Virginia Needs a New Constitution, Part 1

by Donald J. Rippert

Carved in stone.  America’s elite and their lap dogs within our political structure know that larceny is best accomplished within a vacuum of change. If the “little people” in a democracy ever figure out that they can force the politicians to change the laws then the elite find crony capitalism far more difficult to practice. For example, big money in politics favors the elite (who have the money). It also favors their political puppets who know they are better able to remain “politicians for life” if raising gobs of money remains more important than solving problems. So, the question of the excessive influence of money in American politics is simply answered with two words, “Citizens United.”  The U.S. Supreme Court found it unconstitutional to restrict money in politics, ergo it can’t be done. But, of course, it can be done. The U.S. Constitution can be amended. Yet as Americans across the political spectrum vent their rage against the influence of George Soros and the Koch Brothers nothing is done. Why?

The Big Lie. America’s political insiders have convinced many of us that the U.S. Constitution is, effectively, inviolate. The right tells us that the Constitution is the product of divine inspiration written by human hands. The left relies on stasis and judicial manipulation of “the living Constitution” to let unelected judges perform the duties that our elected representatives stubbornly refuse to undertake. The net result of this conspiracy between America’s vested interests and its political class is a polarized nation where economic stagnation is the order of the day for an ever increasing percentage of its people. Yet no matter how fundamental our problems become, the case for fundamental change is blocked by a bizarre belief that the U.S. Constitution cannot be changed.

Erasing history. One of the more insipid approaches taken to ossify the U.S. Constitution is to rely on the ignorance of many Americans by insisting that the framers knew they had created a near perfect document and, therefore, made it very hard to change. The fact that the framers wrote the first ten amendments before the ink dried on the U.S. Constitution somehow doesn’t dispel this recounting of history. Thomas Jefferson provides an interesting perspective both from his vantage as a founding father and from the long life he led after the American Revolution. Jefferson had the chance to observe the Constitution’s effect on America for decades after its ratification. In a letter to Samuel Kercheval in 1816 Jefferson had this to say:

“But I know also, that laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as new discoveries are made, new truths disclosed, and manners and opinions change with the change of circumstances, institutions must advance also, and keep pace with the times. We might as well require a man to wear still the coat which fitted him when a boy, as civilized society to remain ever under the regimen of their barbarous ancestors.

And lastly, let us provide in our constitution for its revision at stated periods. What these periods should be, nature herself indicates.”

 Jefferson knew the Constitution was imperfect. After 26 years of seeing the U.S. Constitution in action he was contemplating the merits of scheduled revisions.

Sic Semper Tyrannosaurus. Virginia has a much different constitutional history than the United States. The State Constitution of Virginia has been rewritten six times since it was first ratified in 1776. Not amended, not revised, rewritten. Much of what has gone into those constitutions was the predictably disgraceful and prejudiced thinking emblematic of Virginia’s political class. However, Jefferson’s home state has proven that it is willing to avoid being trapped under “the regimen of their barbarous ancestors.”

But what of today?  Would Virginia’s current political class consider following the Old Dominion’s longstanding history of “out with the old and in with the new”? Thinking optimistically I suppose that would depend on whether there were enough good ideas to justify yet another rewrite. Thinking pessimistically, our state politicians are as corrupt as their peers in Washington and know full well that mandated unchanging power keeps their political lives long and their personal pockets full.

Just this once, I am going to think optimistically about our current state government.

The remainder of this series will examine why it is time that we throw out the present Virginia constitution in favor of a new one that keeps pace with the times and improves the lot of all of us governed under that constitution.

Yorktown Units Allowed to Operate on Emergency Basis

Existing power lines crossing the James River. Photo credit: Daily Press

U.S. Secretary of Energy Rick Perry has issued an order allowing the coal-fired Yorktown Units 1 and 2 to operate on a limited basis for three months this summer to prevent uncontrolled power disruptions in the North Hampton Roads area of Virginia. Dominion Energy had planned to shut down the two units to meet Environmental Protection Agency clean-air regulations. But PJM Interconnection, the regional transmission organization serving Virginia, requested the exemption in March.

“I hereby determine that an emergency exists in the Commonwealth of Virginia due to a shortage of electric energy, a shortage of facilities for the generation of electric energy, and other causes, and that issuance of this Order will meet the emergency and serve the public interest,” stated Perry in an order dated June 16.

The units will operate only as needed to reduce the risk of power outages until Dominion Energy’s 500 kV Skiffes Creek transmission line is completed. The units also can be used during transmission construction when existing lines will need to be taken out of service.

A week ago the U.S. Army Corps of Engineers gave a conditional go-ahead to Dominion to build a transmission line across the James River, eliminating the major regulatory barrier to the project. But the utility still needs to obtain permits from the Virginia Marine Resources Commission, a water quality certification from the Department of Environmental Quality, and a permit from the James City County Board of Supervisors for a switching station, reports the Williamsburg Yorktown Daily.

Meanwhile, construction is expected to take a year and a half, leaving the Virginia Peninsula vulnerable to rolling blackouts on days of peak demand in order to avoid an uncontrolled, cascading blackout that could spread way beyond the region.

Dominion had cited the threat of blackouts as justification for hurrying the permitting process, which has dragged on for years. After shutting down the two polluting Yorktown units this spring, the utility instituted a Remedial Action Scheme (RAS) that would immediately drop load to 150,000 customers in the event that  an uncontrolled blackout took place.

“The order provides authority to PJM and Dominion to run the [Yorktown] units only when needed to avoid loss of electric power in the North Hampton Roads area when certain power demand levels are reached,” says PJM spokesman Ray E. Dotter.

UVa Philanthropy Now Equals State Support

What would T.J. say?

The University of Virginia could reach a milestone this year: collecting more money from private donations than from the state.

At a Board of Visitors meeting earlier this month, Melody Bianchetto, UVa’s vice president for finance, told board members that a steady stream of philanthropic income is expected to provide more than $150 million in operating funds over the next years, reports Derek Quizon with the Daily Progress. That compares to the $150.5 million appropriated from the state General Fund to the University of Virginia this year.

Quizon asks an interesting question: If the trend of increasing reliance upon private over public support continues, what are the implications for how UVa is governed? Will the General Assembly lose leverage?

“You’re more responsive to the goals of the people who give you your revenue,” says Dustin Weeden, who analyzes higher-ed issues for the National Conference for State Legislators. “There are a whole host of concerns private donors have that are different from the goals of the state.”

Private donors tend to favor things like new facilities and research, which could benefit the state in other ways, but not necessarily in the way public universities traditionally benefit the state: with affordable undergraduate degrees for in-state students. “Public institutions can’t completely shrug it off,” Weeden said. “But I think they push for more autonomy and control over their own operations.”

Weatherford said UVa and William & Mary are experimenting with a new model — new for public universities in Virginia at any rate — that may allow them to keep costs low in the long run. They have the freedom to try this experiment because the state allows it, says Greg Weatherford, spokesman for the State Council of Higher Education for Virginia. “One of the best things about being in Virginia is they have the flexibility to try that,” he said.

Quizon also quotes me in the article, addressing the question of whether UVa might aim to become a private institution. Even if the shift to private philanthropy continues, I opined, I didn’t see the university seeking to transform itself into a private institution. “That impulse does exist — people would probably love to get rid of that General Assembly oversight and cut the strings — but at the end of the day, they want to be a state institution.”

Bacon’s bottom line: No question, passing the 50/50 milestone of philanthropic versus public funding has symbolic value, reminding everyone of the state’s diminished role in supporting the university. But that $150 million is still critical to the institution’s functioning. It could not be replaced by philanthropy in the short run, and it could not be easily replaced by raising tuition. The balance of power in the relationship between the university and the state doesn’t change. Unless UVa uses more of those philanthropic dollars to stabilize tuition, as opposed to building a grander, more prestigious institution of higher learning, they will rely upon state funding and legislators will continue to agitate against tuition hikes.

Charts of the Day: Job Polarization

Virginia employment change since 2008. Source: StatChat

The good news in the ongoing evolution of Virginia’s economy is that employment in high-paying occupations has increased since 2008. The bad news is that employment in low-paying occupations has risen as well while employment in middle-class occupations is shrinking.

Kathryn Crespin with the Demographics Research Group at the University of Virginia published these charts from Bureau of Labor Statistics data in the StatChat blog.

“Job polarization is certainly not unique to Virginia,” she writes, but the trend has been more noticeable here since 2008 than in the rest of the country. … Although there has been an uptick in middle-wage job growth in Virginia over the past few years, job polarization is a nationwide, long-term trend that has developed over the past few decades and shows no signs of resolution any time soon.”

Virginia employment change since 2008. Source: StatChat

Exploring the Dark Side of the Creative Class

Richard Florida, who gained renown 15 years ago with his book, “The Rise of the Creative Class,” is a progenitor of big ideas exploring the nexus of urbanism, innovation and prosperity, and he’s back with another book and another big idea. Having documented in previous works that a handful of “superstar cities” are sucking up the lion’s share of artistic, scientific, and entrepreneurial talent and creating a wildly disproportionate share of global wealth, he delves into the dark side of urban prosperity. The title of the new book lays out his thesis succinctly: “The New Urban Crisis: How Our Cities Are Increasing Inequality, Deepening Segregation, and Failing the Middle Class—and What We Can do About It.”

The “clustering” effect – capital, corporations and talent migrating to large metro regions with deep labor markets – creates a huge economic advantage for the world’s biggest metros, and an economic advantage for dense urban centers within those metros. As the creative class grows in wealth and power, there ensues a competition for prime urban space. Prosperous inhabitants bid up the price of housing, while NIMBYs inhibit the development of new units. Soaring housing prices drive out the working and middle classes, and push the poor into enclaves segregated by income, race, and education.

The result is “winner-take-all urbanism,” says Florida. “The talented and advantaged cluster and colonize a small, select group of superstar cities, leaving everybody and everywhere else behind.” This baleful trend, he describes as the “New Urban Crisis.”

As with all of Florida’s books, “The New Urban Crisis” has much to recommend it. Florida is very good at descriptive analysis – showing what is going on. It is impossible to finish this book without agreeing with his conclusion that a handful of highly innovative supercities are more prosperous than others, that the combination of increasing demand and constricted supply are increasing the cost of housing, and that housing soaring prices in these metros are displacing the poor and middle class. Florida will convince you that prosperous cities are becoming more unequal, not less, and that the pervasive pattern of the past half century – prosperous suburbs and decaying urban cores – is being replaced by a patchwork pattern of highly affluent neighborhoods intermixed with neighborhoods of concentrated poor in both urban cores and suburbs.

Florida is far less persuasive with his prescriptive analysis. As a political liberal, he agonizes over the growing inequality within metro areas, particularly the impact on poor African-Americans. Despite the promise of the book sub-title, he devotes little attention to how metros fail the middle class. Hispanics are strangely absent from the discussion. As for whites in rural/small town America, he evinces no concern whatsoever.

As a liberal, Florida remains sublimely confident that government is the solution to what ails the U.S. He is realistic enough to acknowledge that the New Deal/Great Society paradigm is getting long in the tooth, and that America needs to realign resources to reflect 21st-century realities. He also regards the thicket of NIMBY-empowering zoning regulations and building codes as a prime cause of rising housing prices and income segregation, and argues that they need to be scaled back. But whether he’s writing about the minimum wage, mass transit and inter-city rail, and the scourge of poverty, his confidence in the beneficent power of government never flags.

In previous books, Florida attributed the success of large metropolitan areas in large part to three factors – talent, technology and tolerance. By tolerance, he means acceptance of cultural and ethnic diversity: gays, bohemians, and racial, religious and cultural minorities. In a North American context, he is undoubtedly right: Open societies do foster creativity and innovation. (I’m not sure how well his paradigm applies to Singapore, Seoul, Tokyo or cities in ethnically homogeneous countries like Sweden and Finland, but that’s an issue for another time.)

He views Republicans as retrogrades, and regards the election of Donald Trump as an unmitigated disaster. “Summoning up the political will to face up to the New Urban Crisis will be no easy thing,” he says. “And it will be ever more difficult with Donald Trump as president and the Republicans in control of both houses of Congress.”

Yet he is strangely incurious about one of his own findings: The more politically liberal the city, the greater the inequality. At least he acknowledges the phenomenon, even if he explains it away:

Our most liberal cities number among the most unequal. …. Across the United States, inequality is not just a little higher, but substantially higher, in liberal areas than in more conservative ones. … My own analysis of all 350-plus US metros found wage inequality to be positively correlated with political liberalism and negatively associated with political conservatism.

Florida never entertains the possibility that liberalism causes poverty and inequality. “Of course, inequality is not a direct product of liberal political views,” he says. “Rather, liberalism and inequality are simply both attributes of large, dense, knowledge-based metros.”

An alternative narrative would suggest that inequality arises from the juxtaposition of massive wealth creation of new industries with tragi-comic ineptitude of big-city administrations, mostly Democratic and mostly liberal. “Blue” cities are more prone to over-spending and fiscal crises. (The situation in blue-state Illinois has deteriorated to the point, we read in the news today, that the PowerBall and MegaMillion lotteries are dropping the state as a client!) Blue cities have larger under-funded pension liabilities, their taxes are more punitive, their inner-city schools are worse, their murder rates are higher, and unemployment is more chronic – all of this despite the immense advantages conferred by the presence of greater wealth to tax.

A core argument of “The New Urban Crisis” is that high housing prices are driving inequality and income segregation. Florida alludes to the work of so-called market urbanists who argue that eliminating restrictive zoning and building codes will allow developers to build as needed. “They make an important point: zoning and building codes do need to be liberalized and modernized,” he concedes. “We can no longer allow NIMBYs and New Urban Luddites to stand in the way of the dense, clustered development our cities and our economy need.”

While deregulation will help by building more housing and increasing density, he adds, the high cost of land combined with the high cost of high-rise construction will limit new construction to expensive office towers and will not create affordable housing. As evidence, he points to Houston, one of the few large metros in the U.S. where developers “can build what and where they want.” While Houston housing is more affordable than New York’s, L.A.’s or San Francisco’s, he says, it is “rather expensive” compared to that of most other metros, and the metro ranks high in his inequality and segregation indices.

I’ve never found persuasive the argument persuasive the argument that building luxury towers instead of workforce housing leads to higher housing prices for the poor. If the super-rich occupy the luxury towers, they relinquish the slightly less luxurious/preferable accommodations where they once dwelled. The merely rich move in, in turn creating vacancies in their less opulent quarters, which in turn creates openings for the merely affluent, and so on down the line. Unless Latin industrialists and Russian oligarchs are buying up all the luxury tower units as a hedge, new luxury housing eventually exerts downward pressure on housing prices down the line.

Edward Banfield described the economic logic in his classic, “The Unheavenly City.” Writing in 1968 at the height of white flight and the original urban crisis, the urban sociologist foretold the trends that Florida describes in “The New Urban Crisis.”

If present trends continue, thee will not only be more people in the cities in the next two or three decades, but a higher proportion of them will be well-off. … In this very affluent society, housing probably will be discarded at an ever faster rate than now, and the demand for living space will probably be greater. In the future, then, the process of turnover is likely to give more and better housing bargains to the not well-off, encouraging them to move even farther outward and thus eventually emptying the central city and bringing “blight” to the suburbs that were new a decade or two ago.

Eventually land in the suburbs would be worth more than land in the central city, Banfield predicted. “When this time comes, the direction of metropolitan growth will reverse itself: the well-off will move from the suburbs to the cities, probably causing editorial writers to deplore the ‘flight to the central city’ and politicians to call for government programs to check it by redevelopment the suburbs.”

Lo and behold, 40 years later, Florida describes a “suburban crisis” of flight from cheap-to-build but expensive-to-maintain suburban sprawl back into the city. At least he avoids the trap of calling for government programs to redevelop the suburbs.

Banfield didn’t foresee everything – he did not predict the growing preference for walkable, mixed-use communities in denser settings. But he understood basic economics: As the wealthy migrate to the most luxurious housing, the poor migrate to the least desirable and cheapest housing. At this stage in urban evolution, that means the poor are moving into the aging, 50s- and 60s-era ranch-style tract houses of the inner suburbs that no one else wants. That’s the affordable housing that Florida yearns for, but he does not see it for what it is.

There’s nothing that liberals love more than a good social crisis – it gives them meaning in life. As much as I appreciate Florida’s previous work, I can’t get as exercised as he does about the New Urban Crisis.

The Biggest Screw-Up in the History of Bacon’s Rebellion

A monster apology to readers as well as to everyone in Virginia’s higher ed industry. I have screwed up with the publishing system of this blog, but never before on the scale and magnitude of the disaster that befell Bacon’s Rebellion this week. I have taken down all four articles in the four-part series on the 2005 Restructuring Act

It should be evident to everyone that some of the articles were incomplete. Even if they didn’t look incomplete, I had not fact-checked them or double-checked with key sources, as I had promised. What appeared on Bacon’s Rebellion was a rough working draft that I fully intended to modify as I incorporated feedback from sources.

Hoping to publish the articles this week while I was on vacation, I scheduled them for auto-posting, one per day. Last Friday, I concluded that the series was in no condition to publish. However, with everything going on in my family life, I neglected to amend the publication schedule. The articles auto-published one by one while I was gone. Because I had no Internet access, I did not realize what had happened until I arrived home today.

I will continue to conduct my fact- and quote checking — if anyone is still taking to me — and I will republish the articles when they are ready. When that will be, who knows? I got a three-day jury summons for next week. When it rains it pours.

RIP Sugar Bacon

After suffering a severe stroke, my stepmother, Marguerite “Sugar” Bacon, died two days ago at the age of 87. She and my dad had been married 60 years, and after my dad died two months ago, she missed him terribly. I don’t believe in heaven, but if I’m wrong, I’m pretty sure she’s with him now.

Sugar was a wonderful stepmother, and I have no memories of a life without her. I truly thought of her as my second mom.

She was a remarkable woman. Very traditional in her beliefs, she never worked a paying job. She thought a woman’s place was in the home. She also thought it was a woman’s place to say exactly what she thought… about any topic. Her marriage with my dad was a partnership of equals. She never understood what women needed to be “liberated” from. She ran the household, was active in the community, and rose to positions of leadership in the Garden Club. Asking little for herself, she always sought to be of service to others.

It’s been a tough 10 days, and I’ve had to put my blogging on the back burner. The blog will be quiet next week as well for a variety of personal reasons. But I’ll have a lot to say when I come back.

— JAB

Ed Gillespie: a Leader with Imaginative Ideas and Meaningful Solutions

William J. Howell

by William J. Howell

The June 13th Virginia Primary is quickly approaching and it is time to choose a Republican who can offer the kind of responsible, conservative solutions our Commonwealth needs and deserves.

Fortunately, we have a candidate in Ed Gillespie who is wholly committed to ideas and policies based on principles of limited, effective government. He will lead Virginia with humility and fortitude, and will work closely with the Republican-led General Assembly to govern.

I have known Ed and Cathy Gillespie for a more than a decade, and I have always been impressed. He was an aide to House Majority Leader Dick Armey, the primary author of the Contract with America, and served as a state and national party leader. He is well versed in policy details and is an authentic and genuine communicator.

But what impresses me the most today is his laser-like focus on policy. Never have I seen a candidate so focused on substantive issues and real solutions. To date, Ed has released four policy plans, including a plan to provide meaningful tax relief in a responsible way, a 15-point ethics plan to increase confidence in government, a real reform plan to make state government work better, and a path toward regulatory relief that will tear down barriers to entry for job creators. His imaginative ideas and pragmatic approach to government is what Virginia needs to get back on track.

Our economy struggled during the McAuliffe-Northam Administration. Our growth rate was stagnant at two percent or below for five straight years and Virginians from every walk of life took hits. We need a governor who will work with our General Assembly and act in a collaborative manner to enact change. Ed will do that, as is evident from the support he enjoys from over two-thirds of the Republican members of the House of Delegates and Senate of Virginia.

As I think back on my time as Speaker of the House of Delegates, I am reminded of the countless conversations I’ve enjoyed with hard-working Virginians about our great Commonwealth. There were good times and bad but through it all, the honor I felt in being given the opportunity to serve never diminished.

I also had the opportunity to watch and work with many gubernatorial candidates – some went on to be successful at the polls and at the Capitol, others saw different results. Few have impressed me in the way Ed Gillespie has in his run for governor this year. Ed is a man of character and ideas.

As we come upon the time of year in Virginia where it is time to make a choice about our candidates for governor, I encourage you to join me in voting for the man I am confident will lead with focus and in the same tradition of our most effective governors.

Ed often says he isn’t running to be something rather he is running to do something. He’s earned my vote and my confidence.

William J. Howell, R-Stafford, is Speaker of the House.

Fairfax Snags AWS Corporate Center, 1,500 Jobs

AWS data center in Ashburn. Photo credit: Atlantic

Governor Terry McAuliffe announced a major economic-development coup yesterday: Amazon Web Services (AWS) will locate its new East Coast corporate campus in Fairfax County, creating up to 1,500 jobs. AWS, which already operates several data centers in Northern Virginia and distribution centers downstate, will provide cloud computing services from the new campus.

“When one of the world’s most successful companies chooses to expand its footprint across Virginia, it is a testament to our talented workforce and business climate,” McAuliffe said in a press release. “Because it was a priority to win this transformational project, we partnered with Virginia’s Major Employment and Investment Project Approval Commission to ensure that AWS chose the Commonwealth. We have a longstanding relationship with Amazon and are proud that the company will continue to play a key role in building the new Virginia economy.”

Virginia competed successfully against Texas and Washington for the project.

Amazon employs nearly 7,000 Virginians. Between the AWS corporate center and a new distribution center in Frederick County, the Seattle-based technology giant will add more than 2,000 jobs over the next several years, said Secretary of Commerce and Trade Todd Haymore.

“The actual infrastructure at the heart of AWS’ infrastructure-as-a-service isn’t the thing that makes it important to developers; it’s the services and APIs built on top of that infrastructure,” wrote Ingrid Burrington in a 2016 Atlantic magazine article about AWS’s Northern Virginia operations.

AWS cloud services provide web hosting, application hosting, storage and backup, content delivery, and scalable database solutions, according to the press release. “AWS offers over 90 fully featured services for compute, storage, networking, database, analytics, application services, deployment, management, developer, mobile, Internet of Things (IoT), Artificial Intelligence (AI), security, hybrid, and enterprise applications.”

Bacon’s bottom line: AWS’s decision to locate in Fairfax County is good news. I take it for granted that the 1,500 technology jobs will pay well. As a bonus, these jobs represent a significant step toward the diversification of Northern Virginia’s economy away from direct federal employment, adding luster to the region’s status as the nation’s leading location for data centers. While the federal government will be a major customer, the corporate center will serve private and nonprofit clients, too.

A criticism of data centers is that they support few jobs. Well, the AWS campus will support a lot of jobs. This announcement is very good news, and none of what follows should diminish the accomplishment.

However….. I do have questions. AWS will be eligible to receive $7,000 in state incentives per net new job created, up to 1,500 jobs. That represents a state subsidy of up to $11,250,000 for the company with the fourth largest market capitalization in the world ($423 billion as of March 31, 2017).

The state “custom performance grant” will be triggered by Amazon hiring 600 employees. The Virginia Economic Development Partnership (VEDP) worked with the Major Employment and Investment Project Approval Commission to secure the project. McAuliffe approved the grant, which also must be approved by the General Assembly. Although the press release did no say so, Virginians can be reassured that the grant is contingent upon AWS creating the jobs it says it will.

But why is any subsidy necessary? The press release says that Virginia competed with Texas and Washington state for the project. Really? Virginia competed with Texas and Washington for an East Coast corporate center? The press release says that AWS will be providing services to businesses, government, and educational organizations.” The biggest government customer of all happens to be the federal government, the center of which is within spitting distance of Fairfax County. If you want to provide cloud services to Uncle Sam, you need a location in the Washington metropolitan area, not halfway across the country.

One of AWS’s services is GovCloud, designed to host sensitive data and regulated workloads. States the GovCloud website: “AWS GovCloud (US) is operated solely by employees who are vetted U.S. Citizens on U.S. soil, and root account holders of AWS accounts must confirm they are U.S. Persons before being granted access credentials to the region.”

The website does not mention GovCloud employees requiring security clearance, although I would find it difficult to imagine that they wouldn’t. Lending credence to my conjecture, AWS works closely with Corporate Office Properties Trust (COPT), a real estate investment trust that specializes in national security tenants.

“Amazon’s relationship with COPT may help reassure federal and local government agencies that the Amazon US East facilities meet their requirements,” wrote Rich Miller in Data Center Frontier in September 2016.

“Security is in COPT’s DNA,” the company says, noting its historic focus on security. That includes Anti-Terrorism/Force Protection (ATFP) compliance, with a controlled perimeter greater than 150 feet from the building, biometric access controls, man traps, video surveillance zones, and extensive experience building SCIF (Sensitive Compartmented Information Facility) space for government clients.

Given the emphasis on security for data-center infrastructure, it would seem likely that similar considerations would prevail at the Fairfax County corporate center where employees provide value-added services. Surely it would be easier for AWS to recruit employees with security clearances in Northern Virginia than either Washington, where GovCloud is currently located, or Texas.

I welcome Amazon as a corporate citizen of the Commonwealth. But I have a tough time swallowing a $11 million subsidy for a cloud-services project that logic dictates should be located (1) near federal agencies in Washington, D.C., and (2) in a mid-Atlantic location easily accessible to the entire east coast to serve other clients. (Perhaps there is a third advantage — physical proximity to the company’s Northern Virginia data centers, but that’s pure conjecture on my part.)

VEDP and the MEI commission undoubtedly had good reasons for providing the grant. But we’ll never know how well the commission conducted its due diligence. Economic-development deals are always treated as highly confidential, and the public never gets to know the justification for why public funds are expended. I hate the lack of transparency.

No, Reduced State Subsidies Do Not Drive Tuition Increases

One of the great debates in higher-education policy is the relationship between cuts in state subsidies for colleges and universities and increases in tuition. Over the past two decades states (including Virginia) have curtailed state support, and college tuitions have soared. The higher-ed lobby argues that the one is the direct and proximate cause of the other: Institutions raise tuition to compensate for state cuts.

The national debate has played out here in Virginia. Last year, House of Delegates fiscal analyst Tony Maggio estimated that between 1996 and 2015, for every dollar the state cut in college subsidies, public Virginia institutions raised tuition by two dollars — implying that half the tuition increases could be attributed to the cuts. In March, Heywood Fralin, a member of the State Council of Higher Education for Virginia (SCHEV) contended that using a 2001 starting date for the analysis would have shown a dollar-for-dollar correlation between reductions in state support and higher tuition — in effect blaming the cuts for 100% of tuition increases. (See “Deciphering Higher Ed Statistics.”)

Against the backdrop of the same debate playing out nationally, Preston Cooper, an American Enterprise Institute scholar, has published research that reaches a remarkable conclusion: There is almost no correlation between changes in state funding and changes in tuition. State budget cuts account for maybe 5% of the tuition increases.

Proponents of the “state disinvestment” hypothesis blaming state cuts for tuition hikes are correct that smaller state subsidies among the 50 states has coincided with aggressive tuition increases nationally. Between 2004 and 2015, state subsidies per student fell by $1,319, or 15%, while average tuition increased $3,488, or 56%. But there is little causal relationship between the two trends, Cooper argues.

To the statistically untutored, those numbers might appear to suggest that roughly 38% of the tuition increase can be explained by state cuts. But such a superficial reading fails to explain why tuition rises both during periods of increasing subsidies and declining subsidies.

In his paper, “Pennies on the Dollar: The Surprisingly Weak Relationship between State Subsidies and College Tuition,” Cooper delves deeper than broad aggregate numbers. He examines year-to-year changes for hundreds of public universities across the country.

Citing the work of economist Howard Bowen, Cooper suggests that colleges do not seek to minimize costs like corporations do. They are not profit-maximizing institutions. (They are, I would suggest, prestige-maximizing institutions, which drives them to spend money on projects to enhance their rankings.) Colleges and universities, he contends, seek to maximize all available revenue streams and then benchmark their costs to the revenue they are able to raise. “An institution finds a way to use each dollar it accesses.”

Institutions charge all the tuition they can all the time. Whether direct subsidies go up or down is irrelevant. Subsidies and tuition are independent of one another; the pass-through rate is zero.

Cooper’s data indicate that Virginia’s public four-year colleges and universities actually have a slightly negative pass-through rate — 6.1%. “Negative pass-through,” he explains, “does not mean that institutions respond to subsidy cuts by reducing tuition outright but that institutions reduce tuition relative to its (sic) underlying trend when subsidies fall.”

Cooper theorizes that universities, reflecting their core mission of teaching, do try to avoid slashing instructional spending. Cutbacks fall most heavily on research and administrative costs.

Bowen … predicts that institutions will raise more revenue than they need to provide education and then channel the excess funds into superfluous expenditures that may be tangential to the core educational mission. When revenue streams contract, this low-value spending will be the first to go.

A corollary of Bowen’s theory, suggests Cooper, is that increasing state support for higher education will lead to trivial reductions in tuition. Colleges and universities will seek to maximize tuition revenue in any case. But more generous state subsidies will fund increased spending. Rather than increase direct support to institutions, he argues, states should consider abolishing subsidies and using the money to fund grant aid to students.

Bacon’s bottom line: I find Cooper’s theory intriguing, and I think it provides a useful frame of reference for examining trends in state subsidies and college tuition in Virginia. But I would like to see how the numbers play out before accepting his findings. In particular, his theory suggests that institutional spending would increase or decrease (with a year delay) in response to changes in state support. While the task might be tedious, it should be easy enough to look up the numbers. If I have time, I will do so and report back to readers.