By Steve Haner
When I’m wrong, I should rush to admit it. The concerns expressed by others on this blog that the Northam Administration was failing to recognize the financial aspects to the COVID-19 pandemic were valid. The person exhibiting wishful thinking was me, with my assumption they were already acting.
That’s because they just acted, with an executive order to state agencies to freeze hiring, tighten spending and otherwise batten down the fiscal hatches for a storm. “We can expect to enter a recession soon,” Chief of Staff Clark Mercer writes in a four-page memo quoted by the Richmond Times-Dispatch.
Wrong. The economy has been in recession for a month. A month. The concern now is a depression.
Mercer said the state expects “significantly less revenue” than the most pessimistic forecast Northam’s economic and revenue advisory councils considered last fall and reduced cash balances at the end of this fiscal year that will carry into the next two-year budget and require cuts in spending.
“Our intention is not to cut the budget in the short term, but decisions will depend on how much revenue comes in,” he said.
Wrong again. The state will be slashing the budget as never before, and the Governor should have started the process weeks ago. One can only hope, and it may be a forlorn one, that agency financial managers saw the clouds and acted on their own. If the Governor’s people are only now getting serious about the amendments to the budget due in seven days, shame. Continue reading
5G rollout reaches Virginia. Outside of Crystal City and the Reagan National Airport, Hampton Roads is the first region in Virginia to enjoy 5G cellular access. Verizon has announced that its 5G Ultra Wideband mobility service is available in the Virginia Beach Oceanfront, downtown Norfolk, Newport News, Old Dominion University, Hampton, Chesapeake, and other high-traffic locations, reports Virginia Business. Said Governor Ralph Northam in a statement: “This technology will propel the industries that drive coastal Virginia — the military, advanced manufacturing, logistics, higher education, health care, tourism and more. We can’t wait to see new opportunities unfold for workers and innovators.” The service is available in 31 other cities.
Virginia unemployment still 2.6%. Virginia’s unemployment rate remained at 2.6% in November, even as the labor force expanded by 13,326, or 0.3%. Employment set a record of 4.4 million people, reports Virginia Business. While Virginia job creation has lagged the national pace, there is a bit of good news within the numbers: Job creation is market driven, not government-driven. Year over year, the private sector added 47,400 jobs while the public sector shed 7,300 jobs.
…But never fear, government is still creating some jobs. For example, the Virginia Department of Game and Inland Fisheries has hired a diversity and inclusion officer. The 450-person department, according to the Richmond Times-Dispatch has “struggled” with diversity: only 9% of employees earlier this year were “people of color,” compared with the average at Virginia agencies of 36%. Meanwhile, Virginia’s Office of the State Inspector General is conducting an audit of diversity and inclusion practices within state natural Resources agencies, including the Department of Conservation and Recreation and the Virginia Marine Resources Commission. Continue reading
Janice Underwood (foreground). Photo credit; Washington Post
by James A. Bacon
Governor Ralph Northam has appointed Virginia’s first director of diversity, equity and inclusion.
In the new “senior-level position,” Janice Underwood, former director of diversity initiatives at Old Dominion University, will develop a “sustainable framework to promote inclusive practices across Virginia state government,” stated a press release from the governor’s office. As part of that job, she will implement a “measurable, strategic plan” to address systemic inequities in state government practices, and turn feedback from state employees, external stakeholders and community leaders into “concrete equity policy.”
Well, this is quite the indictment of Virginia state government, including the tenure of Northam’s four gubernatorial predecessors, three of whom were fellow Democrats: Terry McAuliffe, who is rumored to be pondering running again for the governorship, as well as Virginia’s two U.S. Senators Mark Warner and Tim Kaine. Who knew that Democrats allowed inequities to persist so long?
Remarkably, Northam, who has vowed since his blackface controversy to dedicate himself to racial equity, provided no details regarding what “systemic inequities” exist in state government. The inequities must be pretty grievous if they are to be described as “systemic.” But he leaves citizens hanging as to what they might be. Remarkably, the Washington Post and Richmond Times-Dispatch, which normally are hyper-alert to evidence of racial injustice, neglected to inquire what Northam might have been referring to. (The Daily Press covered the story, too, but I could not get past the firewall.) What, oh, what could the governor mean? Continue reading
Free falling. As coal production declines, the economy of far Southwest Virginia is in free fall, with potentially dire fiscal consequences for local governments. “A sharp decline in coal production jeopardizes the fiscal health of local governments, degrading their capabilities to provide adequate public services and issue and serve debt,” finds a report by Columbia University’s Center on Global Energy Policy and the Brookings Institution. Between 2007 and 2017, Virginia coal production fell by 50% from 24.9 million short tons to 12.8 million. The study identifies Dickenson and Buchanan counties as the fifth and sixth most mining-dependent localities in the nation, with 17% and 16% respectively of the labor force engaged in the industry in 2015. The Virginia Mercury has the story here.
Tarnished silver. Phase One of the Washington Metro’s Silver Line to Tysons ran $220 million over budget and was completed six months later. Now Phase Two of the $5.8 billion project funded largely by commuters on the Dulles Toll Road, reports the Washington Post, is running late. The project, expected to be wrapped up next month, may not be completed until next spring or summer. The construction project has been plagued by cracks in concrete structures, defective rail ties, and faulty dimensions for a rail-yard platform. It is not clear yet if the problems will exceed the project’s $550 million contingency fund.
Why do today what you can put off until tomorrow? Bacon’s Rebellion has made much of Virginia’s $5.8 billion in unfunded pension liabilities. Now a new study, “The Sustainability of State and Local Government Pensions: A Public Finance Approach,” says there’s no reason for Virginia or any other state to panic. After “reverse engineering” future benefit cash flows of the pension plans, the authors find that pension benefit payments in the U.S., as a share of the economy, are currently at their peak level and will remain there for the next two decades. Thereafter, the reforms instituted by many plans will gradually cause benefit cash flows to decline significantly.” Continue reading
Virginia Retirement System overall investment returns, all funds. Source: JLARC
The percentage of state employees making voluntary contributions to their own retirement pot, contributions which are matched with free money, has continued its rapid decline over the past year. As of March 2019, fewer than half of state employees who should be investing in their own retirement are doing so, according to a Virginia Retirement System update Monday.
A year earlier, according to the comparable report given the Joint Legislative Audit and Review Commission and reported on Bacon’s Rebellion, 58 percent were contributing something and drawing in matching funds. A year before that it was 79 percent. Just how much money the 52 percent adding nothing this past year failed to invest, and how many matching dollars were therefore not captured, is not in the report. Continue reading
A recent article in the Washington Post highlights an issue I alluded to in my recent post on government outsourcing functions. To summarize: The Alexandria school superintendent’s budget proposal called for eliminating 30 custodian positions and outsourcing the jobs to a private company. (The system already contracts with private companies for custodial services in many schools. This proposal would have completed the outsourcing.) The reason for the proposal was budget savings. After a lot of blowback, the superintendent relented some, proposing that custodians who had worked for the school system for at least five years could keep their positions during the next school year. That left 10 custodians facing the loss of their jobs.
This sort of outsourcing is common at all levels of government. In Richmond, the custodians for state buildings are not state employees, but work for a company that has contracted with the state to clean the offices. The same is true for security guards at the entrances to state buildings, with the exception of the Capitol Police. Continue reading
Safe hospitals. I’ve long maintained that the best thing you can do for your health is stay out of hospitals — 160,000 deaths occur annually across the country from avoidable medical errors monitored by the Leapfrog Hospital Safety Grade. Fortunately, Virginia hospitals are safer than most. The Old Dominion has the second highest percentage — 53% — of hospitals in the country of hospitals meriting Leapfrog’s A rating. In Maryland only 25% of hospital scored an A, and in Washington, D.C., there are no A-rated hospitals, reports the Richmond Times-Dispatch.
Expanding hospital. Speaking of hospitals, Carilion Roanoke Memorial Hospital has just announced a $300 million expansion that includes a new tower to care for emergency and heart patients, a new behavioral health hospital across the street, a parking garage and a pedestrian skyway to connect it all. The expansion is part of Carilion’s plan to invest $1 billion over the next seven years, according to the Roanoke Times. Roanoke Memorial scored a B in Leapfrog’s ranking, incidentally. Roanokers might legitimately inquire if some of that $300 million could be better spent on preventing avoidable medical errors.
Bye, bye, Jeff, baby. The Commonwealth Transportation Board unanimously voted yesterday to allow Arlington County to change the name of Route 1 from Jefferson Davis Highway to Richmond Highway, reports the Washington Post. The United Daughters of the Confederacy had spearheaded the naming of the highway after the president of the Confederate States of America, as a “direct and antagonistic response” to the establishment of Lincoln Highway across the northern states, said Arlington Board Chair Christian Dorsey. Continue reading
Governor Ralph Northam is looking for a new senior-level official to promote diversity and inclusion within state government, reports the Richmond Times-Dispatch. The new employee will report directly to the governor and his chief of staff.
Among the qualifications listed in the job description: the “understanding of systemic and institutional bias.” States the RTD:
The director will be responsible for developing a plan to promote inclusive practices and address system inequities in state government. The person who fills the post will be tasked with “promoting diversity and fostering an inclusive environment throughout state government where employees feel a sense of belonging.”
Questions: In what way is Virginia state government infected with “systemic and institutional bias”? Are we to believe that the Virginia state government apparatus, which has been run by Democrats for four of the past five gubernatorial administrations, is riddled with racism? I know the political justification for this appointment — Northam is trying to atone for his blackface scandal. But is there a factual justification — as in actual evidence of bias — for creating the office? If there is, why haven’t we seen it?
Following up on Jim’s recent post about the WMATA pension problems, I decided to check on the recent performance of the Virginia Retirement System. Now that I get a monthly check from these folks, my interest is more active than in the past.
Analysis of pension plans is out of my league, but there is a recent report that does create some concern and even I understand it. VRS is required by statute to conduct periodic stress tests. The latest one was released in December. For those who are interested in digging into the weeds, here it is . Toward the end of the report, the authors point out that VRS lost about 25% of its value in the first couple of years of the Great Recession. They warn that, if there is another great shock or even a period of a few years of returns lower than needed, the plan would be in a worse position to absorb the shock than it was in 2009. The Free Lance-Star had a good summary of the issue in this editorial.
In summary, to keep VRS able to meet its pension obligations, the General Assembly needs to continue its recent practice of paying down the plan’s unfunded obligations.
Under a “shock” scenario in which Virginia Retirement System (VRS) investment returns replicated the disastrous performance of the 2008-2009 market crash, the state portion of the retirement plan would see an increase in unfunded liability of $6.9 billion. Employer contribution rates would have to increase to 22% of covered payroll from 13.5% now in order to maintain the integrity of the system. State and local governments would have to cough up hundreds of millions of dollars more in pension payments each year even as a recession was eroding revenues.
Those numbers are found in a recently released report to the General Assembly, “VRS Stress Test and Sensitivity Analysis.” The report is not predicting that such a scenario will occur. Rather the purpose is to show how vulnerable the Commonwealth would be if it did. While investment returns have performed handsomely since the 2008 mortgage-crisis recession, shrinking Virginia’s unfunded pension liability, the global economy is slowing and the strong investment gains of recent years cannot be taken for granted.
Even investment returns on the VRS’s portfolio only modestly lower than the assumed 7% could prove devastating. “If the VRS fund only returned 5% annually each of the next five years, the State plan would see an increase in unfunded liability of approximately $2.2 billion,” the report says. Continue reading
by Bob Shannon
Having attended last Thursday’s Joint School Board and Board of Supervisors meeting at Hamilton Holmes Middle School, I have a few observations.
Dr. David White, King William County school superintendent, made specific mention of the low morale problem among school personnel. Of course the remedy, according to Dr. White, is an across-the-board 5% pay raise for everyone. He cited the lack of a pay raise last year and the need to keep King William schools’ compensation attractive/competitive.
Last year in an effort to keep anyone’s take home pay from declining, measures such as higher co-pays and deductibles had to be raised in order to accomplish this. Have these folks already forgotten the hundreds of thousands of dollars that tax payers picked up in their increased health care costs?
In the economic contraction beginning in 2008 and lasting six years, did a single school employee get laid off or lose their job? Did one school employee have to take a pay cut? Did a single school employee have their pension contributions cut? Did even one of them lose a week of the 12-13 weeks they get off each year ? Continue reading
by Chris Braunlich
Should Virginia teachers have equal access to any legitimate employee association offering professional support, insurance and other benefits, so they can find the best deal for their money?
Legislation introduced by Sen. William DeSteph, R-Virginia Beach, SB1236, would give non-profit Virginia teacher associations an equal opportunity to make their pitch to teachers in every school division. It would end the practice in many school systems of providing monopoly access to politicized employee associations, notably the Virginia Education Association.
The issue is no trivial matter – not for the associations nor, especially, for the employees. In a litigious world, teachers – who regularly interact with underage minors, parents, colleagues, and powerful administrators – are especially in need of professional support and liability insurance providing legal protection. It is something they never want to use but know they need to have. Continue reading
Governor Ralph Northam wants to boost the retiree health credit for state police, law officers, sheriffs and their deputies. He has included $8.1 million in his proposed FY 2020 budget to pay for a $2-per-year of service increase for state police and a $1.50- to $5-per year increase for sheriffs and deputies.
While the increase in benefits will be paid for, it legislative hearings have revealed how poorly these retirement plans are funded to begin with. Northam’s proposal would add $76 million in liabilities to two plans that are funded at less than 10% of their long-term obligations. House Appropriations Chairman Chris Jones, R-Suffolk, called the benefit increases “fiscally irresponsible.” Continue reading