Category Archives: News

Virginia Ranks 13th Best in Fiscal Condition

Ranking of Fiscal Condition, FY 2016. Source: Mercatus Center.

The Commonwealth of Virginia’s fiscal condition ranked 13th among the 50 states in FY 2016, according to data in the Mercatus Center’s “Ranking the States by Fiscal Condition” report released today.

The Mercatus methodology incorporates 13 financial indicators falling in five buckets: cash solvency, budget solvency, long-run solvency, service-level solvency, and trust fund solvency.

Here are the key statistics Mercatus considered:

There is a significant time lag in the reporting and analysis of the data — this is FY 2016 data, and Virginia is now in FY 2019. So, the ranking reflects the state’s fiscal performance during the McAuliffe administration, not the Northam administration.

Hampton Roads Crawls Out of Recession Hole

Source: “State of the Region: 2018 Hampton Roads”

After shrinking 1.1% in 2016 and growing only 0.9% in 2017, the economy of the Hampton Roads metropolitan area is on track for a 2.2% expansion this year, and employment has surpassed the peak reached before the 2007-2008 recession, reports the new State of the Region report by Old Dominion University’s Strome College of Business. Summarizes the report:

Hampton Roads finally appears to be putting the Great Recession in the rearview mirror. By mid-2018, we had about 0.3 percent more jobs than at the prerecessionary peak of July 2007. … By 2010, Hampton Roads lost more than 38,000 jobs from its previous peak level of employment, in 2007. In 2017, our region had about 4,000 more jobs on an annual basis than in 2007, making 2017 the first year our annual level of employment exceeded the prerecessionary peak.

However, the report sounded a cautionary note for Virginia’s second-largest population center:

Compared to our neighbors, we have fared poorly in generating jobs. While Virginia added almost 212,000 new jobs by May 2018 compared to the prerecession peak, only a few of these jobs have been in Hampton Roads. Most have been in Northern Virginia (149,400) and Richmond (54,800).

Defense spending. The rebound this year is driven by an increase in defense spending. The region remains captive to the fortunes of the defense industry, which is dictated not by market fundamentals but the ebb and flow of politics in Washington, D.C.

From 2013 to 2016, defense spending in our region remained around $19 billion. In 2017, direct defense spending approached $20 billion and we forecast that it will be $21.5 billion in 2018, subject to how much of the increased spending is for multiyear procurement contracts (ships, for example) and how much is for operations and maintenance.

In 2011 defense spending accounted for 46.1% of the region’s economic activity. The percentage declined to 40.8% in 2017 and has inched back up to 42.0% this year. Compounding the impact of defense spending on regional prosperity, the average compensation of a military service member was on average 2.2 times that of the average compensation of someone working in the private sector.

The authors take a sober view of how long the burst in military spending can continue. Interest expenditures on the national debt are projected to climb from $316 billion in FY 2018 to $992 billion in FY 2028, crowding out discretionary funding, including that for defense. “The optimism for the next two years is due in large measure to the lack of fiscal restraint by lawmakers in Washington,” the authors write.

Port of Virginia. Outside the military, the major driver of economic activity in Hampton Roads is the port. After suffering from a brutal contraction in seaborne trade during the 2007 recession, volume has recovered smartly. In the past two years general cargo tonnage and container traffic have leaped ahead by 5.3% and 7%. The state budget included $350 million this year to start the process of dredging shipping lanes to a depth of 55 feet and widening the channel to 1,400 feet, maintaining the Virginia’s ports competitive advantage of accommodating cargo ships of ever-increasing size.

The biggest uncertainty is the prospect of trade war with China, which is the No. 1 country of origin and destination for shipping in and out of the Virginia ports.

Affordable housing. One benefit of Hampton Roads’ slow-growth economy is that housing remains more affordable than the national average — as it has for many years. While the monthly payment for a median-price resale house comprises 24.4% of median household monthly income nationally, it’s takes up only 20.2% in Hampton Roads. If the region can get its economy cranked back up, there isn’t much danger that high housing prices will discourage in-migration.

Getting Virginians their Lives Back One License at a Time

LaPonda Carter lived with a relative in Amelia County, raising her daughter and driving to her job at the VCU Medical Center in downtown Richmond. She frequently loaned her car to the family member. Unbeknownst to her, the relative racked up frequent toll violations. The charges quickly added up — $0.75 per toll, plus $25 administrative fees for not paying on time, plus $500 court fines, plus court costs. The fees, fines and penalties eventually reached an astonishing total — nearly $100,000. Adding insult to injury, Carter had her license yanked.

By working with Drive-to-Work, a Richmond-based nonprofit organization dedicated to helping lower-income Virginians get their driving rights restored, she managed to get her licensed reinstated. Now Drive-to-Work is working with her to resolve the toll-violation cases.

Virginia law allows for the suspension of revocation of driver’s licenses for a wide variety of offenses that have nothing to do with bad driving — collecting court costs, non-payment of civil judgments, and failure to pay child support. Of Virginia’s 5.8 million licensed drivers, 974,000 are under suspended-license orders. While some kind of sanction may be called upon for their offenses, says Drive-to-Work President Randy Rollins, a person deprived of a driver’s license often is unable to work and meet the very obligations the suspended licenses are meant to punish.

Ten years ago when Rollins first approached members of the General Assembly to reform the laws, he typically got a frosty reception. But attitudes are changing among both liberals and conservatives, he says. Restoring drivers licenses increasingly is seen as an issue that both advances social justice and supports individual responsibility and self-help.

The nonprofit group operates first and foremost to help people like Carter get their licenses back and work out arrangements so they can pay their fees, fines and penalties. Case workers have helped more than 2,000 individual clients to date. In a related initiative staffed by volunteer attorneys, Drive-to-Work has given 96 prison seminars to help offenders get their licenses when they are released from custody.

Rollins also is working with the Department of Corrections (DOC) to remove another potential impediment — the need to attend a driver improvement clinic before getting a license reinstated. What better time to attend such a clinic, he asks, than when offenders have lots of free time in prison? Drive-to-Work will deliver a clinic online for $65 per participant, a sum that will be reduced to $20 after DOC and Drive-to-Work subsidies. That program is temporarily in limbo up as DOC undertakes the migration of its IT systems to the state’s new vendor, but Rollins is optimistic the issues will be worked out soon.

In the meantime, Rollins, who served as Secretary of Public Safety during the Wilder administration, is working to help lawmakers identify ways to help the cause. He highlights one piece of successful legislation and two additional measures that he would like to see passed.

Pay plans for court fees. Millions of Virginians live paycheck to paycheck, and they don’t have a spare $1,000 to pay court fines and fees. Rather than suspend their licenses, making it harder to work and pay back anything, a law sponsored by Republican Del. Manoli Loupassi allowed for repaying the fines in agreed-upon installments and restoring the license when the agreement was signed, not later when the fines were paid in full.

After a year’s experience, says Rollins, the law appears to be making a difference. Judges are considering individual circumstances when setting payment agreements, many are requiring lower down payments, and a 10-day grace period is preventing defaults.

Suspensions for civil judgments. If a motorist drives a car while uninsured and causes an accident, his or her license can be suspended for failure to pay civil judgments to the insurance companies. While Rollins agrees that there should be sanctions against people who fail to pay, he says suspending their licenses for reasons unrelated to safety violations makes no sense. The license suspension is just another collection tool. If you owe a hospital money, the hospital can’t suspend your license. If you default on your credit card, the card company can’t suspend your license. Why should insurance companies be treated differently?

Child support payments. Licenses can be suspended for failure to pay child support. Child support obligations can run into the tens of thousands of dollars. While the courts do allow payment plans, the minimum down payment is too high, Rollins argues. A $20,000 obligation, for instance, would require a 5% down payment or $600, whichever was higher — often beyond the means of the poor and near poor. Del. Betsy Carr, D-Richmond, sponsored a bill last year that would have set the obligation at the lower of 5% or $600. The bill was defeated last year.

“Suspensions for child support have nothing to do with traffic safety,” says Rollins. In fact the suspension can be a barrier to gainful employment and reduce the chances for paying any child support.”

Five Virginia Corporations Among Most Transparent

Five Virginia companies — including the frequently criticized Dominion Energy and Altria Group — are included among the 57 transparency “trendsetters” in the 2018 CPA-Zicklin Index. The others include Northrop Grumman Corp., Capital One Financial, and Norfolk Southern Corp.

The Index benchmarks political spending disclosure practices and political spending policies of S&P 500 corporations. The ideal political spending policy, according to CPA-Zicklin, explains: (1) the company’s process for making contributions or expenditures to influence political and/or judicial campaigns; (2) how management and the board oversee such decisions; and (3) the public policy considerations that influence such decisions.

The Index is published by the Center for Political Accountability (CPA) and the Zicklin Center for Business Ethics Research at The Wharton School at the University of Pennsylvania.

Here’s how the Virginia companies rank on a percentile basis compared to other companies in the S&P 500:

Northrop Grumman — 97.1%
Capital One Financial — 95.7%
Altria Group — 94.3%
Norfolk Southern Corp. — 94.3%
Dominion Energy — 91.4%

After the first full year of the Trump administration and a Republican majority Congress, this year’s Index finds that large public companies are holding steady in disclosure and accountability regarding election-related spending, states the press release announcing this year’s results.

Now, if only CPA-Zicklin would start monitoring dark money in the non-profit sector, where billions of dollars spent to shape public opinion and public policy (though not elections) go largely unaccounted for. Here in Virginia, the Piedmont Environmental Council sets an extremely high bar for transparency, listing all major donors and the size (within a range) of their contributions, while the Virginia Chapter of the Sierra Club provides virtually no information about its funding sources at all. Other environmental and social-justice groups vary considerably in their transparency.

Nine of Ten Schools Accredited Under New State Standards


Ninety-two percent of all Virginia public schools are accredited under new state standards, according to data released by the Virginia Department of Education (VDOE) this morning. Seven percent of schools were accredited “with conditions.” Accreditation was withheld for only one school.

However, 322 schools will undergo academic reviews or implement corrective action plans under the new approach. That compares with 250 schools last year.

The new standards, approved by the state Board of Education last year, recognize the academic growth of students making “significant progress” toward meeting grade-level expectations in English and mathematics.

“I am pleased that these ratings show that — in the vast majority of our schools — most students are either meeting or exceeding Virginia’s high standards, or they are on their way toward grade-level proficiency,” Superintendent of Public Instruction James Lane said in a VDOE press release. “But the ratings also reveal that in many schools, there are achievement gaps undetected by the previous accreditation system. … We hope that by shining a light on these gaps our schools will continue to develop innovative strategies that result in equitable outcomes for our children.”

Added Board of Education President Daniel A. Gecker: “Rather than putting a label on a school, we are helping schools and the communities they serve set priorities and plan for continuous improvement.”

The new system places schools in one of three categories.

Level One schools “meet or exceeds” the state standard or demonstrates “sufficient improvement.” The state will continue to monitor their performance but no additional action is called for.

Level Two schools are near the state standard of sufficient improvement. The school and division must “implement essential actions and research-based strategies” to improve performance. Also, the school must “undergo an academic review conducted by VDOE or under department guidance.”

Level Three schools are below the state standard. These schools must undergo VDOE academic review and, in consultation with VDOE, “develop and implement a corrective action plan.”

“This new system provides parents and other members of school communities with a clearer understanding of what schools are doing well and where they need to improve,” Secretary of Education Atif Qarni said. “They will be able to look at the online School Quality Profile report for a school and instantly see how the school is performing on each school quality indicator and drill down to more detailed information.”

School-by-school quality data and accreditation ratings can be viewed in School Quality Profile reports on the VDOE website.

What It Takes to Build Virginia’s Talent Pipeline

House Speaker Kirk Cox

It’s time to give Virginia’s colleges and universities some “tough love,”  House Speaker Kirk Cox, R-Colonial Heights, said yesterday.

The answer to sky-rocketing increases in the cost of attending college is not tuition freezes, caps, unfunded mandates or other one-size-fits-all measures like those that surfaced in the General Assembly last session, the Speaker said in a speech to the GO Virginia Foundation board meeting in Richmond.

But he added: “If the higher education institutions do not come together with the state government and the business community to address affordability in a meaningful and tangible way… if they do not support common-sense reforms like the bill passed by the House of Delegates last session to allow public comment before raising tuition… then I fear there will be little anyone can do to stop a wave of policy proposals along those very lines.”

Cox issued the warning while addressing the broader topic of the link between workforce development and economic development. In the most concrete proposal of his speech, he called for partnerships between government, business and individual higher education institutions that spell out (1) what the school will commit, (2) what the state will invest, and (3) what the business partners will contribute.

“We don’t need more people playing politics with the price of education, but we also don’t need people with their heads in the sand, pretending the problem doesn’t exist,” he said. “We need people partnering in practical ways to bring the price of education down!”

There is no silver bullet or quick fix on college affordability. We need to move forward on a range of solutions: alternative pathways; transfer programs; online options; cost-saving innovations; more efficient collaboration among institutions; more help for students through financial aid, TAG grants, and work-study opportunities and so on. …

In the institutional partnership agreements that I envision … in return for a financial commitment from the Commonwealth, each school will make transparent commitments concerning the four-year net cost of attendance for in-state undergraduates, the internship and work-study opportunities that will be provided, and the maximum student loan debt levels that any Virginia student may incur.

Virginians cannot expect tuition predictability and restraint at the campus level if the General Assembly cannot provide “adequate, reliable funding,” Cox said in a reference to erratic state support for higher education. But he placed much of the onus for declining affordability and access on the higher-ed institutions.

“Higher education is at a pivotal moment,” Cox said. “We have never needed our higher ed system more than we do now … because it is the key to the talent pipeline, and the talent pipeline is the key to the future. But, at the same time, higher ed’s political position has never been shakier.” The bond of trust between colleges and elected officials “has never been more at risk.”

If our colleges and their leaders don’t recognize the shift in public opinion on higher education…. if they don’t understand how the populist message is resonating…. and if they don’t come to the table seriously on the points of greatest concern — affordability and accountability — then it is very likely that the criticism will reach critical mass, and it will be impossible to maintain the progress we have made.

The talent pipeline. In one of the most comprehensive speeches on workforce development to come from a Republican legislator in recent years, Cox affirmed the need for an educational system that provides young Virginians with the skills they need to participate in a growing economy.

“What we hear from Virginia businesses, large and small, is this: The main reason their business is not growing is they can’t find qualified workers.” At the same time, Virginia is experiencing a brain drain — unable to find good jobs here, people are leaving for better opportunities elsewhere. For four straight years, he said, Virginia has experienced a “net loss of talent” to other states.

The “build it and they will come” approach is not only ineffective. It costs too much… is too resistant to innovation… moves too slowly to keep up with the fast-changing economy… and, frankly, is too old-school and uncool to appeal to eager, creative, tech-savvy young people.

Cox embraced the goal of making Virginia the Top State for Talent, similar to the long-term objective stated by the State Council of Higher Education for Virginia (SCHEV) to make Virginia the best educated state in the country. But he stressed that increasing the number of college graduates must be accompanied by efforts to provide grads with meaningful employment, or they will leave. Continue reading

Dominion Objects to Testimony on Pipeline Cost

One of the first decisions the State Corporation Commission may need to make in Monday’s hearing on the Dominion Energy Integrated Resource Plan (IRP) is whether to allow and consider testimony about the cost of the Atlantic Coast Pipeline.

Dominion filed a September 7 motion asking that testimony from a witness brought by Appalachian Voices “be stricken as irrelevant and improper,” which the environmental group answered with its own brief filed Friday.  Dominion argues the cost of the pipeline is not part of the IRP and is not properly before the commission in this case.  It will seek to recover the pipeline capital costs when gas from the pipeline is subject to a future fuel cost review.

Gregory Lander of energy consulting firm Skipping Stone states in his disputed testimony that the costs are already built in.  “The Company’s 2018 IRP embeds the costs of the Atlantic Coast Pipeline into each of the generation scenarios it presents…. (but) has not properly costed-out the all-in cost of increasing, beyond its current pipeline capacity portfolio, the costs associated with the level of pipeline capacity it intends to obtain on the Atlantic Coast Pipeline.”

He claims that acceptance of the IRP by the Commission in effect accepts that up to $3 billion of the cost of building and operating it will be passed on to ratepayers over 20 years.  Those are in addition to the cost of the gas.  Opponents of the pipeline argue it is not necessary to bring natural gas via the ACP to Dominion’s generators, and if it does so it will be supplanting lower-cost alternatives.

“In reality, the Company’s goal is not to avoid scrutiny of the ACP costs in this proceeding, the Company’s goal is to avoid scrutiny of the ACP costs in every proceeding,” states the brief in support of retaining Lander’s testimony.  It noted a similar effort to keep the data out was made successfully in 2017’s IRP case and during the certificate of need case for the new natural gas generation plant in Greensville County.

This is just one of the disputes expected when the SCC takes live testimony for two days on the plan, which outlines several scenarios for meeting future demand in Dominion’s territory while meeting current and future environmental rules. The amount of demand growth over the period is itself the main point of contention, with opponents claiming the utility has inflated its needs to justify excessive new plant construction.

In rebuttal testimony Dominion pushed back on claims by the SCC staff and others that it won’t need additional generation. It says the others ignored recent winter peak demands and claimed that an economic slow period responsible for flat demand is coming to an end.  “The lack of economic growth in Virginia has been a key driver to the forecast being higher than what has actually occurred” wrote Dominion’s director of energy market analysis Robert Thomas.

One of the reasons cited for expected growth is the explosion of data centers in Virginia, but representatives of that industry filed their own written comments disputing they will cause higher demand.  The letter was signed by eBay and Adobe among others.

Continue reading

BVG Makes Case for Virginia as Offshore Wind Supply-Chain Hub

Manufacturing job-creation potential for the offshore wind industry. Source: BVG.

Virginia is very well positioned to establish a supply-chain hub for an East Coast wind-power industry, says a report written by offshore-wind consulting firm BVG Associates and underwritten by the Virginia chapter of the Sierra Club.

Although Virginia will not participate in the “first wave” of  East Coast offshore wind projects, which is ramping up now in northern coastal states, Virginia-based businesses could supply key components to those pioneering efforts if the Commonwealth acts quickly, concludes the newly published report, “Offshore Wind in Virginia: a Vision.”

The report lays out the following scenario for wind farm-driven economic development:

Virginia will derive immediate economic benefits while maturing its offshore wind supply chain, ensure development of its own 2 GW [gigawatt] offshore wind by 2028, and provide the tipping point for a second wave of lower-cost projects off Dominion Energy’s service territories, notably the Kitty Hawk lease area in North Carolina.

The study should be read with the understanding that Sierra Club-Virginia is promoting Virginia offshore wind generation to advance its long-term goal of eliminating fossil fuels and nuclear power from Virginia’s energy mix. Even with that caveat in mind, the study provides the most detailed analysis yet published of how Virginia can leverage offshore wind into a major economic-development boon for the Hampton Roads maritime sector. The Northam administration has hired a BVG associate to help the state fashion a strategy to build an offshore wind supply chain.

According to the report, Virginia has five big competitive advantages:

  • An industrial coastal infrastructure, with large areas for laydown and storage, quayside length for load-out, and direct access to the open ocean with unlimited vertical clearance.
  • A large workforce with competitive pay scales and experience in shipbuilding, ship repair, ports, logistics, and vessel operation.
  • Highway, rail, and inland waterway connections linking Virginia’s ports to industrial centers throughout the Southeast, Mid-Atlantic, and Midwest.
  • Eastern population centers with high and growing electricity demand, particularly for the Internet economy. Northern Virginia has a large and growing data-center corridor, and two new data centers are being built in Virginia Beach.
  • High-voltage interconnection capability in Virginia Beach sufficient to handle the anticipated commercial wind-lease area after “moderate investment.”

The first two advantages make Hampton Roads an attractive location for the fabrication and assembly of jacket foundations and offshore substation platforms. Two sites in the region could be made ready for a steel fabricator within 20 to 29 months at a cost of $5 million to $15 million. Jacket and substation production could create more than 2,000 new direct and indirect jobs.

The first phase of offshore wind production will be expensive. Wind supply chains in Europe like to see an annual market of at least 1 gigawatt, the equivalent of 80 to 125 turbine nacelles, turbine towers, blades, or foundations. A factory owner would look to produce 200 kilometers of cable per year, a volume needed to apply lean manufacturing strategies. Lacking U.S.-based investment, first movers in offshore wind would have to pay premium prices. Another complication is the Jones Act, which prohibits European-built and based vessels from transporting components between U.S. harbors. Offshore wind-service companies cannot yet justify building state-of-the-art jack-up vessels in the U.S. in compliance with the Jones Act.

First-mover states — Massachusetts, Rhode Island, Connecticut, New York, New Jersey, and Maryland — have committed to build more than 3 gigawatts of offshore capacity. Virginia has committed to build 5 gigawatts of renewable energy, including a substantial component from wind, by 2028. Dominion Energy has proposed to build two turbines with experimental designs to ensure that a larger wind farm could stand up to hurricane conditions frequently experienced in the Mid-Atlantic.

Writes BVG:

By the middle of the next decade, Virginia could be a leading U.S. market for offshore wind, driven by the ability to benefit from the lessons learned from northeast coast states and the maturing U.S. supply chain, complemented by Virginia’s strong infrastructure, location benefits, and deployment of offshore wind at scale.

Suppliers to the wind industry, such as turbine, foundation and cable manufacturers, like to see a regular run-rate for installed capacity. This allows easier investment planning and more efficient facilities. Manufacturers also need projects of a certain size to achieve economies of scale. … The Virginia market in our scenario is … not big enough by itself to attract investment, so the Atlantic Coast market as a whole is crucial. In our scenario, Virginia provides the tipping point, creating the demand needed to support an investment decision.

Some infrastructure investment in Hampton Roads may be necessary. Given the inevitable time lags in gaining regulatory approvals, BVG says, Virginia needs to act quickly. Portsmouth Marine Terminal would need between $11 million and $25 million to upgrade the port for major offshore use, with “additional costs in the facilities themselves.”

The report provides no estimate of how much it would cost to upgrade Virginia’s electric grid to accommodate a massive supply of offshore wind, nor, beyond general statements that wind power is complementary with solar power, does it discuss the impact of intermittent wind power on reliability. Fossil fuel advocates argue that wind and solar provide no surge capacity in extreme, polar vortex-like weather events.

The BVG study make no policy recommendations. It cedes that task to the Department of Mines, Minerals and Energy, which is developing a strategic plant to identify supply-chain businesses and how to market Virginia as a hub for the industry.

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.

Chain Reaction: Tuition Rises Due To Higher Tuition

Annual average increases since 2010 in General Fund (GF) support and in-state tuition and fees at each school, compared to the Higher Education Price Index (HEPI) and Consumer Price Index (CPI). At nine schools the state funds have lagged even the smaller inflation measure.  Source: House Appropriations Committee

Increased pay for faculty and administrators is one of the major cost drivers behind the continuing climb in tuition and fee charges, a member of the House Appropriations Committee staff told that committee Monday.   As those charges climb, the universities are also increasing the percentage of tuition revenue used to provide financial aid for students being priced out, transferring costs from one group of students to the other.

Anthony Maggio’s presentation went into details missing from the State Council of Higher Education for Virginia’s own review of the cost increases.  His critical overview highlighted:

  • The six institutions that exceeded the tuition increases in their six-year plans. (Eight institutions including the Virginia Community College System stayed under the amounts in their plans.)
  • The amount the schools are still charging in their mandatory fees to support their athletic programs, now more than $1,500 at eight of fifteen schools and over $3,000 at one.  Legislation in 2015 slowed but has not stopped the growth.
  • A potential way he believes the universities may be shifting more research program costs onto the students’ tuition or fee payments, further explaining rising tuition.

Athletic charges included in mandatory comprehensive fees. Source: House Appropriations Committee

Maggio reported that Radford University increased tuition 7 percent instead of a planned 3 percent hike and blamed, among other things, enrollment loss and a commitment of funds to economic development activities.  The other schools that exceed their targets often mentioned salaries or fringe benefit costs.

Continue reading