident. It is clear from Chatterji et al’s data that on average the effect is significant.

What may be true on average across the 50 states, however, is not necessarily the case here in Virginia. Average numbers can conceal considerable variability. So, consider the study as an indicator of what might be the case in the Old Dominion, pointing the way for follow-up research.

I knocked out some quick numbers this morning, inspecting the biographies of Virginia’s 100 House of Delegates representatives to see which institutions of higher education they attended, if any. Not all of our delegates attended college. Eleven, by my count, attended community college but did not pursue advanced degrees. Many attended private colleges, often out of state, who are not included in the numbers. But 46 have undergraduate degrees from Virginia public colleges and 16 (often overlapping with those with undergrad degrees) have graduate degrees from public Virginia institutions.

Without question, Virginia’s public institutions of higher education have an extensive alumni network to tap when pushing for legislation. To what degree do old-school loyalties affect delegates’ decisions? Do graduates of in-state institutions vote any differently from grads of out-of-state colleges and universities? That question will take extensive additional investigation to answer.

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.