Salvaging Southside and SW Virginia

Nearly a decade has passed since the passage of the Master Settlement Agreement which divvied up more than $200 billion in cigarette company proceeds between the 50 states. Virginia chose to dedicate more than half of its share — some $770 million so far — to the tobacco-growing regions of Southside and Southwest Virginia whose inhabitants were most hurt economically by the decline of the tobacco cultivation.

A big chunk of those funds were paid directly to owners of tobacco allotments, but $432 million has been funneled into development and revitalization projects for the economically lagging regions. The commission still has a $1 billion endowment capable of passing out $60 million a year or more, more or less forever. A decade later, the questions arise: Has the money been well spent and how can the funds be better spent in the future?

John Reid Blackwell raises that question in the Times-Dispatch today, drawing heavily upon a report recently issued by a blue ribbon panel tasked with reviewing the “structure and operations” of the Tobacco Indemnification and Community Revitalization Commission, the group that has dispensed the tobacco allotment funds. The commission has spent millions following the conventional economic development play book: upgrading the region’s telecommunications infrastructure, attracting and retaining manufacturing jobs, building educational capacity and supporting entrepreneurial initiatives.

Viewed within the narrow parameters assigned to it, the panel made some sound observations and recommendations.

Given the existing state of the Southside and Southwest economies, it is fair to ask whether the expenditure of over $400 million by the TICR since the year 2000 on “regional transformation” projects has had the desired transformative effect on the regions. …

Despite this spending, population in the region continues to decline, wage rates still lag behind the rest of the state, there is persistent high unemployment and poor educational attainment is still endemic.

The panel suggests, among other things, tweaking administration of its tobacco-funded endowment, routinely updating the commission’s strategic plan and streamlining the governing organization. Some some proposals go deeper and may well encounter some resistance.

The panel recommends adopting an “investor” approach to disseminating funds rather than a grants approach, in which funds are parceled out to every town, city and county throughout the region as commissioners respond to “grass roots initiatives.” A foundation/endowment approach would view its spending plans as “investments” that continue to pay off well into the future. Along the same lines, it should fund fewer micro grants under $100,000 and more investments that offer the potential to “transform” the region. The panel also calls for collecting data and measuring outcomes.

Finally, and most importantly, the panel recommends investing more strategically in education. “The [panel] believes that education from preschool to high school and beyond high school is the future of Southside and Southwest Virginia. No miles of highways constructed, no tens of thousands of feet of water or sewer lines laid, nor any number of industrial park buildings erected can change this.”

Good recommendations all. The report provides excellent advice for ensuring that the tobacco endowment money is better spent. But the panel did not ask the really big question, which was outside the scope of its study mandate: Are the Southside and Southwest Virginia economies even salvageable in the Knowledge Economy. Is the Tobacco Commission fighting an unwinnable battle? Is the Tobacco Commission, in effect, spending hundreds of millions of dollars rearranging the deck chairs on the Titanic? I’ll tackle that issue in the next post.

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  1. Anonymous Avatar

    Too bad the Tobacco Commission handed out millions to quota holders — what a scam.
    In its first efforts, the Virginia commission distributed millions to individuals who held quotas whether they actually grew the leaf or not. While at a business magazine here some years ago, we FOIA’d the 12,000 or so names and addresses of the tobacco quota holders who got the payments, which were in the neighborhood of $1,000 to $10,000 a pop.

    In one county, if I recall correctly, one third of the payees didn’t even live in the tobacco belt. Their daddies or great grand daddies held the quotas and were allowed to pass them down like some kind of medieval rent or sinecure. Some of the recipients lived on the Gold Coast of Chicago, Las Vegas or in some of the raunchier neighborhoods of Brooklyn or Philadelphia.
    They were undeserving winners in a leftover New Deal system designed to shore up little tobacco farmers and keep them from infesting cities like Raleigh, Charlotte or Richmond after the Big Tobacco bought up their failed farms penny on the dollar. It may have been a good idea at the time, but thanks to good ole Southern boy politicians, the program kept coming back up for renewal for years and was never killed. After a while it morphed into quotas to artifically restrict the supply of tobacco and keep its prices artificially high. In other words, here was argicultural socialism run by a GOVERNMENT program in a part of the country that so prided itself on being anti-government. Ya gotta love conservatives for this. Go figure. Quota holders, however, were laughing all the way to the bank as they got four or five times more for their deadly tobacco crops than for beneficial soybeans, corn or cotton.
    And here in Good Ole Virginny, the good ole boys on the Tobacco commission made sure that Bubba or Rufus living in that luxury apartment overlooking Lake Michigan or in East New York, Brooklyn got money to ease the pain caused by the dreadful end of farm socialism. Ain’t no welfare queens here. Nossir.

    Peter Galuszka

  2. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    “The [panel] believes that education from preschool to high school and beyond high school is the future of Southside and Southwest Virginia.”

    Yep just what SWV needs, more teachers and teacher’s unions. You know what education buys you? A ticket to NoVa. The educated ones who stay are usually in two groups. The sons and daughters of the current power brokers, and teachers. All the rest join their less educated cousins on the annual pilgrimage up the Hillbilly Highway. I’ve seen this scheme played out for decades in Appalachia. Without a viable economic development plan all that tobacco money will go up in smoke, leaving the region just as destitute as before.

  3. Spank That Donkey Avatar
    Spank That Donkey

    I just added up the PPTRA numbers otherwise known as the Car Tax Cut for Henry, Pittsylvania, and Patrick counties, the cities of Martinsville, Danville.

    FY 1999 to 2007 $76,854,494has been returned to the citizens of those localities….

    Last year the total was $10,699,502

    Now consider this… that is the economic impact of a plant employing 300 people with an average hourly wage of $15. The Math…

    $15 x 40hr week = $600 x4 weeks = $2,400 a month x 12 months = $28,800 annual x 300 employees = $8,640,000.

    Let the balance be benefits, etc.

    Now how’s that for economic impact? Furthermore, for the sake of argument (which I love) we know that the $10,669,502 is 70% of the PPTRA for those localities.. we know it is less because PPTRA was frozen at $950 million, so each localities share is less than 70%…

    $10,669,502 x 1.30 = $13,870,352 or Mark Warner’s broken promise in 2004 to complete the phase out of the car tax during his administration is short changing the Martinsville are $3,200,850 annually…

    Go back do the math and that is around an employer with 100 jobs at $15 an hour average wage…

    Cannot the argument be made that of any region in VA that should have had the PPTRA fully funded was this area?

  4. Anonymous Avatar

    Spank that Donkey:

    Go spank yourself. What kind of convoluted math is this? You are positing that people of a small area of hard-hit Southside benefit by getting a rebate on their car taxes.

    Is that a system? If so, it is hardly sustaining. And what does it mean to the Commonwealth at large? That we don’t have money to pay for the roads, schools, etc., we need. WHat happened in Southside can’t be sustained by some minor tax cut anyway.

    I hope you spank yourself into your next fantasy.

    Peter Galuszka

  5. Spank That Donkey Avatar
    Spank That Donkey

    Mr. Galuszka:
    Pardon me for having offended your sensibilities.

    Firstly, please go back thru your car tax records march down your Commissioner of Revenues office, and pay back your refunds since 1999.

    Secondly, May I suggest you begin going door to door in the Martinsville area and ask each person to pay their entire car tax refunds since 1999.

    Also, please post here your condemnation of Governor Mark Warner for endorsing a full phase out of the car tax in his 2001 campaign.

    Maybe at that point, we can discover exactly who is living in a fantasy concerning taxation policy.

    Now the reason why I interjected this form of sending $$ into Southwest VA, along with the Tobacco funds as discussed, because it is a viable way to help relieve the financial burdens of those VA Citizens.

  6. Anonymous Avatar

    Mark Warner did the right thing by dumping this neocon, retrograde nonsense.

    Peter Galuszka

    PS: You miss my point. I am talking about SUSTAINABLE support for Soouthside and Southwest. Not some temporary rebate gimmick. What’s YOUR answer? I’m looking for ideas, not lame excuses for a has-been Virginia governor.

  7. Spank That Donkey Avatar
    Spank That Donkey

    Dear Mr. Galuszka:
    I have news for you. The PPTRA is a sustained tax cut that feeds (ahem) $10.6 million annually into the Martinsville economy.

    The number for the coal mining counties is $100 million over the past 10 years (aggregate) and $13.8 million just in FY 2007.

    The Tobacco money will be spent and gone…. the PPTRA thanks to Gov. Gilmore, and was passed by a bi-partisan vote of the General Assembly will live on.

    Obvoiously the difference between you and I is that I say give the people back their money and they will do for themselves…

    You see obviously see SWVA and Southside VA as an opportunity to get everyone on a government program… because only govt. can solve their problems?

    The Great Society was a failure, unless you consider our inner cities currently as some kind of success story?

  8. Mike Smith Avatar
    Mike Smith

    Excu-u-u-u-se me! But since when did Big Government know better than private citizens and businesses how to “invest” their own money? If you believe in BG then you must believe, as did “mainstream” economists as did John Kenneth Galbraith and Paul Samuelson, that the Soviet Union could not be beat as the economic powerhouse of the world.

    Of course the tobacco money has failed to “fix” Southside Virginia.
    That Big Tobacco and Big Farm would “partner” with Big Government to rape the public should not surprise anyone. Adam Smith warned us of that.

    That Big Government turned on Big Tobacco to the tune for $billions, for a legal though politically incorrect product just gave BG more welfare money to distribute to its favored “clients.”

    Bad economics. Rape of the constitution. Theft on a grand scale.

    Want to help Southside and the rest of Virginia?

    Get government and lawyers off our backs!

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