Tag Archives: James A. Bacon

As Virginia Inches Toward Becoming a Majority Minority State, What Do Racial/Ethnic Classifications Mean Anymore?

Whites will comprise less than a majority of Virginia’s population by 2040 — 47.4% — according to recent projections by the Demographics Research Group at the University of Virginia. That’s down from a forecast 58.6% in 2020.

The percentage of non-Hispanic whites and blacks in the state’s population will shrink by 5.7% and 8.3% respectively, while the percentage of Asians and Hispanics will increase by 96.0% and 114.3% respectively.

To some degree, demographic projections reflect underlying demographic reality. But they also are influenced by politics and culture, as Hamilton Lombard points out in a post yesterday on the StatChat blog. “It can be easy to read too much into very long term population projections,” he warns. “All the racial/ethnic projections only make sense if you understand the haphazard way we categorize and track race in the U.S.”

For example, a large majority of Hispanic Americans self-identify as white, but the Census Bureau categorizes them as a “non-white” minority because they also identify as Hispanic. Before 1970, they were categorized as white.

But after the Civil Rights Acts of the 1960s, the National Council of La Raza successfully lobbied to have anyone with a “Spanish origin” counted as a separate ethnic population in the 1970. Armed with data for the newly categorized Hispanic population which the 1970 census supplied, organizations could apply for various grants and develop policies specifically for Hispanic Americans. Other groups, after seeing the success of La Raza, have lobbied to have various U.S. ethnic populations counted separately. As a result, the number of race/ethnic categories on the census has risen from four in 1960 to possibly nine by 2020.

Another example of how the Census Bureau shapes perceptions of ethnicity and race: Since the Census began allowing respondents to identify as more than one race in 2000, the U.S. “mixed race” population, 86% of whom select white as one of their races, has grown from zero to nearly 10 million.

Yet another example: Census has proposed counting Middle-Eastern and North-African Americans as a separate race. Because most self-identify as white, the new classification would accelerate the decline of the “white” population and increase the “non-white” population.

Bacon’s bottom line: Two mega-trends are colliding here. On the one hand, the Great American Assimilation Machine continues to do its work, eroding ethnic and racial identities. On the other hand, by creating a racial spoils system (dispensing funds and perks to non-whites), government policy creates material incentives for people to nurture separate ethnic identities.

A century ago, white ethnic identities such as English, Scotch-Irish, Irish, Italian, German, Polish, Swedish, Jewish, etc. were as strong as racial identities today. Over time, intermarriage and the dissolution of ethnic enclaves merged white Americans into the melting pot. Today, white Americans are less likely than ever to define themselves by the national origin of their ancestors and more likely than ever to simply think of themselves as generically “white.”

The Ancestry.com ads running on cable TV are a striking illustration of this trend: There would be no need to utilize DNA to identify peoples’ ethnic origins unless most people had forgotten those origins. I thought I was Hispanic and found out I was half Italian! I thought I was German and found out I’m a mutt!

Meanwhile, the rise of “multi-racial” populations is proceeding apace. According to a Pew Research Center analysis, one-in-seven U.S. infants (14%) were multiracial or multi-ethnic in 2015, nearly triple the share in 1980. This is not just a matter of “light skinned” ethnicities intermarrying. Increasingly, Americans are broaching the color line.

One would think that all but the racial purists among us would welcome this trend. But political forces are driving the population in the opposite direction. Many politicians believe that the path to political power lies in the cultivation of racial grievances. These politicians (I won’t mention names) exist in both parties. By enabling the doling out of government spoils (usually at the behest of the political party that favors activist government — but, again, I won’t mention names), the Census Bureau’s ethnic/racial classifications perpetuate the sense of separateness.

It is impossible to predict which force — assimilation or the urge to political power — will win out in the end. But we can count on one thing: Changes in politics and culture undoubtedly will influence which races and ethnicities the Census Bureau Sam counts, and, consequently, how Americans perceive themselves. In the meantime, readers should understand Census ethnic and racial classifications for what they are: increasingly meaningless distinctions imposed and maintained for political reasons.

Should We Subsidize Rural Economies?

Last week I offered a point-by-point review of Democratic gubernatorial candidate Ralph Northam’s plan to revitalize rural Virginia. In rough summary, I concluded that the plan wouldn’t accomplish much, but on the other hand, it wouldn’t cost much either. The Northam proposals had considerably more merit than a lot of ideas — such as a $15-per-hour minimum wage — that he could have put forth.

Writing in the Richmond Times-Dispatch op-ed section, however, Bart Hinkle took issue with core assumptions of the Northam plan.

First, Hinkle noted that investing in job creation in Southwest Virginia is not necessarily the optimal solution for reducing unemployment. Perhaps people could better improve their circumstances by moving to urban areas that offered greater economic opportunity.

Of course, some people in Southwest Virginia might want to improve their economic circumstances and still stay put. But is it the state’s job to ensure that they can? And if the answer is yes, then what does that imply about, say, struggling economic sectors? Should the state help people stay in fading industries as well as fading regions? If not, why not?

Hinkle also questions the value of providing workers skill-specific training. He cites a Journal of Human Resources study that suggests technological and other changes often leave skill-trained workers behind, and that employers, rather than retrain them, often let them go and bring in new talent. The real need, the study suggests, is “for more general cognitive skills that give workers the ability to adapt to new circumstances and new jobs.”

On a more philosophical plane, Hinkle wonders why the job of providing specific workforce training has devolved to the state in the first place.

If companies need workers who are trained to perform specific tasks, then why don’t those companies do the training themselves? Why should the state — i.e. the taxpayers — shoulder the burden of doing it for them?

Labor, he suggests, is a production input just like raw materials. If Acme Semiconductors wanted to build a plant in Virginia, and it asked the state to ensure a steady supply of silicon, the state probably would tell Acme to pound sand. But if Acme says it wants workers trained to work in a clean room, Virginians feel compelled to help out.

Bacon’s bottom line: These are all good questions.

I am reminded of a Daily Signal article published last week about a federal-state-private job-training program set up in Kentucky coal country, practically next door to Virginia’s coal-mining counties, to teach people in 20 weeks of classroom training how to code. Under the banner of turning “coal country” into “code country,” the program paid interns $400 a week to learn how to write software code, and Interapt promised high-paying jobs to those who completed the course. But after a year and $20 million, the program has fallen far short of expectations. Only 17 people have found jobs in the tech sector.

The Kentucky program may or may not be typical of government-backed workforce training programs generally. Some programs deliver modestly positive results; others are scandalously, almost fraudulently bad. But even if they do help people find jobs, how long will skill sets from a 20-week training program stay relevant? How many graduates will have jobs requiring those skills three, four, or five years from now? Hinkle raises an important point: If companies require workers to possess certain skills, why don’t they train their own? Why has this obligation been fobbed off to government?

While acknowledging the value of Hinkle’s questions — I do lean libertarian, after all — I frame the issue differently. Rural Virginians do need help. If they can find local jobs through targeted training programs, great. If not, mastering new skills will make it easier, by making people more employable, for them to move to jobs in growing metropolitan areas, just as Hinkle thinks they should do.

If state government is going to subsidize anything under the banner of economic development, it should be education and training. Given that I favor continued state support for higher education mainly benefiting the upper middle-class, as noted here, how could I not endorse training expenditures to benefit those lower on the socio-economic ladder?

However, I am acutely cognizant of the dangers in turning job training over to untested government programs or public-private partnerships. Any program must be subjected to rigorous review to ensure that the benefits are commensurate with the costs. Resources are too scarce. We cannot afford to waste them.

Tuition Increases Moderating Nationally More Than in Virginia

Data source: SCHEV

Tuition at college and graduate school, after scholarships and grants are factored in, increased 1.9% in the 2016-17 academic year across the United States, reports the Wall Street Journal based on data from the U.S. Labor Department. That represented a considerable moderation from the 6% average tuition increases that had prevailed since 1990.

The WSJ analysis suggests that tuition hikes will continue to be restrained as the number of college-age students levels off, families rebel against the high cost of attending college, and competition for students intensifies.

Public Virginia universities increased tuition more aggressively than colleges and universities nationally. The average increase among public Virginia institutions in 2016-2017 was 3.6% — almost double the national average — according to the State Council of Higher Education for Virginia (SCHEV) 2016-27 Tuition & Fees Report. And SCHEV’s preliminary projection for the 2017-18 academic year indicates that tuition increases are accelerating — averaging 4.7%.

(Note: these numbers are not directly comparable to the Labor Department statistics because they do not adjust for scholarships and grants, but they are indicative of trends.)

Bacon’s bottom line: It is unwise to draw hard-and-fast conclusions from only two years’ worth of data. Many factors drive tuition increases, one of the most prominent of which is the level of state support, which fluctuates widely from year to year due to local fiscal and political considerations. But the disconnect between cost increases in the Old Dominion and the nation could spell trouble for Virginia institutions.

Among public four-year institutions in Virginia, competition is greatest for out-of-state students who don’t enjoy the discounted, in-state tuition. Because they pay the full freight, these 32,000 out-of-staters have a wider range of states and colleges to choose from.

Economic reasoning would suggest that the aggressive tuition hikes of Virginia institutions will be reflected in a declining rate of applications and acceptances by out-of-state students. This may not matter for the elite institutions, who have the latitude to pick and choose, but it could impact the second-tier universities. Because out-of-state students pay such high tuition, they subsidize in-state students. Losing even a small percentage of out-of-staters could pose a major financial setback.

The out-of-state enrollment rate at Virginia institutions this fall will be worth watching.

Why Do Taxpayers Subsidize Public Colleges?


True, state support for higher education does constitute a subsidy for the upper middle-class. Think of it as a tool to recruit and retain human capital.

Why do taxpayers subsidize public colleges? Dimitrios Halikias and Richard V. Reeves with the Brookings Institution ask that question in a new paper. Four-year colleges, they noted, are dominated by children of the upper-middle class, who can afford the cost of attendance better than most. Why should states expend scarce resources to benefit the well-to-do?

One justification for the subsidies, the authors suggest, is that higher education provides public benefits in addition to the private returns that accrue to the students themselves. They identify two benefits in particular. Universities act as ladders for social mobility, allowing students from less affluent families to improve their lot in life. And they function as laboratories for research, expanding knowledge in ways that benefit the higher population.

A stronger case can be made for public support of institutions that provide one of those two benefit, say Halikias and Reeves. Institutions that do both, they call Leaders. Institutions that do neither, they term Laggards. Those that out-perform in providing mobility, they dub Ladders, and those that excel in research they refer to as Labs.

Drawing upon data from Mobility Report Cards, which rank colleges by their ability to attract low-income students and push them up the income ladder, and university research prowess based on the Carnegie Classification of Institutions of Higher Educationthey assigned each of the nation’s 342 selective, four-year, non mission-oriented universities to one of the four buckets. (They exclude Historically Black Colleges and Universities, liberal arts colleges, and military-oriented institutions. The University of Virginia, which I would classify as research institution, does not appear on the list. Neither does the College of William & Mary, which they presumably count as a liberal arts college.)

According to this methodology, Virginia has three Leaders — and not the ones who usually appear on lists of top universities. As can be seen in the table above, in order of social mobility, they are Old Dominion University, Virginia Commonwealth University and George Mason University. These institutions admit relatively large percentages of students from the lower-income quintile and relatively low percentages from the upper income quintile.

Particularly questionable from the Halikias-Reeves perspective are the low-mobility, low-research laggards: Christopher Newport University, Radford University, Longwood University and James Madison University. Indeed, LU and JMU have the distinction of ranking the lowest in the country by this measure.

Bacon’s bottom line: Regardless of what you might think of the authors’ methodology — it has its weaknesses, as I’m sure administrators of LU and JMU would be quick to point out — but it does raise a really important question. Why do states subsidize college tuition for all? If states must be in the game of subsidizing higher education, why not make all dispensations means tested?

I’m of two minds. As one who espouses libertarian principles, I see no justification to subsidize higher ed. Insofar as there is merit to the logic of the idea of social benefits to the subsidies, then one might make an argument for means-tested financial aid. On the other hand, I’m a taxpayer. I’ve paid large sums to the Commonwealth of Virginia over my lifetime, and a reduced-cost education first for me and then for my children is one of the few perks I’ve received in return (other than benefits like roads, state police and state parks available to anyone.) So, color me conflicted.

There is one important argument, however, that Halikias and Reeves neglected — at least in a Virginia context. Access to a superior system of higher education is a big draw to anyone considering moving to Virginia. If we want to attract human capital, there are few things more enticing than good K-12 schools and affordable, quality colleges. We give tax breaks and subsidies to businesses to lure them into the Old Dominion. Likewise, we subsidize higher education in order to recruit and retain the smartest and best educated employees… who, incidentally, pay the most in taxes. Unlike incentives for out-of-state businesses, Virginia citizens have been paying taxes all along — some for their entire lives.

Virginia often is criticized for spending less on higher-ed subsidies than the national average, and considerably less than our neighbor to the south, North Carolina. In an ideal world, no state would subsidize higher education, colleges would do a better job of controlling their costs and keeping tuition low, and private philanthropists would donate more money to scholarships. But we live in the world we live in, and eliminating state support for higher-ed would severely undercut Virginia’s economic competitiveness and its prospects for economic growth.

The Magical Land Where Everyone Is Above Average


The proportion of high school seniors graduating with an A average has grown sharply over the past generation, even as SAT scores have fallen, reports USA Today.

In 1998, 38.9% of seniors graduated with an A average. By last year, the percentage had grown to 47%. Over the same period, average SAT scores fell from 1,026 to 1,002.

The USA Today article is based on research by Michael Hurwitz of the College Board and Jason Lee, a doctoral student at the University of Georgia’s Institute of Higher Education.

Writes US Today: “The upward creep is most pronounced in schools with large numbers of white, wealthy students. And its especially noticeable in private schools, where the rate of inflation was about three times higher than in public schools.”

We’re not getting smarter — we just think we are.

Is anyone curious how the numbers play out in Virginia? I sure am.

Pipeline Passes FERC Environmental Review

While the proposed 605-mile Atlantic Coast Pipeline (ACP) would have temporary adverse impacts on people and the environment, the impact can be reduced to “less-than-significant levels,” if the project is constructed and operated in compliance with federal standards, declared the Federal Energy Regulatory Commission in a final Environmental Impact Statement issued today. Read the EIS here.

The finding is a critical step toward ultimate approval or denial by the commission. Backers of the project lauded the FERC finding, while pipeline foes criticized it. Here follows a sample of the immediate reaction.

Atlantic Coast Pipeline. Leslie Hartz, vice president-engineering and construction for Dominion Energy, the ACP’s managing partner: “The favorable environmental report released today provides a clear path for final approval of the Atlantic Coast Pipeline this fall. The report concludes that the project can be built safely and with minimal long-term impacts to the environment. The report also reinforces previous findings by the FERC and decades of research demonstrating that natural gas pipelines do not adversely impact tourist economies or residential property values. With this report, the region moves one step closer toward a stronger economy, a more secure energy supply and a cleaner environment.”

Allegheny-Blue Ridge Alliance. Executive Director Lew Freeman: “The Trump administration’s final environmental report issued today for the Atlantic Coast Pipeline, which would carry fracked-gas through West Virginia, Virginia and North Carolina, utterly fails to independently assess whether the project is even needed. This is the core issue upon which all other considerations of the controversial project are based, says a coalition of community groups and legal and technical experts.”

Energy Sure. Samantha Quig with the Virginia Chamber of Commerce and Rich Greer with the Laborer’s International Union of North America: “After almost three years of extensive study by the Federal Energy Regulatory Commission (FERC) and other agencies, we are encouraged by the favorable conclusions of the final environmental report released today. Never before has an infrastructure project in our region received so much scrutiny by so many agencies and offered so many opportunities for public input. We have total confidence in the process, and we are convinced the project will be built with all necessary protections for the environment and public safety.”

House Republicans (no link): Virginia House of Delegates Speaker William J. Howell and Speaker-designee M. Kirkland Cox: “We are heartened by today’s positive news from the Federal Energy Regulatory Commission regarding the Atlantic Coast Pipeline. Construction of this project is crucial to ensuring Virginia’s economy continues to grow in the years ahead, and that our families and businesses will continue to have access to affordable and reliable domestic energy. As Governor Terry McAuliffe has noted, the ACP is really a ‘jobs pipeline’, and it is desperately needed in our Commonwealth. We know that we can grow Virginia’s economy, and create thousands of good paying jobs for our people, while also preserving the environmental treasures we all cherish and love. Today’s report proves this.”

Southern Environmental Law Center. Staff attorney Greg Buppert: “FERC still hasn’t addressed the most basic question hanging over this project: Is it even needed? It’s FERC’s responsibility to determine if this pipeline is a public necessity before it allows developers to take private property, clear forests, and carve up mountainsides. Mounting evidence shows that it is not.”

Bold Alliance. Richard Averitt, affected landowner and entrepreneur: ““The FEIS is based on incomplete information, false narratives, and superficial statements of need that are based on corrupt self-dealing. It makes a mockery of the approval process. It’s clear that FERC exists to do the bidding of the industry that pays its salaries and feels no responsibility to the public or to the truth.”

I’ll add more responses as I get them.

Public Housing Vs. Private Housing, Round Two

A couple of weeks ago, I published a post, “Your Taxpayer Dollars at Work: Stuffing Poor People into Hideous Housing,” trying to put the $150 million maintenance backlog at the Richmond Redevelopment Housing Authority into context. I noted that the RRHA’s $65 million budget, spread over 4,000 public housing units, amounts to $16,250 per unit per year, which would buy luxury digs in the private rental market. That seemed like an outrageous amount of money, I wrote. However, I made it clear to readers that I needed to vet my “back-of-the-envelope calculation” before drawing any authoritative conclusions.

It’s a good thing I added that disclaimer because, in fact, I did omit relevant information. Hang with me because this gets a bit involved. The Richmond Times-Dispatch ran an unsigned editorial citing my numbers, unfortunately without noting my caveats. RRHA CEO T.K. Somanath took justifiable umbrage at my suggestion that for the money it spent, the authority could put housing project residents into a posh apartment in Richmond’s Manchester neighborhood. In point of fact, he said, the RRHA spends only $30 million maintaining its public housing project. The rest of the budget is dedicated to real estate and community development projects.

Somanath chastised the T-D for “parroting the grossly inaccurate musings of libertarian blogger Jim Bacon,” although he did acknowledge that my piece had contained the aforementioned caveats. The T-D reprinted Somanath’s letter and responded, as appropriate, that he was “quite right. We’re grateful for the additional context, and we should have included it in the original piece.”

But Somanath doesn’t get off the hook so easily. Let’s take a closer at the numbers.

The figures at right come from the RHHA’s 2014 annual report. (The numbers in the 2015 annual report are not as detailed, and the 2016 annual report has not been published yet.) The heading atop the column refers to the “Total Low-Rent Housing Fund Group,” which, if I am not mistaken, refers to public housing.

Thus, we can see that the RRHA spent $31.2 million in 2014 on Richmond’s public housing projects. Of that amount, “operation and project cost” amounted to $28.4 million. Averaged over the 4,000 housing units, it cost about $7,100 a year per unit to operate and maintain Richmond’s public housing. Please note: That’s just to operate and maintain the properties.

To make an apples-to-apples comparison between the cost of public housing and the cost of private-sector housing, we would have to include the capital cost of purchasing land and making improvements equivalent to the public housing units.

We can get a sense of the capital cost by looking at the City of Richmond assessments. I looked up the assessments for Mosby Court, South Mosby, North Mosby, Whitcomb Court, and Creighton Court, accounting for 1,501 apartments all told. (If I had all day, I’d dig up assessments for the other public housing units, but this is a blog — I don’t have all day.) The land and improvements for those properties totaled $47.4 million, averaging $31,600 per unit. If assessments are similar for the other public housing projects, that extrapolates to a value of about $126 million for the entire portfolio of public housing projects.

Now, let’s say the RRHA tried to replicate its public housing portfolio from scratch, selling $126 million in 30-year municipal bonds paying a 3% yield to purchase the land and build the apartments. That would amount to an average financing cost of $1,525 per unit per year. Add that cost to RHHA’s “operations and project cost, and you get a total annual cost of $8,625 per year, or $718 per month per unit.

What can you rent in the private housing market for $718 or less per month? Well, you can rent a two-bedroom, one-bath, 800-square-foot apartment at Nottingham Green for $645. You can rent a two-bedroom, one bath, 795-square-foot apartment at Village South Townhomes for $629. You can rent two-bedroom, two-bathroom apartments at The James on W. Bacon Street (cool, huh?) for $709. The James includes a pool, fitness center, water, heat, cable and air conditioning!

You pick:

Mosby Court

or…

The James

I’m sure these comparisons could be refined. I made three requests, one by email and two by telephone, to interview Somanath and make sure I was using the RHHA numbers correctly. He never responded. If he doesn’t like these numbers, I gave him every chance to shape this article. If he changes his mind, I would welcome his input after the fact.

The disparity between public housing and private housing may not be as great as I conjectured in my original article, but it is still significant. And, to return to the point of my previous post, the original justification for public housing in the 1930s was that government needed to address the “market failure” of private builders. If the private sector couldn’t provide affordable housing for the poor and working class, government needed to step in. From the evidence provided here, it still appears that the private sector can provide superior housing in the Richmond region at a lower rental price.

My point is not to condemn the RHHA. I’m sure RHHA employees are doing the best job within the constraints they are working under. The point is that public housing projects are a failed model for sheltering low-income Americans. The logical solution is to get government out of the business of owning and operating low-income housing. Tear down the projects, let the private sector re-develop the land, and empower the poor through vouchers to seek their own accommodations.

UVa Responds…

Marcus Martin

Two days ago, I posted an article, “How Big Is UVa’s Diversity Bureaucracy?” In it, I noted that Marcus Martin, the University of Virginia’s chief diversity officer, was paid $349,000, the highest salary of any of 50 higher-education diversity officer identified by Campus Reform. I also endeavored to describe the size and effectiveness of UVa’s diversity bureaucracy.

In response, I received this communication from UVa spokesman Anthony de Bruyn, which I reproduce in full:

I write to provide you and your readers important context and clarifications regarding your article “How Big Is UVa’s Diversity Bureaucracy?”

Marcus Martin, M.D., is a practicing physician, professor of emergency medicine and the founding chair of the School of Medicine’s Emergency Department, as well as vice president and chief diversity and inclusion officer at the University of Virginia.  Through his clinical activities, educating and mentoring of medical students and young physicians, he contributes to our medical and education missions. He also teaches a popular course for undergraduates. Dr. Martin is a well-published author and has served in several prominent emergency medicine leadership roles across the nation. And, he is involved in several community-based organizations in Charlottesville and Albemarle County. His compensation reflects not only his responsibilities as the University’s chief diversity officer, but also his role as a medical doctor and long-time faculty member. The characterization of him as merely a bureaucrat is pretty far off the mark.

Just last month, the National Science Foundation again awarded a $5 million grant for which Dr. Martin has been the principal investigator.  This grant, in its second renewal, seeks to boost the number of underrepresented minority students in STEM careers.  The grant involves a consortium of eight universities and colleges, the Virginia-North Carolina Alliance, in addition to the University of Virginia.  NSF renewed the grant because of its demonstrated outcomes.

Your article unfairly criticizes the work of several committees at the University that make important contributions to our living and learning environment, and implies a large number of full-time bureaucrats who do little else.  The members of these committees are students, faculty, staff and community representatives who volunteer their time and expertise over and above their academic and work commitments. The committees study important issues such as improving our recruitment and retention of faculty, staff and students from historically underrepresented groups, and enhancing our community of inclusiveness and to make UVA a better place for everyone.

And, despite the suggestion that there are few substantive results from our diversity efforts, the University has the highest graduation rate for African American students of any public university in the nation. Our current focus is helping minority students succeed in the STEM fields. Next month we will welcome the most diverse class in UVA’s history.

The Board of Visitors recently approved an endowed professorship in Dr. Martin’s name in recognition of his valuable and lasting contributions to medical education and the University community.

Bacon’s response: Dr. Martin sounds like major asset to the university. (See his full bio here. It is impressive.) I don’t think my article characterized him as “merely a bureaucrat,” but if I left that impression, I am happy to stand corrected.

Now, on the much more substantive issue of the effectiveness of UVa’s diversity program, one of de Bruyn’s statements — “the University has the highest graduation rate for African American students of any public university in the nation” — also could use some context.

Yes, it’s true, UVa does have the highest graduation rate for African-American students of any public university in the nation. That’s an achievement for which the university deserves accolades, and which I have lauded on more than one occasion.

However, UVa also has one of the strictest admissions policies of any public university in the country — certainly of any public university in the state — as seen in the exceptionally low percentage of lower-income Pell grant students in the student body. There is a very high correlation between Pell grant status and the six-year drop-out rate. More Pell students means more drop-outs; fewer Pell students means higher graduation rates. Insofar as Pell grant recipients disproportionately hail from African-American families, UVa’s admissions policies limit the number of lower-income African-Americans at higher risk of dropping out.

So, the question is this: Is the exceptionally high graduation rate of UVa’s African-American students due to the ministrations of the diversity bureaucracy or to the stringency of the university’s admissions policies, to some combination of the two, or perhaps to other policies entirely? I would love to see some hard data.

Northam’s Affordable, Not-So-Ambitious Plan for Reviving Rural Virginia

Ralph Northam, Democratic Party candidate for governor, grew up on the Eastern Shore, so it’s not surprising that he has given considerable thought to the challenges of economic development in Virginia’s small towns and rural communities. Earlier this week, he unveiled his plan for economic growth in rural Virginia.

If you’re looking for a “Marshall Plan” to reinvigorate rural Virginia, this is not it. The plan is not ambitious, and there may not be enough in it to get rural Virginians especially excited about Northam’s candidacy. But it has this virtue: Proposals don’t require spending vast sums of money, so they are at least feasible from a budgetary perspective. This is a plan that Northam, if elected, has a realistic chance of implementing.

Personally, I distrust “Marshall Plan” approaches to chronic social and economic challenges. Instead, in our fiscally constrained era, I’m a fan of low-cost, low-risk initiatives that will likely yield a positive return on investment. In that spirit, I’ll start by illuminated the most promising ideas in the Northam plan and work my way down the list.

Virginia’s Rapid Readiness Program. Northam proposes a “rapid readiness program” similar to successful workforce training programs in Georgia and Louisiana. “We could get this program started here in Virginia with a ten million dollar investment, with funding tied to business participants, number of projects delivered, and individuals successful trained,” states his plan.

Assuming that Northam is drawing upon the thinking of Virginia Economic Development Partnership CEO Stephen Moret, who set up the Louisiana program, the program would function as a extension of Virginia’s economic development effort by offering a workforce-training solution as an incentive for corporations to invest in Virginia. The program would differ from existing educational/training offerings by creating a team capable of providing customized training within a time frame required by corporations to get their operations up and running.

While the rapid readiness program would be applied across the state, rural areas arguably would benefit the most because such training applies most frequently to light manufacturing projects that typically locate in smaller communities.

I’m not sure $10 million is sufficient to fund this program properly. Regardless, there is a readily available pot of money — Northam and Moret no doubt would disagree with me about this — and that is the Commonwealth Opportunity Fund, which the state dips into to provide “incentives” for economic development projects. But as Moret himself said in a presentation to the State Council of Higher Education for Virginia two days ago, workforce is one of the top three factors (and often the No. 1 factor) that corporations consider when deciding where to locate. Incentives are a secondary factor. Shifting money from incentives to workforce training looks like a no-brainer to me.

Expanding renewable energy. Expanding solar generation is viable rural economic development strategy. Solar farms may create few permanent jobs, but they do increase the tax base, and they often pay streams of royalties to landowners (depending on how particular deals are structured).

“In my home county of Accomack on the Eastern Shore,” says Northam, “the commonwealth’s largest solar farm is in the process of being built, which will ultimately power several data centers owned by Amazon.”

Northam says he is committed to working with Virginia’s electric utilities and the General Assembly to “remove barriers that stand in the way of developing and expanding clean energy efforts.” Note the phrase “remove barriers.” Northam is not asking for new subsidies or tax breaks. Solar doesn’t need subsidies; market forces increasingly favor solar. Rather, Northam wants to remove obstacles that inhibit businesses, entrepreneurs and homeowners from building rooftop solar and solar farms.

Utility-scale solar like the Amazon Web Services farms in Accomack need little help — Dominion Energy and Appalachian Power have ample incentive to deploy solar on a large scale. The barriers exist at two levels: local zoning codes and state regulatory policy. Local governments need to make their zoning codes more solar friendly. Meanwhile, state lawmakers need to craft “net metering” legislation that balances the interests of independent solar producers with those of electric utilities who maintain the electric power grid that everyone depends upon.

Broadband for all. Most people would accept the proposition that broadband Internet service is critical infrastructure for economic development today. The problem is that sparsely populated rural areas are not attractive markets to Virginia’s big broadband providers.

Northam points to a pilot project in Southside Virginia in which Virginia’s Tobacco Commission, Microsoft, and the Mid-Atlantic Broadband Company utilize unused portions of the television broadcast spectrum to push out high-quality wireless broadband. So far, more than 100 households have been connected, and the number could reach 1,000 by year’s end.

“Under this innovative public-private program, Virginia’s share of the cost is $500,000, leverage private investment for a total investment of $1 million,” states the Northam plan. “This commonwealth should look to replicate this successful program across rural Virginia.”

How so? He would pull together disparate broadband initiatives across the commonwealth under the direction of a cabinet official “who will be responsible for getting more people connected.” Northam also advocates legislation similar to that adopted in Minnesota that creates a clear set of metrics, including upload and download speeds, to evaluate broadband access. Whatever else you say about these proposals, it doesn’t sound like they will break the bank.

Expanding the University of Virginia-Wise. Northam proposes increasing the educational offerings of the University of Virginia-Wise to encompass high-need, high-growth disciplines such as cybersecurity, unmanned aerial systems, energy, and computer engineering and programs. Expanding UVa-Wise would cost about $15 million initially, Northam says, with a possibility of scaling up funding over time.

We have a unique opportunity … to transform UVA-Wise into an international destination for students and researchers. This will have a tremendous effect on the regional economy because when you can attract students and top talent from around the world for research and development, grants will follow. And with grants and applied research, business opportunities will soon follow. And structured correctly, these businesses will not only start up in Southwest Virginia, but they will remain and grow.

The idea of creating “innovation districts” around college campuses is a hot one right now, and anyone who has seen the Virginia Tech Corporate Research Center can readily understand the potential for economic development near college campuses. But Tech is the top research university in the state. Whether its success can be replicated on even a modest scale by a tiny, largely unknown newcomer is questionable. Tech has invested hundreds of millions, maybe billions, of dollars, over decades building academic programs, hiring star faculty, recruiting graduate students, and assembling the administrative infrastructure it takes to win research contracts.

Competing for research dollars is tough. Well established institutions such as Old Dominion University and the College of William & Mary have seen their research programs falter in recent years. It is a stretch to suggest that a $15 million investment in Wise would spark the miraculous transformation that Northam describes.

Startup tax plan. To help attract and retain new business in rural and economically depressed regions of Virginia, Northam proposes a “zero BPOL and merchant’s capital tax for new startup and small businesses .. for the first two years. This will drive economic activity and startups to rural areas, and result in no loss in existing revenue to local governments.” Once local businesses take root, they will start paying taxes — a win-win.

It’s good to see a Democratic Party candidate advocating tax cuts! But the proposal lacks crucial detail. BPOL and merchant’s capital taxes are local taxes. How does Northam propose eliminating those taxes for two years? Will the state just command localities to change their ordinances? Will the state reimburse them for lost revenue? Does he have the remotest idea of what the initiative would cost? Finally, while the BPOL and merchant’s capital taxes are near the top of the list of things that small businesses in Virginia hate, is there any body of evidence suggesting that a mere two-year reprieve will stimulate more startups?

There’s more to Northam’s plan, but the other proposals, which address workforce development, are statewide in nature and don’t address peculiarly rural issues. So, I won’t dwell on them here.

Perhaps the best thing that can be said about this plan is that Northam isn’t making extravagant promises that he can’t keep. These narrow-bore proposals won’t exactly spark a rural Renaissance, but for the most part, they seem politically and fiscally feasible.

Four Not-So-Good-Options for Higher-Ed Funding

Few would disagree that college tuition is becoming an intolerant financial burden on middle-class families, and few would dispute that declining state support for public colleges and universities is at least partly to blame for tuition increases. What can be done to create a “stable and sustainable” funding model for public higher education in Virginia that can help stabilize tuition increases?

The State Council of Higher Education for Virginia (SCHEV) threw that question into the lap of its staff, and the staff has responded. In a presentation to SCHEV’s resources and planning committee yesterday, Finance Policy Director Dan Hix and two finance staffers laid out four options for purposes of discussion.

If the answer to Virginia’s higher-ed affordability crisis is to be found through increased revenue, then one of these ideas, or a mix-and-match combination of them, could well provide the solution. But, as I opine below, the drawbacks are severe. The solution to the higher-ed funding crisis lies on the cost side, not the revenue side.

Option 1: Increase General Fund support at the rate of inflation through the 2018-20 biennium with the understanding that tuition for in-state undergraduate students will increase at the same rate.

The obvious advantage of this idea is that it would provide a stable revenue source for Virginia’s public institutions over the next biennium. “This option allows all parties involved from the state, to institutions, to students and their parents to have a predictable annual increase in base support, thus allowing for improved planning,” states the SCHEV memo.

Assuming an average annual inflation rate of 2%, the plan would raise an additional $29 million from the state General Fund and $64 million in tuition revenue, for a total of $92 million.

An obvious drawback is the risk that the General Assembly would renege on its promises, as it has in the past, if state revenues don’t match forecasts. Another is that even if lawmakers could be counted upon to deliver, colleges and universities might not want to be constrained by an inflation-linked spending cap.

Option 2: Reduce state support for graduate education by changing the current funding splits from 37% from the state and 63% from tuition to 25% and 75% respectively, and reallocate the “savings.”

This approach approach would make higher education more affordable for undergraduate students at the expense of graduate students, and it would reallocate money from larger research universities to smaller, undergraduate-oriented institutions.

Reducing the state split to 25% would raise about $39 million to reallocate to undergraduate-oriented institutions. Politically, this option might have legs. Undergraduate students are more likely to come from Virginia; graduates are more likely to be out-of-staters. Any plan that benefits Virginia families will be popular with politicians and their constituents.

General Fund share versus tuition revenue, 2017-2018 school year. Click for larger image.

The drawback is that the impact would be highly uneven. Some institutions are much more dependent upon state support than others. Among research institutions, for example, the General Fund share ranges from 30% state support as a percentage of state support + tuition revenue at Virginia Commonwealth University to a mere 18% at the University of Virginia, as shown in the table at left.

Moreover, some institutions have a higher percentage of graduate students than others, and some have more research grants to help pay for graduate students than others. The plan would not simply create winners and losers, but lost revenue could be especially devastating to institutions lacking the market power to increase tuition revenue aggressively.

Option 3: Allow selected institutions to increase their share of out-of-state undergraduate students up to 50% of their total undergraduate enrollment.

This option recognizes that certain institutions — UVa, the College of William & Mary, and Virginia Tech most prominently — enjoy sufficient prestige in the higher-ed marketplace that they can increase tuition more aggressively for out-of-state students than they have in the past. The idea would be to allow them to increase enrollment for out-of-state students while not taking away any current spots from in-state students. Across the higher-ed system, out-of-state students pay 163% of their cost. The bigger “profit” from out-of-staters would enable the state to reduce its support by a like amount. SCHEV estimates that the shift would free up $270 million in General Fund revenue for reallocation to needier institutions.

The drawback of this option, as currently configured, is that there is nothing in it for UVa, W&M or Tech. The elite three institutions would increase their charges for out-of-state students but the profit would be distributed to other institutions. Indeed, they likely would regard this policy as a huge negative, for charging higher tuition would shrink the pool of applicants to draw from.

Option 4: Reduce state support for both undergraduate and graduate students at selected institutions by changing the current fund splits from an average of 41% from the state and 59% from tuition to 30% and 70% respectively, and reallocate the “savings.”

Translation: Reduce state support for UVa, W&M and Tech and allow them to make up the difference by raising tuition. This option would raise $91 million for redistribution to other institutions, but Tech would have to increase tuition by 14.4%, W&M by 15%, and UVa by 23.6%.

The obvious drawback is that the state’s flagship institutions would go all Kim Jong Un in response to a policy that impacted them so negatively. Even to disinterested parties, the idea of dis-investing in the state’s strongest institutions and funneling funds to its weakest institutions might not seem wise.

SCHEV staff is acutely aware of the drawbacks of its proposals. “This is not an easy document and we are not entirely easy with some of the options included here,” states the memo. “However, if the next ten years are similar to the
last ten years for Virginia public higher education, our system is indeed in peril and options such as these may be necessary to save it.”

Bacon’s bottom line: Lawmakers can’t be relied upon to keep its funding promises, and all revenue-raising options have major drawbacks. For the most part, the options simply redistribute wealth between institutions, creating winners and losers. It’s not clear that the statewide system would be any better off.

In closing comments at yesterday’s meeting, newly appointed Council chair Heywood Fralin laid out his priorities for SCHEV. He wants Council members to have greater oversight of the Virginia Plan for Higher Education (the state’s strategic plan for higher ed). And he wants to focus on three pressing issues: (1) the restructuring of higher-ed funding, (2) tying higher education to economic development, and (3) finding ways to reduce higher-ed costs.

Finding cost savings is the great unexplored frontier. SCHEV does useful work in identifying opportunities for shared services, and it monitors higher-ed’s use of space to caution against overbuilding. But, as I argued in my four-part series on higher-ed accountability, SCHEV does not monitor faculty productivity, administrative overhead, or a host of other cost drivers.

While it would be unwise for SCHEV to begin micro-managing Virginia’s colleges and universities, I suspect there would be strong political support for SCHEV to collect data, establish benchmarks, and provide boards of trustees with analysis that they’re not getting from college administrations. The General Assembly should reallocate a couple million dollars from whatever additional sum it plans to give the universities next year and beef up SCHEV’s data-collection and analytical capabilities.