Follow Ups: Fracking and Taxes

Fracking does not, repeat, does not harm underground water. But it can pollute surface water.

Frack me a river. A week ago, I noted how American Rivers had designated the Rappahannock River the fifth “most endangered” river in the United States on the grounds that the gas industry was showing interest in drilling in the Taylorsville shale basin beneath the river. Environmentalists claim that fracking is a hazard to drinking water, while industry groups say it is not. My take at the time: Who knows?

Now a Duke University study using sophisticated chemical tracing techniques has demonstrated that fracking has not contaminated groundwater in sample of 112 drinking wells in West Virginia, although accidental spills of fracking wastewater have polluted surface water. Fracking, or hydraulic fracturing, is a technique in which drillers inject pressurized sand, water and chemicals deep underground to fracture shale in order to release the oil and gas it contains. Environmentalists have long claimed that the procedure can contaminate water in underground aquifers.

“Based on consistent evidence from comprehensive testing, we found no indication of groundwater contamination over the three-year course of our study,” said Avner Vengosh, professor of geochemistry and water quality at Duke, co-author of a peer-reviewed study. States the press release:

Samples were tested for an extensive list of contaminants, including salts, trace metals and hydrocarbons such as methane, propane and ethane. Each sample was systematically analyzed using a broad suite of geochemical and isotopic forensic tracers that allowed the researchers to determine if contaminants and salts in the water stemmed from nearby shale gas operations, from other human sources, or were naturally occurring.

The tests showed that methane and saline groundwater were present in both the pre-drilling and post-drilling well water samples, but that they had a chemistry that was subtly but distinctly different from the isotopic fingerprints of methane and salts contained in fracking fluids and shale gas. This indicated that they occurred naturally in the region’s shallow aquifers and were not the result of the recent shale gas operations.

What’s true of West Virginia is not necessarily true of Virginia — geologies differ. And the Duke study warned that impact of fracking on groundwater might take longer than the three years of the study period to take place. Still, with its sophisticated science, the study undermines the endlessly repeated claim that fracking is a threat to underground water.

Solar farms: no longer a money-loser for local government.

Fixing a tax quirk. Three weeks ago, I blogged that a quirk in the way the state treats the value of solar energy projects for tax purposes could throttle Virginia’s solar industry in its infancy.

Under state law, solar farms qualify for an 80% tax exemption on projects exceeding 25 megawatts — an inducement for developers to build large solar facilities in Virginia. The exemption significantly reduces local government revenue from the project. At the same time, the Secretariat of Treasury has not taken the exemption into account when calculating the local tax base for purposes of distributing state aid for education. The perverse result is that local governments could lose tax dollars from a big solar investment, creating disincentives for them to provide needed permits.

Reston-based solar developer SolUnesco brought the discrepancy to the attention of state officials. After reviewing the matter, the Tax Commissioner issued a ruling to eliminate the discrepancy: “The actual assessed value will be reported by the Department to the Department of Education (DOE) as the true value of property to be used by DOE to calculate the amount of state educational funding.

“The So What,” says Francis Hodnall, CEO of SolUnesco, is that “projects over 25 mw … will provide a net revenue to counties.”

Widgeon Grass, another Chesapeake Success Story

widgeon grass

Widgeon grass. Photo credit: Bay Journal

Spurred by a tripling of widgeon grass, the acreage of underwater grasses in the Chesapeake Bay grew 8% between 2015 and 2016 to about 97,000 acres. The expanse, which exceeds the 2017 restoration goals set under the Chesapeake Bay program, was the highest recorded by the Virginia Institute of Marine Science in 30 years of measurements, reports the Daily Press.

The achievement is “fantastic,” says Robert “J.J.” Orth, who heads up the seagrass monitoring and restoration program at VIMS. “It speaks a lot to the fact that … the efforts to clean up the bay, the TMDLs, probably are working.”

TDMLs, or total maximum daily loads, are limits set by the Environmental Protection Agency for levels of nitrogen, phosophorous and sediment allowed into the bay and its tributaries.

Underwater grasses are a critical element in the bay ecosystem, providing habitat for blue crabs, young fish, and other aquatic animals. They also absorb excess nutrients, buffer shoreline erosion and promote water clarity.

Widgeon grass, a food for migratory water fowl, thrives in the moderately salty waters of the middle and lower bay. A “boom or bust” species, the grass can experience rapid growth and dramatic declines. There is a risk that a 2003 die-off that resulted in the loss of half the bay’s widgeon grass could occur again. But the Daily Press says Orth is optimistic that warmer bay temperatures will forestall a repeat next year.

Eco-City Alexandria Kvetches about Accelerated Potomac Cleanup

Nasty! Oronoco Bay in eco-city Alexandria.

Nasty! Oronoco Bay in eco-city Alexandria. Image credit: Greater Greater Washington.

The City of Alexandria bills itself as an “eco-city.” In 2007, it published a “green-ventory” of environmental plans, policies and programs. In 2008, the city adopted an “eco-charter.” Since then, the city has launched initiatives to tackle invasive plants, expand the regional BikeShare program, bolster transit bus service, weatherize apartments of low-income Alexandrians, design LEED-certified city buildings, install energy-efficient lighting fixtures, and replace diesel buses with hybrid-electric buses — all trendy, green priorities.

Meanwhile, the city’s aging combined sewer overflow system dumps an estimated 70 million gallons of raw sewage, waste and rainwater into the Potomac River every time it rains. The city has had years to fix the problem, which it estimates will require $386 million in local funds. Until yesterday, the plan was to pay for the sum through a gradual 500% increase in city sewer fees over the next ten years.

Now city officials are “reeling,” reports the Alexandria Times, after Governor Terry McAuliffe signed into law a bill that will compel the city to accelerate its timetable for fixing the problem by two years to 2025.

“We appreciate the governor’s earlier efforts to substitute a more reasonable deadline, and we remain fully committed to getting all four outfalls in Alexandria done, and to getting them done right,” said Mayor Allison Silberberg in response to the news. “While we are moving full steam ahead, we are very concerned that this legislation requires a deadline engineers have indicated is not feasible.”

Bacon’s bottom line: Yeah, yeah, yeah. If Alexandria really wants to consider itself an “eco-city,” its first priority should be to stop dumping human excrement into the Potomac River. Which would have a greater positive impact? Investing in save-the-world efforts to reduce CO2 emissions, which, might reduce global warming by a hundred-thousandth of a degree over the next 100 years, or stop fouling the river? I’ll hazard a guess that people living downstream would prefer the latter.

Until Alexandria gets its act together and stops polluting the Potomac, maybe it could do the rest of us a favor and spare us the “eco-city” blather.

Pipeline Approaches Approval, but Foes Still Full of Fight

Ridge removal zones along the ACP route are shown in red based on Dominion Pipeline Monitoring Coalition calculations.

From the perspective of its managing partner, Dominion Transmission, the Atlantic Coast Pipeline is looking more and more like a done deal. Dominion has completed more than 65% of the high-performance steel pipe needed to build the roughly 600-mile pipeline, and it has procured almost 85% of the land, materials and services it needs, pipeline executives disclosed today.

Pipeline officials also say they are nearing the end of a two-year regulatory process. In December, the Federal Energy Regulatory Commission (FERC) issued a favorable draft Environmental Impact Statement. The final EIS is expected by June 30th.

“We have every reason to believe the favorable draft EIS and — ultimately — the final EIS will provide a strong foundation for final approval of the project later this summer or in the early fall,” stated Diane Leopold, CEO of Dominion Energy, the pipeline’s managing partner, in a press conference this morning.

But foes of the pipeline have raised an issue they hope will derail ACP’s plans. The pipeline will cross 38 miles of mountains in Virginia and West Virginia that would require 10 feet or more of their ridge tops to be removed — up to 60 feet in places, they claim. Comparing the pipeline construction to the coal industry’s practice of mountaintop removal, Mike Tidwell, director of the Chesapeake Climate Action Network, said in a dueling press conference today that the pipeline would cause “irrevocable harm” to the region’s environment.

Creating flat space on steep mountaintops to provide room for trench digging and construction activity would require removal of an estimated 247,000 dump-truck loads of excess rock and soil, asserted Dan Shaffer, spatial analyst with the Dominion Pipeline Monitoring Coalition. Finding somewhere to place the massive volume of this “overburden” even temporarily without causing runoff into rivers and streams will be a huge challenge, he said, And, even though ACP would be required to restore ridge lines to their “approximate original contour,” breaking up the rock causes the volume to swell, creating a large amount of spoil that must be permanently disposed somewhere.

Pipeline foes raised these concerns about “mountaintop removal” with FERC in comments submitted during the draft impact statement. The draft document “failed to address this important issue,” noted Ben Luckett, an attorney with the Appalachian Mountain Advocates. He contends that the pipeline requires a new draft EIS and a new public comment period.

Even if FERC declines to re-open the draft process, anti-pipeline forces plan to raise the issue in state “401 certification” water-quality reviews. In Virginia the Department of Environmental Quality (DEQ) has promised to allow extensive public input. Given the potential for massive runoff, erosion and sedimentation, said Luckett, “states cannot reasonably make a determination that the pipeline won’t lead to violations of clean water standards.”

Dominion spokesman Aaron Ruby strenuously objected to the comparison of pipeline construction with coal-mining mountaintop removal, which “conjures up images of mountains that have been completely flattened. … We’re not removing the tops of mountains. That is total misinformation.”

Building pipelines in rugged mountain terrain “is not new to us,” said Leslie Hartz, vice president-pipeline construction for Dominion Energy. Only “small clearings” will be required for construction purposes on ridge lines. Contractors will restore the terrain with native material to its original contours, as required by FERC. There may be a “small amount” of spoil left over, but ACP has identified ways to employ it usefully for other purposes.

In describing the construction process, Hartz said the project would be broken into 17 “spreads,” or construction units, each of which will be built simultaneously in linear fashion. Mountainous terrain would have shorter lengths, perhaps 15 to 20 miles. Some blasting would be required to remove rock, she said. Material left over after the mountain contours are restored will be used to re-establish habitats and create protective barriers to restrict access to right of way.

Pipeline foes question whether ACP fully comprehends the challenges it faces. The Friends of Nelson, contracted with Blackburn Consulting Services LLC to walk the route along Roberts Mountain. The soil there is thin, and construction will require extensive blasting to remove enough bedrock to dig pipeline trenches eight feet deep. Some slopes along the route are precipitous, as much as 65°. (Forty degrees qualifies for a black diamond ski slope.) Creating 125-foot wide rights of way would require removing enormous amounts of rock.

States an issue brief released by the pipeline opponents:

Numerous engineers who have looked at this issue have asked the obvious question: What does Dominion plan to do with the tremendous amount of overburden? Dump it into surrounding valleys as companies do with mountaintop removal for coal? Truck it off the mountains with massive dump trucks? And take the massive amounts of rock and soil to what location?

While ACP has vowed to restore the mountains to their approximate original contour in line with FERC requirements, foes say there is a qualifier. ACP will restore the mountain ridges to the extent practicable “taking into consideration cost, existing technology, and logistics in light of the overall purpose of the ACP.”

Ruby retorted that ACP understands the challenges far better than the pipeline foes. For starters, he said, there is no need to flatten a 125-foot-wide area on the ridge line, he said. The company will carve out just enough space to excavate the trench, which will be “significantly narrower” than 125 feet.

Further, he said, the company has “one of the most protective programs ever used by the industry, specifically designed to provide enhanced protection of soil erosion. We have site-specific plans for every steep slope we encounter, based on the unique conditions and characteristics of each slope.” These plans take into account the soil type and depth, the grade of the slope, the depth of the bedrock, the width of the ridge line and the types of vegetative cover.

ACP also disputed the Dominion Pipeline Monitoring Coalition estimate of construction impact.

In explaining how he calculated miles of ridge-line impacted and thickness of overburden to be removed, Shaffer said that he was forced to rely upon publicly available information. He used the centerline depicted on Dominion Project Facility Maps submitted to FERC (here & here), generated a 125-foot Right of Way from that and overlaid them with topographical and elevation data. He estimated the thickness of the mountain that would be removed by creating transects across the Right of Way at periodic intervals and sampled the elevation value along each transect. The methods, he conceded, were “fairly simple.” While acknowledging some room for error, Shaffer said there was no escaping the conclusion that the impact would be significant.

The assumption that ACP will cut away a full 125 feet is wrong, Ruby said. Without the assumption, the rest of the analysis falls apart.

Business and Computer Science Majors are the Biggest Bargains in Higher Ed

Graphic credit: “Costs of and Net Return to College Major”

It is widely known that certain college majors offer better career prospects than others. Engineering and business majors earn more money on average than, say, art and English majors. Less well known is the fact that certain majors are more expensive to teach. As seen in the chart above, engineering graduates cost twice as much to educate as library graduates.

The data comes from a new study, “The Costs and Net Returns to College Major,” by Joseph G. Altonji and Seth D. Zimmerman, published by the National Bureau of Economic Research. They drew their cost data from the Florida State University System.

The insight that different majors have different costs has important implications for how state systems of higher education allocate their resources. In Virginia, there has been a big push since the “Top Jobs” legislation of 2011 to increase the number of STEM (science, technology, engineering and math) graduates at Virginia colleges and universities. The shift to higher-cost STEM majors, while arguably justified from an economic perspective, contributes to the rising cost of higher education.

Another way to slice and dice the data is to look on the return on investment for different majors based upon the cost of providing the education and the present value of graduates’ earnings. As seen in the chart below, business majors, who cost relatively little to educate but enjoy high lifetime earnings, represent an extraordinary bargain. By contrast, architects, who are expensive to educate but earn relatively little, are a Return on Investment disaster. Much to my surprise, even engineers don’t look like such a bargain.

Career earnings may not be the best way to measure the social value of a particular major. It is possible that architects contribute far more to social well being than their pay stubs would indicate. (It’s hard to imagine that genders-studies majors have anything worthwhile to contribute to the world, but, hey, that’s me.) But the present value of earnings is a pretty good proxy for a graduate’s economic value.

As lawmakers ponder how to allocate scarce higher-ed dollars, they would be well advised to take into account how much bang for the buck colleges are getting for their investment in different disciplines. Perhaps Virginia colleges need to promote enrollment in business schools and less in architecture. I never imagined myself saying this, but maybe we should be encouraging more kids to enroll in psychology and fewer in engineering!

Entrepreneurial Monks Peddle Natural Burials, Monastic Immersion

Monks at lunch. Photo credit; National Geographic

The order of Trappist monks living in Holy Cross Abbey in Clarke County has dwindled from 68 to 10, and those ten are aging — the youngest is 59 years old. The remaining monks know they must change to survive. And for a group that traces it origins back to 1098 France, committing themselves to cloistered lives of celibacy, poverty and obedience, they have been pretty darned adaptive.

In a new one-hour documentary and accompanying article, The National Geographic highlights the order’s moves to become environmental sustainability. Organic farming and low-flow toilets are all fine and good, but what impresses me most is the monks’ spirit of entrepreneurial innovation — making the best of what they’ve got in their 1,200-acre property located about an hour’s drive west of Washington, D.C.

The monks have set aside 80 acres set aside for a “natural cemetery.” People  can choose to be buried there in a shroud, as the monks are, or in a biodegradable coffin. Alternatively, they can choose cremation and have their ashes scattered in a separate section of the cemetery. Natural burial ranges from $4,000 to $8,000, depending on the spot. Since the cemetery opened in 2012, there have been 97 interments and 12 people who have had ashes scattered.

But this is the best:

In the last five years, Holy Cross has introduced “monastic immersion weekends” in addition to regular silent retreats, so that men and women can get a fuller taste of monastic life. Those weekends always sell out, says Kurt Aschermann, a companion to the abbey. Even the guests for the regular silent retreats are leaving larger donations than in years past, says Father James, which means that the retreats have become more profitable.

That’s what you call inventing a new business model!

A Business-Like Approach to Paying for I-87

Proposed route of I-87 linking Raleigh and Norfolk.

Proposed route of I-87 linking Raleigh and Norfolk.

Sen. Frank Wagner, R-Virginia Beach, is the Republican candidate you’d almost forget was running for governor were it not for the occasional newspaper article like the one in today’s Richmond Times-Dispatch. He doesn’t have Ed Gillespie’s financial resources, and he lacks Corey Stewart’s penchant for controversy. But he’s out there, plugging away. As a long-time legislator, his ideas deserve a hearing.

Some of his ideas make sense. He is a fiscal conservative disinclined to gamble with big spending schemes or tax cuts that could disrupt the state budget. “This is not the federal government,” he said at a recent reception in Mathews County. “We cannot print money. We have to balance budgets day in and day out every day.”

But some of his ideas need work. His proposal for jump-starting the economy is to increase transportation spending. Because he’s a fiscal conservative, he would finance that spending through a tax hike, shifting to a sliding scale in which gasoline taxes are higher when the retail price of gasoline is lower, and taxes are lower when the price of gasoline rises.

In the article, Wagner elaborated on his thinking about transportation as a driver of economic development:

Virginia’s transportation network does not foster economic growth, he said, and the state will fall further behind North Carolina without major improvements. For one, North Carolina is planning a highway to connect Raleigh and the research Triangle to Norfolk and the port.

“That’s what business-people do,” Wagner said. “They make strategic investments and expect a return on that investment.”

Another thing business people do is conduct cost-benefit analyses before they make big investments. If anyone has conducted a reputable cost-benefit analysis of Interstate 87 between Raleigh and Norfolk, you can’t find it on the website of the Triangle’s Regional Transportation Alliance (TRA). (If someone knows of such a study, please let me know.) By way of justification, the RTA offers gassy language about investment that would accrue to North Carolina communities along the route (without acknowledging that communities not on the route might see investment shrink) and make it easier for tourists up north to reach the Raleigh area.

The singular virtue that I can see in I-87 is that half the proposed route is already constructed to Interstate standards. Supposedly, the 213-mile Interstate would cost only $1 billion to build. By eye-balling the map, I’d guesstimate that North Carolina would be responsible for building and maintaining 90% of the length. If North Carolina wants to waste its money, well, what the heck, maybe Virginia should be willing to throw in a few bucks to open up a new route for truck shipments from Virginia ports.

But that’s all back-of-the-envelope thinking. The acid test of whether such a project would be an economic boon or drain is whether it could support itself through tolls. Is there sufficient demand for a Norfolk-to-Raleigh connection — perhaps from trucks emanating from the Port of Virginia — that it could pay its own way? If so, and if private sector concessionaires were willing to put their own money into a public-private partnership, I’d be inclined to support the project. Conversely, if business people look at the project and decline to invest their own funds, then I’d be inclined to think that I-87 is just another boondoggle backed by civic boosters angling for Some One Else’s Money.

If Wagner really wants to do like business people do, perhaps he should get business people to pay for the project — and not raise Virginians’ taxes.

Standard & Poor’s Rains on Candidate Parades

Standard & Poor's "negative" rating on Virginia's AAA bonds could squelch candidates' plans for spending sprees and tax cuts.

Standard & Poor’s “negative” rating on Virginia’s AAA bonds could squelch candidates’ plans for spending sprees and tax cuts.

When you run for governor in Virginia, you have to make promises, and when you make promises, the only ones that cut through the media clutter are vows to cut taxes or launch expansive new spending programs.

Thus, this year, Republican candidate Ed Gillespie has rolled out a plan to cut taxes by $1.25 billion (assuming tax-revenue forecasts allow it), Democrat Ralph Northam proposes to eliminate the sales tax on groceries at a cost of $500 million, Republic Corey Stewart pledges to abolish the income tax entirely, and Democrat Tom Perriello has touted spending proposals that would jack up spending by $1 billion. Republican Frank Wagner wants to ramp up transportation spending, but he at least proposes a gasoline tax increase to pay for it.

Amidst all these promises, Standard & Poor’s Global Ratings has issued a sobering warning. While the firm affirmed Virginia’s AAA bond rating, it has dialed back its outlook from “stable” to “negative,” writes Jeff Schapiro in the Richmond Times-Dispatch.

Schapiro paraphrases Secretary of Finance Ric Brown as saying:

S&P is worried about two things, both of which are inextricably bound: the cash cushion the state maintains against a reversal in the economy and doubts about Trump-era federal spending, which would significantly increase defense spending — and Virginia’s nagging dependence on D.C.

S&P cited the big withdrawal — about $600 million — from the so-called rainy day fund that Gov. Terry McAuliffe, a Democrat, and the legislature used to help close a $1.5 billion hole in the budget attributed to sequestration.

With a balance in the emergency account of only $281 million, the credit agency views “this as a low level of reserves relative to similarly rated peers and a situation which could weaken the commonwealth’s ability to respond to economic and financial downturns in the future,” said Brown.

Concern about the draw-down of the rainy day fund is easy enough to understand. Less comprehensible is S&P’s worries about the Trump budget, which includes a proposed $50 billion in increased defense spending. The budget may or may not be good for the nation (we can debate that another time), but it would be unquestionably good for Northern Virginia’s and Hampton Roads’ defense-heavy economies.

Whatever… S&P has its reasons. And state legislators are paying attention. When Schapiro asked Chris Jones, R-Suffolk, chairman of the House Appropriations Committee, if tax cuts and spending hikes are justified, he replied: “From my perspective, I have an obligation to the commonwealth to have a structurally balanced budget that is conservative and prudent.” In other words, Jones is extremely cautious regarding any big spending and tax-cutting plans.

Update: In a statement released today, Gillespie is using Standard & Poor’s announcement to double down on his tax plan. He regards his 10% across-the-board cut to state income tax rates as part of the tonic — along with changes to education and workforce training, regulatory reform and a new approach to economic development — needed to “spark the natural, organic economic growth our Commonwealth needs.”

I still like Gillespie’s tax plan, but spending pressure from Medicaid, K-12 schools, higher-ed, mental health and other sources is not abating. The news from S&P reduces Virginia’s margin for error.

GMU Should Cough up Terms of Charles Koch Donations

Charles Koch. Yeah, he's a bogey man for the left. Even so, the public has a legitimate interest in knowing what strings he ties to his donations to GMU.

Charles Koch. Yeah, he’s loathed by left. Even so, the public has a legitimate interest in knowing what strings he ties to his donations to GMU. Image credit: Huffington Post.

Unlike my friends of a leftish persuasion, I don’t have a problem with Charles and David Koch. I largely agree with their libertarian political philosophy. In a nation awash in foundations that underwrite liberal and progressive causes on college campuses, I am happy to see at least one organization backing free-market/limited government principles. In particular, I’m a big fan of the Koch-supported Mercatus Center at George Mason University, whose scholars I quote frequently in this blog. Without the Koch brothers, academia would be even less diverse intellectually than it already is.

But my personal affinity for the Koch brothers does not alter my opinion that any dealings they have with public Virginia universities should be fully transparent. Therefore, I am inclined to endorse a lawsuit filed by Transparent GMU, a student group with legal backing from the liberal-left Appalachian Mountain Advocates, against GMU. The purpose of the lawsuit is to compel GMU, under the Freedom of Information Act, to release records about donor agreements between the Kochs and the university.

The Charles Koch Foundation has donated $48 million to GMU between 2011 and 2014. Charles Koch himself serves on the board of the Mercatus Center. It is a legitimate matter of public inquiry to know what strings might be attached to Koch’s donations. Of course, the same holds true not just with Koch but any and all mega-donors to the university, including industrialists pursuing business interests and philanthropists backing liberal and progressive causes.

GMU officials argue otherwise, according to Fourth Estate, GMU’s student-run news outlet.

“Philanthropy is a critical aspect of George Mason’s success, especially in a time when public universities are receiving fewer funds from the Commonwealth,” GMU spokesman Michael Sandler told the publication by email. “We are grateful to the thousands of donors who give to Mason for a variety of reasons. Some of these donors wish to make their gifts public. Some wish to remain anonymous, which is their right and something the university and the Foundation have a responsibility to respect.”

Privacy is a serious matter worthy of debate. But that wasn’t the logic given in GMU’s response to Transparent GMU’s FOIA request.

In a Jan. 9, 2017, FOIA filing, Transparent GMU sought any records, including grants, cooperative agreements, gift agreements, contracts or memoranda of understanding, related to to contributions that Koch-related entities made to the university. On Jan. 12, Elizabeth Woodley, FOIA compliance officer, replied that GMU was not in possession of such records.

Transparent GMU then asked if the George Mason University Foundation would provide the records. GMU refused to turn over any foundation records on the grounds that it was a separate, private, 401(c)3 charitable organization not subject to FOIA. Citing a fee it enacts on gifts its accepts on GMU’s behalf and its close working relationship with the GMU administration, the lawsuit argues that the foundation is a “component unit” of the university.

The lawsuit is much bigger than GMU and the Koch brothers. Conservatives and libertarians might be inclined for reasons of partisanship to side with GMU in this instance in order to shield Charles Koch and the Mercatus Center from scrutiny. That would be short-sighted, in my view. If there are terms and conditions, then Koch and Mercatus should be willing to defend them.

The internal workings of public research are a black box. GMU alone has dozens of centers and institutes. Last year, I blogged extensively about inadequate oversight of GMU’s Institute for Global Environment and Society, some of whose principals engaged in double dipping. More recently, I have tried to probe the link between the pursuit of research dollars and higher tuition at public Virginia universities generally. We need to crack open university finances. We need to understand the forces at work influencing the affordability and academic integrity of higher ed. Conservatives and libertarians have much more to gain than lose from a court ruling subjecting donor agreements to the reach of FOIA.

Government’s War on the Poor: Parent Plus Edition

Rebecca McEvoy, Parent Plus borrower and likely victim of unintended consequences.

Rebecca McEvoy, Parent Plus borrower and likely victim of unintended consequences. Photo credit: Wall Street Journal.

Rebecca McEvoy, a retired school teacher coping with multiple sclerosis, borrowed $84,000 under the federal Parent Plus program to help her oldest son through art and design school. When he graduated, the government expunged the debt under a law that forgives balances for borrowers deemed permanently disabled. Three years later, she and her husband Dave, also a retired teacher, turned to Parent Plus again. The couple expects to borrow another $50,000 to cover costs for a second son, as Josh Mitchell with the Wall Street Journal tells the story.

The McEvoys’ finances likely would have raised red flags with private lenders, Mitchell dryly notes. They live off modest pensions, and existing debts eat up much of their income. Odds are, they won’t be able to meet their payment obligations for the second round of student debt any more than they could the first.

As of September 2015, more than 330,000 people, or 11% of borrowers, had gone at least a year without making a payment on a Parent Plus loan. The student loan debt crisis is engulfing not only students but many parents. An estimated 41,000 Parent Plus borrowers had their checks garnished in FY 2015.

“This credit is being extended on terms that specifically, willfully ignore their ability to repay,” said Toby Merrill with the Harvard Law School’s Legal Services Center. “You can’t avoid that we’re targeting high-cost, high-dollar-amount loans to people who we know can’t afford to repay them.”

Parent Plus defaults began rising during the Great Recession. By 2011, Obama administration officials recognized that they had a problem and put tighter restrictions into place. Writes the WSJ:

But after schools argued stiffer underwriting would prevent many students from covering tuition, thus reducing college access for minorities and poor students, the administration rolled back the new rules. Research shows that restricting access to loans based on credit scores leads to lower college enrollment.

The Government Accounting Organization (GAO) estimates that taxpayers ultimately will forgive $108 billion on student loans made through the current fiscal year, says the WSJ. Colleges are the only winners here. Federal loans allow them to jack up tuition, but they suffer no adverse consequences when students or parents cannot repay the debt.

Bacon’s bottom line: Thus has the student loan program, created with the best of intentions, been corrupted: simultaneously saddling taxpayers with the cost of a massively expensive entitlement and burdening students and parents alike with billions of dollars in loans they can never repay. That’s quite a two-fer. Two… Two… Two massively destructive unintended consequences in one!

It hasn’t always been this way. Once upon a time, student loans weren’t dogged by subprime mortgage-scale bad debt. The problem arose when Uncle Sam began treating student loans as an entitlement for anyone who wanted to attend college. Refusing loans to students with no credit rating and/or parents with poor credit ratings constituted “discrimination” against the poor and minorities. Once you play the discrimination card, the debate is over.

The unintended consequence, of course, is that when poor and minority students and parents load up with debt they cannot repay, they suffer disproportionately — even when billions of dollars in bad debt are written off. Except in rare instances like Ms. McEvoy’s, student loan debt cannot be dispelled. Uncle Sam extracts its pound of flesh by garnishing wages and social security. Families living on the edge of poverty are pushed into poverty; families living in poverty are pushed into destitution.

All for what? A significant number of poor students make it through college, obtain degrees, and get good jobs that allow them to service their debt. But millions don’t. Federal law limits undergraduate federal loans to $27,000 over four years. Even when parents step in by borrowing under the Parents Plus plan, many poor students lack the resources to graduate. (The problem may be compounded by a lack of academic preparation — student loan programs apparently don’t take that into account either.) Meanwhile, millions of well-paying, semi-skilled jobs go unfilled. Washington could not have better designed a system to crush the poor if it tried.