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Sinking
Expectations
Mark
Warner may still have the vision thing. But shorn
of resources, his new strategic plan for
economic development sets modest goals.
When
Mark R. Warner campaigned for governor, he generated
tremendous enthusiasm in the business and economic
development communities as someone who really “got
it.” He wasn’t some attorney or career
politician – he was a venture capitalist from Northern
Virginia.
He’d participated in the making of the NoVa
economic miracle, and he’d helped set up venture
capital funds around the state. He would apply his
knowledge and experience, he declared, to bring
about economic transformation in the rest
of the
state. Clearly, it was a task that he relished
taking on.
But
the intoxicating hopes quickly evaporated.
Immediately upon taking office, Warner confronted
Virginia’s
worst fiscal crisis in decades. As the
financial
picture deteriorated throughout 2002, he was forced
to order round after round of budget cuts. Instead
of devoting himself to the transformation of the
economy, the governor found himself focusing on the
restructuring of government institutions.
It
is against this background that one must appraise
the publication of Virginia’s
strategic economic development plan. As Michael J. Schewel, secretary of commerce and trade, explained
when unveiling the document last week, the authors
of “One Virginia, One Future” had to take harsh
fiscal reality into account. Roughly half the state
budget – top priorities such as K-12 education and
public safety – is untouchable. That means
discretionary programs, including those in his
secretariat, must absorb twice their proportional
share of cuts.
Schewel,
the lead architect of “One Virginia, One
Future,” had the unenviable task of preparing a
plan for Virginia’s
economic future while simultaneously performing
triage on the agencies in his portfolio, deciding
which programs to save and which to extinguish. It
is understandable, perhaps, that the plan suffers
from diminished expectations. There is, quite
simply, no money to launch any new programs. Indeed,
far
from offering a breakthrough strategy -- the hoped-for
blueprint for migrating the Old Dominion to the new
economy -- “One Virginia, One Future” can be
seen largely as a fine tuning of economic
development policy inherited from the Gilmore
administration.
The
strategic plan is an inscrutable document. Organized
around seven broad goals recycled from Gilmore's
plan – improve
Virginia’s business climate, strengthen traditional industries,
nurture new industries, etc. – it lists in
bullet-point form 62 strategies for achieving those
goals. Some strategies are vague, bordering on
platitudes: “Create and sustain a quality of life
attractive to globally competitive businesses and
workers.” Others reflect ideas that the Warner
administration will undertake should resources ever
become available, such as, “Implement a new
incentive program to attract corporate
headquarters.”
The plan offers only hints, however, of which
strategies will be relegated to the Warner
administration's wish list, and which will be
designated for action.
Fortunately, I had the
opportunity to sit down with Mike Schewel, who
walked me
through the document and outlined the administration’s top
priorities for follow up.
Here's
what I took away from that conversation as the most noteworthy
initiatives the Warner administration intends to
take immediate action on:
The
common thread: The impact of these initiatives will
be felt mainly in rural areas. As Schewel
explains, "In my experience there is nothing
[the governor] feels a more personal commitment to
than dealing with the economic issues of rural
Virginia and the distressed parts of Southside and
Southwest Virginia."
The
underlying premise of “One Virginia, One
Future,” says Schewel, is that human capital is
the building block of economic development in the
Knowledge Economy. To attract corporate investment, Virginia
must equip its citizens with the education and
skills needed to compete in a global marketplace.
In
a burst of candor during the roll-out of the
strategic plan, Schewel told more 400 assembled
economic developers, government officials and
business leaders that, in essence, they needed to
stop believing their own propaganda. “We’re
always bragging about our workforce,” he told a
hushed crowd. Everybody talks about the great
“work ethic” and skills of the people in their
communities, but the claims often are not true,
especially in inner cities and rural regions. Virginia
needs to face
the reality that a high percentage of the state's
population has never completed high school.
The
Warner administration is making human capital a top
priority across the state budget, not just in the
economic development plan. Warner has labored to spare education, especially
K-12, the pain of budget cuts.
Furthermore, one of the administration’s most
concrete economic development goals is to slash by half the number of
adults (25 or older) who lack a college degree –
roughly 30 percent of the adult population of
Southside and
Southwest Virginia
-- within the next 10 years. “If you don’t go
after that nut,” says Schewel, “you’ll be
leaving a large group of the population behind.”
The
administration also is committed to revamping an estimated $275 million in
state, local and federal expenditures on workforce
training around the state. As “One Virginia, One
Future” notes, the system “lacks coordination
and focus.” Twenty-two programs are administered
by 10 agencies in three different secretariats.
Gov.
Jim Gilmore had targeted the same redundancy and
overlap, even appointing Schewel’s predecessor,
Barry DuVal, as the workforce development
“czar.” The Gilmore team did manage to translate
the mandates of the federal Workforce Investment Act
into a statewide structure of local workforce boards
but fell short of its original, ambitious goals. The
Warner administration, starting fresh and drawing upon successes and failures of local workforce
experiments over the past couple of years, may be
able to move the ball farther down the field.
The
strategic plan envisions an “integrated,
seamless” training system that provides a single
point of entry for employers and workers. It also proposes improving the performance of the regional
workforce boards by having them prepare annual,
demand-driven workforce plans. The emphasis is on demand
driven. The idea is to ensure that workers are
getting skills that existing and future industry
actually need.
Schewel
sees the broadband initiative as closely related.
The goal is to make Virginia
the state with the highest percentage of the
population served by affordable, broadband hook-ups.
Most people see broadband as essential
infrastructure for attracting industry, Schewel
says. But he also sees ubiquitous broadband access
as a way to build human capital: “Access to
information is crucial in today’s world.” And
that, in turn, will prove attractive to industry.
“Wouldn’t it be a good thing to say that we’re
the most connected state in
America?”
The
secretary also sees broadband as a stimulus to
entrepreneurial activity. “You want to create a
system that’s affordable enough that people can be
producers on the system, not just consumers.” He
envisions small businesses from Accomack
County
to Lee
County
tapping into the global economy to produce and
transmit large volumes of data.
How
do we get there? “One Virginia, One Future”
advocates performing a statewide audit of local
broadband capacity – a job that is already
underway in the secretariat of technology -- and
convening a Governor-led meeting of Virginia
telecommunications executives to figure out what it
takes to stimulate private investment. The plan also suggests coordinating state
and federal resources, including incentives, to
encourage deployment of broadband capacity.
By
contrast, the strategic plan's emphasis on the
agriculture and forestry industries strikes me as
something of a curiosity. This sector has steadily
shrunk as a percentage of Virginia's economy, and
the state has few obvious competitive advantages.
Yet the Warner administration has set for
itself the remarkable goal of doubling agricultural
and forestry receipts over the next 10 years -- a
level of ambition seen nowhere else in the plan.
When I chatted with Schewel last week, he indicated
that he had just left a working group devoted to
figuring out how to meet the goal, so I can only
conclude that the administration is very serious
about carrying it out.
The strategic plan proposes two main
strategies: promoting agricultural exports and
shifting the focus of agricultural activity from
commodity products to value-added products. The
emphasis on value-added agriculture makes eminent
sense, as I argued in
this column several months ago, and can be
accomplished largely by reallocating existing
R&D resources at Virginia Tech. To
elevate the profile of the ag sector, the plan also
would create a Secretariat of Agriculture and
Forestry when funds become available.
The
strategic plan tinkers
with
Virginia’s
tourism policies, appointing a tourism professional
to run the state tourism program, sprucing up the
Interstate welcome centers and setting up a 24-hour,
toll-free hotline and website. But, in one of the
more intriguing new ideas in the document, a special
task force will develop new tourism product based on
unique rural features. According to Schewel,
the initiative would coordinate the activities
of state agencies like the departments of
conservation, inland fisheries, and others to
identify underutilized assets that can be packaged
as recreational or eco-tours, such as an official Virginia
birding
trail.
The idea, says Schewel, is to market to people
"who want to hike, fish, ride rafts" and
enjoy the outdoors.
Few
people would argue with putting workforce and
broadband at the top of the list of priorities. And
most observers of the Virginia economy would be
gracious enough to concede that rural Virginia
warrants special attention. But the plan is likely
to leave many veteran economic developers
unimpressed.
“One Virginia, One Future” pays little attention
either to the manufacturing sector or to the bedrock activity of the economic
development profession: recruiting out-of-state
investment.
The plan
specifically addresses air transportation, financial
services, maritime ports, military bases, homeland
security, the defense sector, agriculture, forestry,
biotech, venture capital, R&D, information
technology, telecommunications, tourism and foreign
trade, but it makes no explicit mention of
manufacturing or traditional industrial recruitment.
I
have argued in this column that Virginia
needs to
wean itself from its heavy recruiting of out-of-state
manufacturing investment, but even I was startled to
see the extent to which the strategic plan ignores
this traditional strategy.
Schewel
could contend, with some justification, that
extending broadband access, reforming workforce
services and promoting international trade all
create a favorable climate for the manufacturing
sector. He also could argue that the concerns of
economic developers are marbled throughout the plan.
For instance, the plan encourages localities
to cooperate in the construction
and marketing of regional industrial parks. It also adopts
new metrics for the allocation of Governor's
Opportunity Funds used to sweeten the pot for
industries contemplating an investment in Virginia.
Besides the traditional yardsticks -- dollars
invested, number of jobs created -- Schewel wants to
know if the new business pays higher-than-average
wages.
But
that may not satisfy Virginia’s
economic development professionals, who are rated on
their ability to assemble deals that generate jobs
and tax revenue and put local pols in ribbon-cutting
ceremonies. The
plan doesn't acknowledge their contribution or throw
them any bones. If Warner has trouble getting buy-in for
the plan, I predict, it will be because these well-connected
pros feel there’s little in it for them.
Likewise,
I anticipate a lukewarm reception from the
manufacturing sector. Although
Virginia manufacturers have taken a beating in
recent years, mainly reflecting the flight of
labor-intensive textile, apparel and furniture
operations overseas, the industry still employs
more than 10 percent of the workforce and includes
world-class, technology-intensive companies such as
Philip Morris, Dominion Semiconductor and Newport
News Shipbuilding.
The Virginia Manufacturers
Association hopes to revitalize manufacturing as a
high paying, high value-added industry in the Old
Dominion. The emphasis on reforming workforce
services, a major concern, will be welcome. But the
strategic plan may prove disappointing otherwise. By
failing to even give lip service to the vital role
of manufacturing, the Warner administration sends an
signal that it is writing off the industry as a
partner in Virginia's prosperity.
I
can't imagine that's the case. I suspect that the
authors of the strategic plan took it so utterly for
granted that manufacturing is central to Virginia's
economic development that, under deadline pressure
of writing the plan, they never noticed the
omission. Hopefully, the slight can be remedied
through some quiet diplomacy.
In
sum, "One Virginia, One Future" offers
incremental improvements over the previous
administration's strategic plan. If the Warner team
can carry out the priorities it has set for itself,
Virginia's economy will be better off for it. That
would be no mean accomplishment in light of one of
the worst budget crises since the Civil War.
--
December 9, 2002
"One
Virginia, One Future" covers a lot of ground.
It's impossible in a single column to do justice to
the broad scope of the proposals -- in particular, I
have omitted any discussion of the foreign-trade
strategies.
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