Category Archives: Uncategorized

Economic Development “Reset” Needed in Virginia

John O. "Dubby" Wynne wants to overhaul Virginia's outmoded approach to economic development.

John O. “Dubby” Wynne wants to overhaul Virginia’s outmoded approach to economic development. Photo credit: Pilotonline

It’s time for a “fundamental reset” for the way Virginia’s colleges and universities think about economic development, John O. “Dubby” Wynne told the State Council of Higher Education for Virginia (SCHEV) board yesterday. Wynne, former CEO of Norfolk-based Landmark Communications, is a driving force behind the Virginia Go initiative.

“For the first time in decades, Virginia’s economy is not doing very well,” said Wynne. The problem runs deeper than federal budget sequestration’s hit to military spending or managerial issues at the Virginia Economic Development Partnership. Virginia needs to address major structural problems, he said.

One of those problems is the mismatch between jobs and skills in the state. Wynne quoted a figure widely used by Governor Terry McAuliffe, that 150,000 jobs in the IT sector alone are going unfilled; tens of thousands of those are in the cyber-security field. With skills shortages of that magnitude, it won’t be easy recruiting outside corporate investment, Virginia’s traditional economic development strength.

“If outside people see that you can’t take care of your existing businesses,” said Wynne, “the chances of them coming here are small.”

Since retiring from Landmark, Wynne has immersed himself in state and regional economic-development efforts. He serves as vice chairman on the state-appointed Council on Virginia’s Future and is a member of the Virginia Business Higher Education Council. He worked with Dominion CEO Tom Farrell to create the Go Virginia initiative, which has received state dollars this year to spur regional and public-private collaboration to spark economic growth.

Virginia needs to produce people who can participate in the knowledge economy, and the state’s higher ed system is critical to making that happen, Wynne said. It’s an open question, though, how well the state’s colleges and universities can make economic development part of their mission. There are so many stakeholders with a voice, he said, that “it’s very hard to get movement with any kind of market speed.” Higher ed needs “to get a serious discussion going to say that it’s OK to be involved in economic development.”

Aside from workforce development, Wynne cited two strategies for Virginia higher ed to pursue. One is to do a better job of getting intellectual property out of the labs and into the market. Other states have found ways to do this; so should Virginia. He would like to see more incubators and accelerators in university communities.

The other strategy is to identify industry clusters where Virginia has particular strengths and to help create a workforce with the skills those clusters need. Collaboration is the key. As an example, he cited a 40-firm cyber-security cluster in Hampton Roads. Local educational institutions need to develop “a new model” — possibly including more “self-paced” courses — in which local industry is much more involved. Already, three cities in the region are collaborating with a regional community foundation to raise money to build the cluster. Said Wynne: “Companies will move to places helping them grow.”

“If you put all your money in the present and none in the future,” he concluded, “you won’t have a future.”

The Self-Employed as a Political Constituency

Will 3-D printers swell the ranks of self-employed manufacturers?

Will 3-D printers swell the ranks of self-employed manufacturers? Image credit: CNN

The maker movement is transforming the American economic landscape. The number of people who make a self-employed living making stuff is still small — almost imperceptible in a U.S. labor market of 160 million — but it is growing.

In 2014 more than 350,000 manufacturing establishments in the U.S. had no employee other than the owner, up almost 17% over ten years, according to Commerce Department data reported by the Wall Street Journal. By comparison, the 293,000 establishments with employees had experienced a 12% decline in number over the same period. Overall, there are roughly 12 million manufacturing jobs in the U.S.

The boom in self-employed manufacturing is most pronounced in the “food” category, but also notable in chemicals (including soaps and perfumes), transportation, leather, and beverages & tobacco.

I expect the movement to gain momentum as the revolt against mass, industrial-era standardization gives way to mass customization. Technologies such as Computer Aided Design and 3-D printers continue to gain in capability and come down in price, making them available to almost anyone. Many colleges have 3-D printers on campuses, and students are learning how to use them. Meanwhile, just as the Miller-Budweiser beer duopoly has given way to the craft beer revolution — the biggest advertising budgets in the country could not halt that consumer trend — we are seeing the revival of artisinal foods, beverages, and craft products.

The proliferation of self-employed, small-scale manufacturers is part of a larger trend toward the so-called “gig” economy. So far, the needs and aspirations of makers, hackers, craftsmen and free-lancers have gone mostly unrecognized by the political establishment. These self-employed workers are even more politically invisible than small business. They are unorganized politically. They don’t have trade associations, they don’t hire lobbyists, and they don’t donate money to politicians. Indeed, the only politician I can think of who takes them seriously is Sen. Mark Warner, D-Virginia. While the senator has performed a valuable service in highlighting the group and its unique needs, his interest in the topic does not appear to be widely shared, and he can cite few tangible accomplishments yet.

Making a living as a free-lance writer and blog publisher for the past 14 years, I feel a strong affinity for this group. In Virginia, there are hundreds of thousands of us. And as consumer tastes continue to shift from standardized products and services to personalized products and services — our numbers will grow.

We are the petite bourgeoisie. We are noted for our stubborn independence and our ornery attitude toward our “betters” who would tell us what to do. In my view (which, I concede, may not be universally shared), we don’t seek special treatment. We don’t want subsidies, tax breaks or special privileges. We just want a level playing field.

The most important legislative priority for self-employed workers is to gain more control over our health care insurance and retirement plans. Our health insurance should enjoy the same tax status as health plans provided by corporations and other major employers. Our pension vehicles should be portable as we move back and forth between conventional employment and self employment. Oh, and it wouldn’t hurt to keep a lid on taxes.

As I scan the political economy of Virginia, I don’t see anyone (other than Warner) representing the interests of the self-employed. Neither Democrats nor Republicans, beholden as they are to established corporate and bureaucratic interests, provide a natural home for us.

The Libertarian Party could become that home if it moved beyond articulating abstract principles to applying those principles to real-world problems. Indeed, if the Libertarian Party has a natural constituency, it would be the free-lancers and small businesses whose interests are routinely subordinated to those of better organized, more vocal groups who turn to the government for everything. As Libertarians run for office, they would do well to cultivate the large and growing ranks of the self-employed.

Food Pantries, the Latest College Craze

An increasing number of college food pantries in Virginia provide emergency rations to hungry students. Photo credit: VCU's Rampa

An increasing number of college food pantries in Virginia provide emergency rations to hungry students. Photo credit: VCU’s Rampantry

There’s a new wrinkle on the college affordability crisis. Some students are so strapped for cash that colleges are setting up food pantries. As CNN reports, membership in the College and University Food Bank Alliance has quadrupled in the past two years to 398 members.

“Even if you don’t hear about hunger being a problem, there’s probably a population on campus in need,” said Megan Breitenbach, a student who volunteers at the pantry at Montclair State in New Jersey.

Food Bank Alliance members include these Virginia institutions:

Virginia Commonwealth University. The mission of Ram Pantry is to “to provide VCU students with healthy, culturally appropriate, emergency food.” Due to limited resources, the website says, the pantry can no longer service VCU faculty and staff!

Virginia Tech. Tech won reknown for its No. 1 ranking in the “best food” category of “The Princeton Review’s” 2015 best colleges review. But in December 2015, according to the Roanoke Times, the food pantry was serving 50 to 75 students per week.

Old Dominion University. ODU launched Ignite Pantry in October.

Northern Virginia Community College and Eastern Shore Community College also operate food pantries.

Bacon’s bottom line: In their never-ending quest to recruit more elite student bodies, Virginia colleges and universities are placing more emphasis on the kind of food that kids from affluent families are accustomed to. Virginia Tech is a case in point. As I blogged last month when discussing the rising cost of food services at the University of Virginia:

Upgrading from the crappy cafeteria food I ate back in the 1970s to trendy, locally sourced food is expensive, and the lower-income and middle-class students whose families live on McDonalds or Olive Garden budgets are hard-pressed to pay for it.

Little did I realize that the situation was so bad that colleges and universities were setting up food pantries!

With every passing day, it seems increasingly evident that colleges and universities in Virginia (and across the nation) are engines of exploitation, running up the cost of attendance (tuition, fees, room, board), encouraging indebtedness, and sending their graduates into the workforce deeply in hoc — all to acquire the resources to boost institutional prestige in a never-ending race with other institutions doing the same thing. Starving students are the latest symptom of a system that is terribly broken.

Thoughts on Donald J Trump

HOLLYWOOD, CA - JANUARY 16: Donald Trump was honored with a star on the Hollywood Walk of Fame on January 16, 2007 in Hollywood, California. (Photo by Vince Bucci/Getty Images)

HOLLYWOOD, CA – JANUARY 16: Donald Trump was honored with a star on the Hollywood Walk of Fame on January 16, 2007 in Hollywood, California. (Photo by Vince Bucci/Getty Images)

From one Donald J to another.  Donald Trump will be the next president of the United States.  He won less by his own virtue than by the lack of virtue ascribed to the political elite by millions of voters.  For many Donald Trump represented a break from the kind of political orthodoxy exemplified by his Democratic opponent, Hillary Clinton.  This blog’s main author finds him “loathsome”.  The political establishment and its chattering class enablers hate Trump.  Trump has been pilloried on blogs from BearingDrift to Blue Virginia.  I am cautiously optimistic regarding “The Donald’s” election.  Anybody who can send the political establishment, on both sides of the aisle, into a mental tailspin deserves some respect.  Lord knows, that establishment needed a comeuppance. Is he crude and crass?  Yes.  So was Lyndon Johnson.  Does he have some deep seated personality flaws?  Yes.  So did John F Kennedy and Bill Clinton.  Will he be a good president?  Well now, that’s the question.

How to start fast.  If I were advising President-elect Trump I’d have one big thought on how he should get started as the leader of the free world … get the money out of American politics.  Trump’s appeal is that of a renegade.  He’s the antithesis of the Clintons, the Bushes and all the other latter day American monarchies.  Over his first two years in office he’ll have the rare opportunity to drive a stake through the heart of our crony capitalist political class.  Donald Trump  should aggressively campaign for a constitutional amendment to drastically limit the amount of money any person or group can spend in the furtherance of their political agenda.  From George Soros to the Koch Brothers – this has to end.

In his own words.  Donald Trump has been surprisingly candid regarding the influence money has on American politics.

  • In reference to Jeb Bush … “He [Bush] raises $100 million, so what does $100 million mean? $100 million means he’s doing favors for so many people, it means lobbyists, it means special interests, it means donors,” Trump said in New Hampshire last month. “Who knows it better than me? I give to everybody. They do whatever I want. It’s true.”
  • In reference to the Koch Brothers (via Twitter) … “I wish good luck to all of the Republican candidates that traveled to California to beg for money etc. from the Koch Brothers. Puppets?” Donald J. Trump (@realDonaldTrump)”

Dog catches car.  Donald Trump tried to become president in 2012.  His campaign went nowhere.  In 2016 a series of unlikely events has “The Donald” headed to the White House.  Will he view the presidency as the next installment of his reality TV career or will he capitalize on his outsider mystique to build a legacy?  President-elect Trump joins the vast majority of Americans in believing that money plays too big a factor in US politics.  The political elite (from both parties) hate the idea of seeing the money fountain dry up.  There is no practical remedy in legislation based on the Citizens United ruling.  A constitutional amendment is the only way forward.  This would be a rarefied long shot battle against powerful vested interests.  Who better than Trump?

— DJ Rippert

The 5,000-Year Sovereign Debt Bubble

maelstromby James A. Bacon

Every financial bubble has its own unique characteristics. The late-1980s Savings & Loan Bubble was restricted mainly to anachronistic savings & loans institutions. The Internet bubble was limited mainly to tech stocks. The real estate bubble was tied mainly to mortgage finance. The common thread is that in each case, the powers that be convinced themselves that “this time it’s different” — and ridiculed the warnings of the doom sayers. Now we find ourselves in the midst of the sovereign debt bubble, the largest financial bubble in human history, and the story is the same. The experts tell us that everything is just fine and lampoon the critics as cranks and gold bugs.

This bubble is not limited to the United States. Indeed, other economies such as Japan, China and the European Union have been pushing the experiment of covering massive debts with massive credit creation even more aggressively than our own Federal Reserve Bank. But when the bubble bursts and the dominoes start toppling, they’ll eventually reach the United States. In a global economy, everyone is connected to everyone else in ways that are not always visible to policy makers.

In a Wall Street Journal op-ed today, James Freeman notes that there is no evidence in 5,000 years of recorded history of negative interest rates. Such rates are an innovation of modern central banks, and they take the world into uncharted territory. Writes Freeman:

However it ends, the deflating of the sovereign debt bubble may have us longing for the carefree days of the 2008 mortgage crisis. Internationally traded bonds amount to nearly $60 trillion, according to the Institute of International Finance. That’s about six times the mortgage debt outstanding for American homeowners. But those sovereign bonds are a mere fraction of the liabilities carried by the world’s governments. If you count political promises to support retirees, patients and others, the obligations are hundreds of trillions of dollars higher. …

The sovereign debt boom certainly has its share of liar loans. European countries routinely violate pledges to limit larger budget deficits. As for documentation, has anyone found a thorough and comprehensible description of government accounting?

And then there’s China, arguably in a league all its own when it comes to financial opacity. I suspect China is one big Enron, kept afloat by unfounded confidence in its financial integrity. When that confidence starts eroding, watch out. The financial collapse will be spectacular, and China’s economy is big enough to send shock waves around the world.

It’s impossible to predict how the global debt bubble will play out. In the early stages, the U.S. actually might benefit as capital flees to safe havens. Insofar as the dollar is regarded as less un-safe than other currencies, U.S. Treasuries might stay strong. But the unwinding of the global sovereign debt bubble will be unpredictable, creating wreckage in ways that no one today can imagine. There will be secondary and tertiary effects as nation states pursue protectionist policies to blunt the damage.

Many readers are confident, no doubt, that the “experts” who didn’t foresee the real estate crisis know what they’re doing this time. And perhaps, after 5,000 years of recorded human history, we finally have perfected a fiscal-monetary perpetual motion machine that allows us to spend and borrow without negative consequence.

If you don’t believe that fairy tale, however, the only sane course for Virginians is to pursue is a contrarian policy of eschewing debt, building reserves and strengthening the balance sheets of governments and public institutions in preparation for the travails to come. That’s why I obsess over the Virginia Retirement System pension crisis, the Petersburg fiscal meltdown, the decaying finances of other small jurisdictions, the unsustainable increase in college costs and the exposure of higher-ed institutions to declining enrollments, land use policies that drive up the costs of utilities and public services, the overbuilding of transportation infrastructure that governments cannot afford to properly maintain, and the mal-investment of public dollars in futile economic development projects. We are part of the global problem. I don’t want Virginia to be part of the global calamity.

Three City Council Seats, Only One Candidate

Vacant store fronts in downtown Manassas Park.

Vacant store fronts in downtown Manassas Park. (Photo credit: Washington Post)

The City of Manassas Park in Northern Virginia has three open City Council seats this fall — but only one candidate will be on the ballot.  The situation is a stark example, suggests the Washington Post, of the apathy that is growing more prevalent among America’s small cities and towns.

Who can blame Manassas Park citizens for not wanting to run? The city has huge challenges and serving on City Council is a big time commitment, but the job pays only $9,200 per year. The mayor makes $9,800.

The Washington Post describes the challenges this way:

In recent years, the city took on debt — about $120 million — building new schools and other government buildings in hopes of competing with nearby Prince William County and Manassas City for jobs and shopping attractions. So far, there hasn’t been much economic activity. A downtown business district sits mostly empty. …

Meanwhile, local schools are becoming more crowded with the children of families who have moved to Manassas Park in search of cheaper housing. Many are Latino immigrants working low-wage jobs.

With an annual debt payment of $9 million — about 12 percent of the total operating budget — local leaders are anxious about the possibility of cutting services or raising property taxes beyond the $3,947 per year on average that homeowners are already paying.

Few people, it seems, want to take on those headaches.

Heavy debt, eroding economic base, civic apathy and difficulty recruiting qualified candidates for public office is a recipe for decline. Council member Michael Carrera suggests reducing the number of council seats from seven to five, which makes sense for a city of 15,000 people.

Better yet, the city should consider reincorporating with Prince William County and devolving into a town…. assuming Prince William would go along. Unfortunately, there’s no guarantee that Prince William would be willing to take on the city’s headaches and liabilities.

How to Cut UVa Tuition 74% without Really Trying

Helen Dragas

Helen Dragas

by James A. Bacon

Helen Dragas, former rector of the University of Virginia, tried yesterday in op-eds published in the Roanoke Times and Daily Progress to jump-start a conversation about how to dispose of roughly $100 million a year income from a $2.3 billion “Strategic Investment Fund” cobbled together from various sources.

That conversation never occurred in the full Board of Visitors because, Dragas charged, university officials had shepherded a series of actions creating the fund without completely explaining its real purpose. Only after the fact did she come to understand that the estimated $100 million a year was to be used primarily to hire faculty, build labs, promote research and otherwise advance the prestige and reputation of the university — and that was in her last few days as a board member. And when the full board was invited to discuss the university’s plans for the money, it was in a closed meeting the legality of which Dragas has questioned.

Here are proposals that Dragas outlined in her op-eds:

  • Roll back tuition by 74% for in-state students, saving about $5,500 a year of $22,000 for a four-year degree. That would still leave between $40 million and $100 million a year to dedicated to university advancement.
  • Freeze tuition for five years by cutting non-classroom spending.
  • Reduce the $67 million a year spend on financial awards to out-of-state students. With 21,000 applications for 1,200 out-of-state, first-year spots, subsidies are unnecessary.
  • Cut administrative salaries. University staff is overloaded with highly paid administrators. One assistant to a secretary earns roughly $115,000 a year (equivalent to nine student tuitions).
  • Control construction costs. “Excessive costs of almost $1,000 per square foot for a medical center waiting room and $425 per square foot for a maintenance building help explain why cash flow from depreciation has fed the surpluses over time.”
  • Rationalize fund-raising efforts. The university has more than 20 related foundations whose combined activities reportedly cost it more than three times the national non-profit average per dollar raised.

Finally, Dragas proposes:

Virginians interested in mission-centered, efficiently run state institutions should engage a team of the brightest MBA candidates to audit the university’s spending. These objective young minds would earn a stipend, gain valuable experience, and play a meaningful role in keeping UVa excellence affordable for the next several generations.”

Oh, and by the way, the work of the student audit teams would be completely transparent. “That way, board members, administrators, other students and taxpayers could all benefit from their insights and example.”

Richmond Outsources Alternative School to Private Firm

Richmond Alternative School

Richmond Alternative School

by James A. Bacon

Maybe there’s hope for the Richmond city school system after all. The School Board has approved a contract to outsource the education of students with disciplinary issues to a private company, Camelot Education.

Under the contract, Camelot will take over operation of the Richmond Alternative school, which serves students who have been pulled out of their home school because they are too disruptive, reports the Richmond Times-Dispatch.

The contract should be a good deal for taxpayers. The city will pay Camelot $1.8 million for the upcoming school year, supplemented by $800,000 for city support staff. That’s less than the $2.9 million the city had budgeted to operate Richmond Alternative.

More importantly, school officials hope that Camelot will do a better job of educating the problem students. Test scores at the school have been stagnant or dropped in the past three years, and the number of dropouts showed a “significant uptick.”

Explained Michelle Boyd, assistant superintendent of exceptional education and student services:

Camelot will staff the school with people licensed in specific content areas, who are trained in behavior modification and de-escalation techniques and who are experienced at working in nontraditional environments.

Key to Camelot’s success, most notably in the Philadelphia school system, is the emphasis on creating a of norms geared to students with disciplinary issues. These behavioral expectations, sustained by peer pressure among staff and students, include:

  • No one has the right to hurt another person.
  • Education and the classroom are sacred.
  • Never behave in any way that will discredit yourselves, your family, your peers, or your school.
  • Take pride in your school.
  • A Camelot student is always a lady or gentleman.

What worked in Philadelphia may or may not work in Richmond. But surely that is a risk worth taking. The existing system was not working. If the Camelot contract was structured properly, it will set clear performance metrics — reduced absenteeism, higher graduation rates, etc. — for the organization to achieve. If Camelot succeeds, then everybody wins. If it falls short, then Richmond can always find another vendor or put its own team back in place.

The House that Bacon Built

Photo credit: Virginian-Pilot

Photo credit: Virginian-Pilot

The Gwaltney mansion in Smithfield, built by pork and bacon magnate P.D. Gwaltney Jr., is up for auction after staying within the family for 115 years. The building has been on sale on and off for several years. Latest asking price: $940,000. The Virginian-Pilot has the story here.

RVA Snapshot: Nice Vision, but the Devil’s in the Details

rva_snapshotby James A. Bacon

The Capital Region Collaborative, a not-for-profit dedicated to building a more livable, prosperous Richmond region, has just published RVA Snapshot, a set of metrics that compares Richmond to six peer metros of comparable size. The accompanying commentary summarizes the conventional wisdom regarding the region’s strengths and weaknesses, and articulates a “shared vision” for the future.

I find the aspirations particularly interesting, as they express the values of the business, political and civic leaders who influence how the region allocates resources to advance the public good.

Education: The region ensures that every child graduates from high school college or career ready.

Job creation: The region enjoys a diverse economy that is competitive in the global marketplace and provides job opportunities for all.

Workforce preparation: The region aligns workforce skills to employer needs.

Social stability: The region embraces our social diversity as a strong community asset and supports a community where all residents have the opportunity to succeed.

Healthy community: The region transforms into a metro area known for an active lifestyle.

Coordinated transportation: The region maintains its status as one of the most uncongested transportation networks in the country while supporting all modes of transportation.

James River: The region will make the James River a centerpiece for entertainment, recreation, and commerce.

Quality of place: The region is the most appealing and attractive destination for arts, culture and entertainment on the East Coast.

By necessity, these aspirations are watered down to appeal to a broad cross section of the population. It’s hard even for a curmudgeon like me to take exception to any of them. The tricky part is figuring out which tangible actions will advance these goals. And that often boils down to political philosophy — what role should government play? To what extent does the community achieve its goals by taxing, spending and regulating, and to what extent does it rely upon voluntary, bottom-up initiatives?

Needless to say, I favor voluntary, bottom-up initiatives. For example, the Capital Area Farmer Markets Association is creating a food guide listing all restaurants, farms, grocers, markets and other businesses where consumers can purchase local food. I doubt I’ll go out of my way to patronize these establishments, but if other people do, that’s great! I’m all for increasing consumer choices.

I’m less excited by the uncritical emphasis on public transit, which the document kinda, sorta endorses by noting that the Richmond region is 8th lowest ranked among its peers with regard to transit coverage and job access. That may be true, and creating affordable transportation options for the public may be desirable, but expanding mass transit is not a win-win proposition, it’s a win-lose. Money is involuntarily transferred from one group of people (taxpayers) to another group of people (transit riders), usually with little regard to economic efficiency or emerging transportation alternatives.

Regardless, all the right-thinking people in Richmond are lining up behind Richmond’s proposed bus rapid transit system. I have yet to see a discussion of appropriate land uses along the bus corridor or streetscape improvements needed to make the corridor more hospitable for passengers walking from the stations to their destination. Nor has anyone considered how the Uber revolution might be extended to privately operated vans and buses as a way to provide affordable transportation access to the poor. Having dealt with none of these issues, the City of Richmond will incur a long-term obligation to continue operating a money-losing service.

Which brings me to my final point: RVA Snapshot gives no consideration to the long-term fiscal health of local governments in the region. Apparently, is it assumed that AAA and AA bond ratings are a birthright that require no special attention. Trouble is, local governments are hard-pressed to maintain the services at current tax rates without expanding their commitments and setting themselves up for future failure. Sound finances are the bedrock of any community’s long-term prosperity. I would add the following aspiration:

Fiscal health: The region embraces sound fiscal practices that support the ability of local governments to maintain competitive tax rates and pursue excellence in core functions over the long run.