Watch It and Weep!

The looming insolvency of many states and municipalities is getting more and more attention. CBS’ 60 Minutes highlighted the problem Sunday, and everyone concerned about Virginia public policy needs to watch this video.

Needless to say, Virginia is in far better shape than Illinois, New Jersey and California, but it would be foolhardy to think that we are immune from their difficulties. The fact is, we don’t have a good handle on the financial strength of all Virginia’s municipalities and all the independent authorities that have issued debt. We don’t know how much publicly backed debt there is, we don’t know what potential liabilities governments are potentially liable for, and we don’t know how well covered the debt is. We don’t know what impact declining property values will have on municipal revenues, what impact consumer deleveraging will have on sales tax revenues or laggardly economic growth will have on income taxes.

Meanwhile, we face massive cutbacks in federal aid when the “stimulus” package expires, continuing increases in Medicaid spending, and more cuts of unknown magnitude when the newly elected Congress gets serious (or semi-serious) about closing the federal budget gap.

The 50 states, metropolitan regions and municipalities are coming to the end of an the expansionary era that has prevailed since World War II. Spending will be painful to cut. Much of it is baked into the dysfunctional human settlement patterns — scattered, disconnected, low-density — that we have built over the past 60 years. More spending is tied to our dysfunctional, privately-owned-but-highly-regulated health care system, and yet more is tied to our dysfunctional, hyper-bureaucratized public educational system. The days of blindly shoveling more money at roads, schools and health care are over. We cannot afford this madness anymore.

Our major public institutions have evolved as far as they can usefully evolve. They have reached a dead end. Collectively, they are nearing collapse. Virginia has been less profligate than other states, so that foundational truth may not yet be self evident to everyone. But the design flaws in our institutions are endemic — Virginia is only a few years behind the rest.

Government As Usual will not work. We cannot solve our problems by trimming a bit here and there, jacking up taxes and fees but spreading the pain so no one notices, implementing private-sector processes in the search of ephemeral efficiencies, borrowing up to our AAA debt limit, diverting the public’s attention with culture-war issues, and hoping that some economic miracle from source unknown will deliver a revenue windfall from the heavens. No, we must fundamentally re-think the way we deliver and pay for every major public services at the state and municipal level.

Just as we need a new compact between government and citizen at the federal level, we need a new compact at the state, regional and local level. Either we devise the new compact through a deliberative democratic process informed by reasoned debate, or it will be imposed upon us in a panicked crisis mode by remorseless creditors.

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31 responses to “Watch It and Weep!”

  1. Hey, Fauquier county could go under and fold tomorrow, and I would be dancing in the street.

    It is not going to happen, though.
    Muddling through will become an art form.

  2. oldcavalier Avatar

    Hey Bacon, if you really believe what you wrote, then support the Repeal Amendment:

    A major effort to amend the U.S. Constitution, which would allow two-thirds of the states to repeal any law or regulation of Congress, is underway in the U.S. The states involved to date: Virginia, Florida, Texas, Montana, Iowa, Georgia, Indiana, South Carolina, Missouri, Minnesota, New Jersey, and Utah.

    Here is the repeal provision language: “Any provision of law or regulation of the United States may be repealed by the several states, and such repeal shall be effective when the legislatures of two-thirds of the several states approve resolutions for this purpose that particularly describe the same provision or provisions of law or regulation to be repealed.”

    Please support the repeal amendment in order to restore the balance of power between the citizens and the federal government. Over the past several decades, no matter which party is in charge, the federal government has been eroding the authority of the states and the liberty of citizens. The Repeal Amendment will act as an important check against the ever growing power of the federal government. A must-do if the U.S. is to survive!

  3. Gooze Views Avatar
    Gooze Views

    Old Cavalier,
    Why don't you put on your grey uniform and play Confederate soldier?
    What a stupid idea!
    Peter Galuszka

  4. James A. Bacon Avatar
    James A. Bacon

    Oldcavalier, I do support the repeal amendment. Read this post.

    But throwing obstacles in the way of stupid federal laws and regultions is the easy part. It is easy saying "No."

    The hard part is figuring out how to reinvent core national institutions to take us into the next era. What will the education system of the 21 century look like? What will health care look like? What will human settlement patterns look like? Imagining the future is hard, getting buy-in is even harder.

  5. From one old Cavalier to another …

    I wish I could blame the federal government for all of our problems. Lord knows, they deserve plenty of the blame. However, the state governments seem at least as inept as the federal government. When Meredith Whitney said that the state issue was an issue of complacency she might have said it was an issue of incompetence.

    Virginia is no exception.

    Our state-wide politicians are failing to make full payments into the state employee retirement fund in order to fabricate the illusion of a balanced budget. Soon, we'll be in the same boat as New Jersey. For exactly the same reason. Then, our state politicians will pretend they didn't know the payments were held back. Then, they'll blame their predecessors. Then, they'll blame the other party.

    It's sad.

    Our state employees had a defined benefits pension until June, 2010. Then, only newly hired employees went to a defined contribution plan. I believe that the federal government made this change in 1983.

    Our General Assembly passed a transportation bill that was signed by our governor (Kaine) – HB3202 – which was almost immediately ruled unconstitutional by the Virginia Supreme Court.

    Our politicians bemoan the shabby state of Virginia's transportation system while keeping the gas tax (in cents/gallon) fixed at 1986 rates. Failure to keep up with inflation in transportation spending is having the entirely predictable result – a crumbling transportation system.

    An audit of VDOT finds $1B in unspent, unknown budget.

    Abuser fees are passed by the General Assembly and then almost immediately repealed when the politicos finally get around to hearing what the public thinks of the idea.

    I agree with you on the over-reach of the federal government. I just don't know why you think the state legislature is any better.

    What was it the guy from Illinois said? "There's very little I can do or say besides apologize.". That was a state official speaking.

  6. Anonymous Avatar

    Higher Educational Institutions Bond Act of 2011; created. (HB1505)

    Bacon… What is up with this from Putney?

    Authorizes the Treasury Board to issue bonds pursuant to Article X, Section 9 (c) of the Constitution of Virginia in an amount up to $64,579,000 plus financing costs to finance revenue-producing capital projects at Virginia Commonwealth University and Virginia State University. The bill declares that an emergency exists and that the bill is effective upon passage.

    An emergency indeed!!

    How does this relate to the Governor's move?

  7. JAB writes:

    "Much of it is baked into the dysfunctional human settlement patterns — scattered, disconnected, low-density — that we have built over the past 60 years.".

    Like Fox Mulder on the old X-Files show – I want to believe. But I just don't. It seems to me that the wost managed, least successful, most fiscally challenged parts of America are the places that most typify your belief in functional human settlement patterns. Los Angeles is a mess, no tax rate is high enough in New York City and the low density countryside is falling apart. Small cities like Austin, TX and suburbs like Henrico County seem to be working. Aren't these the very places that should collapse first?

    Sometimes, when I read the "blame it all on human settlement patterns" argument, I think of Pink Floyd. Specifically …

    And if the cloud bursts, thunder in your ear
    You shout and no one seems to hear.
    And if the band you're in starts playing different tunes
    I'll see you on the dark side of the moon.

  8. Here's the budget of Virginia:

    what part of this budget has to do with dysfunctional settlement patterns?

    The two biggest chunks – 2/3 of it are Education and MedicAid.

    Transportation is not funded from the general fund.

    Virginia funds schools at the average rate of about $5K per kid then the locality slathers on another 5-8K and the Feds about 1K – mostly for kids having difficulties in the elem grades.

    I understand that we now have an unfunded liability of about 17billion for the pension fund.

    We have a self-professed fiscal conservative governor and so far… rather than confronting the spending – he's pushed it into more debt.

    I think if Bacon and Groveton want to trumpet something – it ought to be that.

    We seem to have a steady stream of the faux fiscal conservatives who say that govt spending must be cut but when they get into office they weasel instead.

    Perhaps in January he'll get to the part about cutting but I have to tell you he seems committed to smoke and mirror budgeting.

  9. Anonymous Avatar

    Virginia's transportation problem exists because: transportation investments are made to enrich landowners who make big campaign contributions (witness Til Hazel and now the Tysons landowners). We are spending $6.5 billion on Dulles Rail, which could have been built for billion less had it been left in the median of the Dulles Toll Road.

    It's been estimated that about 6-8% of Dulles passengers will take rail and about 17% of the trips to and from Tysons Corner will be by rail by 2030.

    Moreover, the arrival of rail will generate growth at Tysons that will require about $1.4 billion more in road improvements that will likely reach the point of failure just shortly after they are completed.

    This has nothing to do with settlement patterns, but rather out and out corruption and an incompetent business community in Fairfax County. The only people who have a clue what's going on are the Tysons landowners.

    The rest of the business leaders are essentially so wed to the federal trough that they are clueless about business.


  10. well.. sort of…. much, if not most of METRO funding did not come from Virginia's transportation fund but I agree with the essence of TMT's point which is that developers know that publically-financed infrastructure is the best way for them to build profitable ventures and that the CTB in Va has few citizens on it and a plethora of business interests on it.

    But Bacon and Risse's premise about transportation investments and their impact on settlement pattern dysfunctionality rings a bit hollow when we consider the enormous transportation investments that have occurred in urbanized locales.

    NoVa is one huge jumble of very expensive infrastructure ranging from the Woodrow Wilson bridge, the Springfield Interchange, and METRO to name 3.

    What's driven people to the exurbs is not the availability of infrastructure but the availability of more house for the money – the ability to afford a typical subdivision home – not a townhome or apartment or condo.

    That's the primary growth driver in the exurbs – wall-to-wall subdivisions accompanied by twice-daily chock-a-block congestion of the commute roads – few of which have been widened.

    One of the biggest costs of widening roads like Interstate 95 is rebuilding the overpasses whose support feet sit squarely where new lanes would be put.

    Lucky for NoVa, they got their WWB, Springfield Interchange and METRO BEFORE VDOT went broke and now any new commute infrastructure will be tolled.

  11. Back to Virginia's finances. Schools, law enforcement and MedicAid are probably about 40% of the State budget.

    If we are going to look at the effects of a shortfall caused by the downturn in the economy and then loss of stimulus money – the likely impact is going to be on those three.

    Which brings into focus – the question of whether or not Virginia is living beyond it's means – and if so – on what basis.

    We don't have a gold-plated State Government in general.

    Virginia does not have a lavishly funded government apparatus.

    If we are "living beyond our means" – it's because we devote a large amount of funding towards education, public safety and public health.

    How about we have an HONEST DEBATE on THOSE issues rather than more of the same conventional but totally wrong narrative that emanates from the right side of the political spectrum?

    I actually think we HAVE spent TOO MUCH money on Education but the results prove that it's not about academics but rather just about anything that can be remotely associated with "education" and certainly not core academics where we place about dead last in the G20.

    So we really have two problems.

    We spend out the wazoo for education – AND – the results are not producing an educated workforce capable of competing for global jobs…..

    and the result of that failure is more adults who require entitlements – funded from taxes.

    When will we actually deal with this reality?

    We're paying out the wazoo for a school system that sucks.

    that's the problem… more so than "spending beyond our means" in my view.

  12. "The hard part is figuring out how to reinvent core national institutions to take us into the next era."


    How can you reinvent institutions and programs while you are stuck with them?

    Writing a law as if it was a conservation easement – permanent for all time – is a mistake for the same reason.

    We moan about sending the bill for wrok we have done (much of it on their behalf) to our grandchildren. But the biggest bill we are sending them probably comes in the form of outdated and nonworking legislation.

    Every bill should come with an expiration date. If nothing else, it will keep the legislature from screwing things up with new bills because they will have to debate re-authorizing the old ones.

    And maybe, just maybe, they can work in a few improvements along the way.

    If the bush tax cuts had been made permanent, the current tax result would be much the same. But the debate and reconsideration of current conditions was worthwhile, and it was the occasion for extending much needed unemployment compensation.

  13. So far we have got Hydra, Groveton, TMT, and Larry convinced that dysfunctional settlement patterns are not the root of all evil.

    Nuff said.

    "What's driven people to the exurbs is not the availability of infrastructure but the availability of more house for the money"

    You mean you don't buy the Risse argument that most people would pay more to live in an apartment if they were given a choice? Me either.


    With regard to schools, why not leave all the old ones as is and only build the new ones with tolls? If the idea works for roads, why not schools?


    I understand TMTs sentiment that
    "…transportation investments are made to enrich landowners who make big campaign contributions …." but I don't see him offering any alternative. It smacks of 70's era anticapitalist ranting.

    ANY transportation system is going to help some landowners more than others. The only solution I see to this is some sort of Kaldor-Hicks equality wherein the winners have to pay off the losers. Ideally, these losers would be granted property (development rights) which they could sell, or keep.

    I wonder if the TMTs of the world would be quite so vocal if they had a stake in development through development right chits, that could be sold. Would TMT be quite so vocal if he knew it meant sitting on a chit worth a couple of grand in the market?

    Would developers be quite so active if they knew their profits were not going to come from expanding their property rights for free?

  14. " With regard to schools, why not leave all the old ones as is and only build the new ones with tolls? If the idea works for roads, why not schools?"

    because the purpose of schools is to educate ALL Kids to grow up to be a viable workforce.

    we tend to forget this – even those who support schools.

    The purpose of public tax dollars is not sports nor cheerleading or band but the core academic skills needed to grow up, get a job, and not need entitlements.

    The reason it is "free" is because if you charged "tolls", many would not send their kids to school to start with and we'd be on our way to 3rd world status.

    but you knew that… right?

  15. oldcavalier Avatar

    To Bacon: Yes, it is easy to say "no" to spending. However, no one in the US Congress knows how to do so. We have numerous unfunded mandates imposed on states. The Repeal Amendment stops the sufficating crush of federal rules.

    To Galuzka: Do you have anything relevant to say about the topics?

  16. balancing the budget is a Constitutional requirement in Va and has little to nothing to do with Congress.

    Balancing the budget or moving it to a better, safer place is not rocket science either as two different commissions with two different approaches have given it a pretty good shot.

    We have a bunch of people blathering … i.e. "pretending" to be fiscal conservatives who are tax&spenders in sheeps clothing.

    The vast majority of the Republican Party as well as the Tea Party folks have had precious little to say about either of the deficit commissions and instead …like the gnomes they are – continue to hum the "cut govt spending" tune with nary a word about how.

  17. because the purpose of schools is to educate ALL Kids to grow up to be a viable workforce.


    And the purpose of roads is to give all travelers equal opportunity to travel, whether they do so or not.

    Not everyone avails themselves of the opportunity in schchools either, bet we require everyone to pay.

  18. Tolls don;t work for new roads for the same reason they don;t work for new schools: it is a path to third world status.

  19. the laws require every kid to attend school.

    they do't require people to pick a home 50 miles from where they work and then to expect others to pay for their commute.

  20. The laws don't require everyone to learn anything in school. but everyone pays for the opportunity.

    The laws don't require anyone to commute 50 miles, nor does everyone want to. The average commute is only 23 minutes, so your argument is based on outliers.

    What we pay for is not equal use, but equal opportunity.

    By your argument, anyone who travels more than 23 minutes should pay into a fund, which is used to subsidize those that travel less. All of a sudden you find this is a lot harder to sell, when you use the actual figures instead of demonizing some mythical outliers.

    And, by your analogy, those that do well in school, (use more than their share of the opportunity) should pay those who do less well.

  21. the laws DO REQUIRE a measure of learning to meet the requirements – they're called SOLS and NCLB.

    and you're wrong as usual.

    what we SHOULD pay for is USE.

    That's how the gas tax was originally designed.

    the more you used – the more you payed.

    23 miles funds?


    you pay per mile.

    if you don't drive it you don't pay it.

    If you use something that was delivered via the roads – you pay your pro-rata share which is incorporated into the price.

    no subsidies.

  22. Nope.

    you pay per mile.

    if you don't drive it you don't pay it.


    But your argument was that people who drive less were somehow subsidizing those that drive more.

    My idea was to charge everyone who drives mnore (those over 23 minutes) and pay those who drive less, to equal out the costs.

    If we pay with a (suitable) gas tax, who cares how far anyone drives?

    If the measure of learning is the SOLs and other standardized tests, then we can close the schools entirely. Anything you need to pass the tests is available online, for free.

    I think you are wrong, the use and the opportunity both need to be paid for. You pay for the opportunity of freedom, whether you ever use it or not.

  23. they do't require people to pick a home 50 miles from where they work and then to expect others to pay for their commute.


    If anything, it is the other way around. Those who use metro to travel short distances get those who travel long distances to pay for their commute.

  24. Anonymous Avatar

    There is a solution for infrastructure funding. Both Fairfax and Loudoun Counties adopted a plan for the upgrading of Route 28 (widening roads and replacing intersections with interchanges). The landowners are paying 75% of the costs, with other taxpayers funding the remaining 25%. In exchange for these payments, the landowners got additional density and protection against any down-planning or down-zoning.

    But Fairfax County wants the public to pay around 58% of the transportation infrastructure costs for Tysons. And, of course, the density granted to Tysons landowners dwarfs that given to the Route 28 landowners.

    Gee, I wonder why I (and many other ordinary citizens) are angry and up in arms about development. The Fairfax County Chamber of Commerce, selling out all of its members except for the Tysons landowners, has endorsed this plan.

    Development makes life worse off for most people in Fairfax County, including businesses.


  25. For the first time since statehood, California did not gain population.

  26. Jeez, tmt, I don't know what to say to you.

    Suppose you are correct, and development does make things worse for most existing residents.

    What this says is that they are claiming additional rights over property they do not own. And, most likely rights they have already exercised on their own property. Assume we are talking about by-right development and not density increases.

    OK, then, when do you start the argument? At one time, Margaret's father could have built anything he pleased, with no restrictions. Zoning reduced that to one house per four acres. Six subsequent downzonings reduced that to zero dwellings per 170 acres ( remaining). With only agriculture as the sole allowable activity, and not all agriculture at that.

    By your argument, her neighbors all benefit from this by avoiding development. All of them have been here a tiny fraction of the time as her family. If she had only the same development rights as her nearest neighbors have already exercised, it would be worth several million dollars to her, even in this market.

    The question is, how do you equalize the benefits and disbenefits? If there is, as you claim, a generalized public benefit, the cost to people like Margaret and many other old line families like hers has to be subtracted from that supposed benefit.

    And that argument only considers current conditions and current rules. The cumulative loss to her, over all the consecutive rule change could easily be tens of million.

  27. Now, Oregon tried to rectify this situation. Their original statewide land use/conservation bill explicitly called for remuneration where property values were reduced, but the regulations to support that stipulation were never put in place. Many people had bought land under one set of rules that was suddenly relatively valueless. A state referendum reset the property rights, but there was a question of resetting them to what? It was determined that they would be reset to 25 years ago, or to earliest continuous family ownership, whichever was earliest.

    In Margaret's case this would have meant 1836.

    That would make the difference between a comfortable retirement and none.

    But it is even Wordsworth than that. Margaret's family fell on hard times for health reasons. Problems that might have been prevented with even minimal health insurance. That happened AFTER the early rounds of downzoning. The family had to sell land. But due to the new restrictions they had to sell far more land than otherwise. People who are now her nearest neighbors (and good friends) got their land at a discount because of large lot limitations. And their properties are worth more because they adjoin property that can "never" be developed.

    Eventually, the rules will change again. But the smaller acreage will be allowed to subdivide first. Having bought at a discount, Margaret's neighbors will cash in first.

    Their neighbors will then be making the same complaint as TMT: windfall profits at his expense.

    It is all hogwash. I saw the same thing happen to old line families on Martha's Vineyard, and in Lender county NC.

    Margaret and others like her are getting raped in slow motion by the county their families have supported for going on two hundred years. On MV it was even worse.

    In Fairfax/Tyson's the situation APPEARS to be different, but fundamentally it is not.

    It is only a question of when you set the clock. When do you decide to start playing fair?

  28. Tmt thinks he is being raped by the Tyson's developers, and he is probably right. The question is, and always has been, what is he giving up relative to what his neighbors gain? How much of their potential profit should be used to cover his loss?

    If you believe that development I'd a net loss, then nothing should ever be done. Moreover, we should tear down everything ever built.

  29. I suffer from several chronic ailments. If I had been Margaret's father I would have been dead at 25, dead at 48, and dead again at 58, all from different ailments, and all controlled by modern miracles. Every day is a gift to me, and I try to live it accordingly. Statistically, the odds that I will live to be as old as emr are slim and none, although I am healthy today.

    When Margaret's father was ill, her family still had some (reduced) options.

    When I become ill there will be none. Margaret will lose her home. All of it.

    She will have a pretty nice pile of cash, but a fraction of the potential.

    Her county supervisors plan will come true. "My plan for your property is to have someone wealthy buy it……… " ( at a huge discount).

    I imagine the Fairfax supervisors want the same thing. Wealthy people instead of TMT.

    And the councilmen in southeast DC want wealthier people than Rufus.

  30. This litany is not intended to be a crying towel for Margaret's problems. It is only that these are closest to me and most visible.

    The intent is to illustrate how taing away and then "giving back" developent rights screws up both the system and the way we think about it, because we only see the current vignette playing out before us at the public hearings.

    The intent is to illustrate that although the situation SEEMS very different between Tysons and Ashby Glen, the underlying issues are much the same.

    And, as I pointe out, I was able to build a home on a lot in Alexandria. But there may be someone else out there, who bought a similar lot at the same time I did, and never developed it. That person will be out of luck when he attempts to do the same exact thing I did. That person will be held to a higher standard of behavior that costs him money and saves me money, accordinng to TMTs argument.

    Exactly the same as Margaret is being held to a higher standard of behavior than any of her nearest neighbors, which costs her money and makes them money.

    Yet in spite of all this, the BIG LIE that development of a new home costs the county more in services than it collects in real estate is so pervasive that Fauquier officials still make that claim today.

    Despite the millions in costs incurred by Margarets family (and others like hers), because of successive and cumulative rule changes, were she to suggest putting up a single, modest, additional structure on the farm, Fauquier officials would say, "Oh no, you can't do that. It would cost us money."

    In Plymouth, Ma there was a developer with a large tract of land, he wanted to develop. Despite the fact that his plan included giving up 70% of it as open and public space, it took him over 200 public hearings before he finally obtained partial approval.

    The reason had nothing whatsoever to do with public services or higher taxes, and everything to do with existing residents controlling land they did not own.

  31. This recession is over. It just does not show in the unemployment figures yet.

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