Tag Archives: James A. Bacon

Hampton Roads Still Stuck in the Economic Doldrums

More disappointing news from Old Dominion University’s economic forecast for Hampton Roads: sub-par economic growth of 1.41% in 2017. That’s slightly below the state’s anemic 1.44% growth rate. While Congress and the President have agreed upon a sustained increase in military spending, the economists don’t expect a significant impact on the region until 2018.

The forecast expects employment growth of 3,800 for the region, concentrated in firms providing professional and business services, leisure and hospitality, and health care services — leaving the region 6,500 jobs below its record, pre-recession employment. Unemployment will decline to 4.4%.

Economic recovery is being led by the private sector. Among primary industries, the forecasters say that the factors contributing to a 6.7% increase in tourism last year should remain in place in 2017: moderate increases in federal travel, low gasoline prices, and economic growth in Hampton Roads’ historic market areas. Meanwhile, the port sector has recovered traffic losses experienced after the recession and is setting record volumes. Major capital investments have made port operations more efficient, and bigger ships, utilizing Hampton Roads’ deep channels, have been calling at the port.

But the military and naval shipbuilding continue to dominate the regional economy — defense spending accounts for 37% of domestic regional product — so, absent a large flow of expenditures from Uncle Sam, Hampton Roads is unlikely to break out of its economic doldrums this year.

Is It Time for a Son-of-Restructuring Act for Higher Ed?

Table credit: SCHEV

At its May meeting today, the State Council for Higher Education in Virginia (SCHEV) explored letting Virginia’s elite universities charge higher tuition and/or admit more out-of-state students. Giving Virginia’s powerhouse institutions authority to generate more revenue would allow the state to reallocate state support to institutions that don’t have the pricing power to offset state cuts in support for higher education.

It is official policy for the state to pay for 67% of the cost of education for in-state students, while students pay for the other third. Funding cuts in recent  years have reduced the state percentage to 47%, putting considerable pressure on public colleges and universities to raise tuition in order to maintain their spending plans.

Council members have consistently voiced their preference for the state to increase its financial support for the higher-ed system. But if it fails to do so, members have agreed, SCHEV needs to consider giving colleges alternatives to raise revenue.

Giving universities even more leeway to set policy than they enjoy now, said council member Marge Connelly, “takes on the flavor of the next iteration of restructuring.” By that, she was referring to the 2005 Restructuring Act which created three levels of autonomy regulatory in exchange for meeting state goals for enrollment, affordability, research, and other priorities. Re-writing the relationship between higher ed and the state along the lines of the ideas in the SCHEV list of options would constitute a second-generation restructuring.

The options include:

  • Out-of-state-enrollment. Institutions would be authorized to increase out-of-state undergraduate enrollment. The current appropriation act restricts out-of-state participation to 25%. Because out-of-state students pay considerably higher tuition, increasing the percentage would create an influx of revenue. Highly ranked institutions like the University of Virginia, the College of William & Mary, and Virginia Tech presumably have the cachet to attract far more out-of-state students. (With its niche educational product, so does the Virginia Military Institute, which has 39% out-of-state enrollment.) The flip side is that fewer slots would be available for in-state students.  (See table above.)
  • Different funding ratios. Instead of maintaining a consistent funding ratio for all institutions (currently 47% of tuition), the state could adjust support according to need, “whereby students would receive a greater subsidy at one institution than they would at another.”
  • “Free” community college tuition. Other states are implementing “free” community college tuition policies. In Virginia, community colleges generate about $500 million in tuition revenue — potentially a huge loss of revenue. However, other states impose numerous restrictions on who qualifies for the free tuition. Therefore, states SCHEV, the fiscal impact of such a policy on Virginia’s community colleges would be considerably less than a half billion dollars.
  • More freedom to set tuition. In theory, the Code of Virginia authorizes the governing bodies of public colleges and universities full authority to set their own tuition, although the General Assembly has the power to override its own laws. While the General Assembly has largely respected university tuition-setting autonomy over the past decade, legislators responding to dramatic tuition increases over the past several years may not be willing to continue maintaining a hands-off attitude. SCHEV’s idea is to let some institutions set rates higher and direct limited general fund support to those lacking that capacity.
  • Charge out-of-state-students more. Appropriation Act language requires institutions to charge out-of-state students at least 100% of the cost of education.  The General Assembly could direct them to charge more than 100% of the cost — in effect to increase the profit margin on out-of-staters — and redirect General Fund support to other institutions. (See table below.)
  • As part of the restructuring deal in 2005, colleges and universities gained more control over procurement, human resources, capital spending, IT, and other functions, depending upon their administrative capacity. Perhaps, says the SCHEV list of options, “the Governor and the General Assembly could implement other changes for some or all of the institutions that would result in greater savings.

Council members’ reaction to the idea of having options was positive, although some took issue with particular options.

“My perception is that people don’t want to increase the percentage of out-of-state students,” said Heywood Fralin, a University of Virginia alumnus and SCHEV vice board chair.

Katy Webb, a retired lobbyist, said the discussion was “worthwhile” but urged caution on the grounds that “how one institution would be affected would be very different than another.”

Institutions with the flexibility to raise tuition or enroll more out-of-state students might not appreciate seeing their efforts being undercut fiscally by having the General Assembly reducing their state support, suggested Minnis E. Ridenour, a former Virginia Tech budget director.

SCHEV took no action on any of the ideas.

Bristol Home Builder Proposes Solar Subdivision

Developer Aaron Lilly is seeking Bristol planning commission approval to construct 30 upscale townhouses using solar power to offset electric bills. He envisions the project as the first solar-powered subdivision east of the Mississippi, reports the Bristol Herald-Courier.

The project would be built on 12.5 hillside acres near an Interstate 81 exit. The townhomes would have 1,600 square feet of living space plus a 400-square-foot garage. Units can be configured with “smart home” technology for monitoring and control that, among other benefits, can provide medical information to a caregiver. Lilly sees the houses as “age in place” residences. He intends to price the properties in the $200,000 to $250,000 range. Said Lilly:

After seeing solar was at least possible, we’ve been working on this for over a year. It is more affordable than ever before and the price of electricity goes up every year. … There would be two meters on the house – one telling how much power we consume from [Bristol Virginia Utilities] and the other how much power is produced and the person would pay the difference.

If power keeps going up and solar keeps coming down, we’re there. If we’re not there yet, we’re close enough. This is our goal and we’re working feverishly to make sure it happens. … The first ones are an experiment. We don’t know how much power we can make.

Planning commissioners were supportive of the proposal and granted preliminary approval.

Bacon’s bottom line: It’s hard to imagine that this is the first time a developer east of the Mississippi has proposed building new townhouses with solar panels on the roof. But I haven’t heard of anyone doing it in Virginia, so, who knows. If Lilly says it’s true, maybe it is. If so, good for him.

Economically, it may make more sense for home builders to install solar during the construction phase — Lilly will build nine connected units in Phase 1 — than for individual homeowners to outsource the project to solar installers one project at a time. Also, Lilly can pocket the solar credits, which might be worth more to him than to individual homeowners. Another selling point is that homeowners can amortize the construction cost over the life of a 30-year mortgage.

Home builders are always looking for a competitive edge. I’m surprised that we haven’t seen more of this kind of activity.

Shareholders Pressure Dominion on Climate Policy

At Dominion Energy’s annual meeting earlier this month, shareholders submitted numerous shareholder proposals requiring the energy giant to adopt more environmentally friendly measures. I took note of some of them in my story about the event but never bothered to inquire about the vote results. I’ve attended plenty of annual meetings in my time, and I’d never seen a shareholder proposal opposed by management approved, or even come close to being approved. I didn’t expect any differently this time.

My bad. As it turns out, 48% of participating shares voted in favor of a resolution that would require Dominion to publish an annual statement on the financial risks that climate change poses to the company, according to the Virginian-Pilot. That total was up from the 23.5% of the vote for a comparable resolution at the 2015 annual meeting.

It wasn’t just gadfly nuns and hippies owning a few shares who voted for the resolution. That many votes required heavy support from pension funds and other institutional shareholders. It’s entirely possible that a similar proposal could pass a year from now. The proposal must be taken seriously, for its sponsors surely will be back next year.

Backers of the proposal cast the issue in terms of what is best for Dominion, not environmentalists, the environment or Mother Gaia: Climate change caused by CO2 emissions is unleashing more frequent and more damaging storms, which can expose Dominion’s infrastructure to storm damage, and will engender tighter anti-carbon regulations that could endanger its multi-billion bet on natural gas electric plants and pipelines.

“The three costliest storms in Dominion’s 100-year operating history, Hurricane Isabel, Hurricane Irene and the June 2012 Derecho, have occurred in the last decade,” states the shareholder proposal in the 2016 proxy statement. “The consensus among climate scientists is that without significant reduction of greenhouse gas emissions, climate change will continue to result in more severe and frequent storms, among other effects.”

Dominion’s restoration costs were $128 million for Hurricane Isabel in 2003, $59 million after Hurricane Irene in 2011, and $42 million after the derecho. “Additionally, between 2011 and 2012, weather events, earthquakes, and environmental regulations imposed more than $450 million in costs on the company, adversely affecting its earnings.”

Also, argued a memorandum in support of the proposal, the company does not seem to be taking into account federal or state legislation that could “either mandate greater deployment of renewable energy or assess financial penalties for the continued use of fossil fuels.” Dominion could be “betting the company” that changing laws, regulation and consumer tastes won’t leave the company with billions in stranded, uneconomic assets.

“Dominion faces serious financial challenges with regard to climate change risks that are not being addressed,” says the memorandum. “Dominion should be required to provide adequate climate risk assessments, including clearly defined actions the Board intends to take to address these risks.”

Dominion responds. Dominion management advised shareholders to vote against the proposal. Committed to being a good environmental steward, Dominion is pursuing an integrated strategy to reduce greenhouse emissions based on a diverse fuel mix, including gas, nuclear, hydro, wind and solar, the company stated. Between 2000 and 2015, the company has reduced the carbon intensity of its generating fleet by 43%, and it has forecast that carbon intensity will fall another 25% as it expands solar production to 5,200 megawatts over the next 25 years.

Dominion says it is one of the lowest carbon-intensity electricity producers in the U.S. Producers at the lowest end of the scale are pure-play renewable companies.

Also, the company responded in the proxy statement, it already reports on financial risks relating to climate change in its 10-Q forms and in its Citizenship & Sustainability Report. Three years ago, it published the “2014 Dominion Greenhouse Gas Report.”

As for the charge that Dominion isn’t taking into account the potential for tighter carbon emissions, in remarks made during the shareholders meeting, CEO Tom Farrell said that carbon regulation is coming. While some politicians have suggested that the Trump administration will roll back the Obama administration’s Clean Power Plan, Farrell said that the EPA is legally required to regulate CO2 emissions, and that a McAuliffe administration study group will come out with state-level recommendations in June.

Bacon’s bottom line: One can argue with the premises of the shareholder proposal, but it really doesn’t matter if the authors are right or wrong in their particulars. What matters is whether shareholders owning a majority of shares believe they are right. If a few more shareholders agree, joining those in the 48%, they could push through their proposal a year from now.

The High-Tuition, High-Discounting Model for Higher Ed Looking Unsustainable

Private colleges are offering steeper tuition discounts than ever before –49.1% for 2016’s first-time, full-time freshmen. But the strategy does not seem to be luring students or boosting revenue. The hefty discounts, reports the Wall Street Journal, “signal how pricing power is shifting from schools to students as some grow skeptical about the value of a costly college degree.”

Private college prices, like hospital prices, are increasingly divorced from reality. Only a tiny percentage of households can afford to pay $60,000 a year in tuition, fees, room and board — and only a small percentage pay the sticker price. Private colleges are price discounting aggressively as they compete for a shrinking number of college students. Nationally, undergraduate enrollment fell 1.9% last fall to 16.3 million.

Despite the increase in sticker price, rampant discounting resulted in net tuition revenue only 0.2% higher this year, well below the estimated 1.8% inflation rate for institutions of higher education, the Journal reports.

Said Ken Redd, director of research and policy analysis at the National Association of College and University Business Officers: “The path they’re on may not be sustainable for very much longer.”

Bacon’s bottom line: At Bacon’s Rebellion we focus mainly on Virginia’s public, not private, institutions of higher education. The sticker price for public colleges hasn’t gone as haywire as they have at private institutions, and public colleges don’t discount prices. Not officially. But they do discount through the back door by setting aside increasingly large sums of financial aid for lower-income students.

This chart shows the meteoric rise of financial aid provided by public Virginia institutions between the fall years from 2005 through 2015, based on State Council for Higher Education in Virginia data:

At state institutions push tuition & fees ever higher, the tab becomes ever more unaffordable to lower-income students. So colleges set aside more money for financial aid… most of which comes from tuition… which pushes tuition prices higher.

While the cost of attendance and price discounting are muted in comparison to private institutions, Virginia’s public colleges and universities are facing the same challenge: fighting for a shrinking number of applicants. With continued tuition increases, they are testing the outer bounds of what students will pay. George Mason University increased tuition 5.5% for in-state undergraduates this year, and Virginia Commonwealth University raised its tuition 3.8%. Will students continue to pay such elevated charges?

While elite Virginia institutions may have power to raise tuition with impunity, middle-tier institutions should heed what is happening to private colleges and universities where aggressive pricing combined with a shrinking demand has resulted in declining enrollment and stagnant revenues. This fall, when enrollment numbers are tallied, will tell the tale.

Bacon’s Mushroom Theory of Economic Development

Pennsylvania mushroom farm

Pennsylvania mushroom farm. Photo credit: Wall Street Journal

We’ve all heard the mushroom theory of management — shovel s*** and keep ’em in the dark. Well, brace yourself for Bacon’s mushroom theory of economic development.

Almost half of America’s mushrooms are produced in Chester County, Pa. After peaking in 2014, however, production has declined slightly in recent years. A big problem: a labor shortage. Reports the Wall Street Journal:

Most mushroom growers have failed in efforts to recruit locals for harvesting jobs, which can bring in as much as $50,000 a year but often require workers to start by 5 a.m. and put in six days a week.

“We’d love to get people who live in this area,” said Meghan Klotzbach … regulatory manager for Mother Earth. “They graduate from high school, they just go to Wal-Mart to work. Why can’t you come here and pick mushrooms?”

Chester enjoys no natural advantages in mushroom growing, which takes place indoors, in the dark, using composted soil. The concentration of the industry in this one Pennsylvania County is a historical curiosity, dating back to two Quaker flower growers in 1885 who discovered they could use wasted space under their carnation beds to grow mushrooms. The region maintains its dominance in part due to an elaborate supply chain that funnels large volumes of manure to the farms. But mushrooms can be cultivated anywhere.

Indeed, they are grown in Virginia. A quick Internet search reveals at least three mushroom farms: North Cove Mushrooms in Charlottesville, Sharondale Farm in Cismont (near Charlottesville), and Urban Choice, which is located in the Scott’s Addition area of Richmond.

The Virginia mushroom farms are small enterprises that sell mainly to farmer’s markers and local restaurants. If labor is a constraint in Chester, Pa., why can’t Virginia farmers take up the slack? Wouldn’t $50,000 a year sound like good money to workers in rural Southside and Southwest Virginia (or for inner city workers in Richmond)?

The Washington, Hampton Roads and Richmond metropolitan regions represent a vast market for fresh, locally grown produce of all kinds. Rural Virginia needs more, better-paying jobs. Mushroom cultivation could fit the bill. Find a couple dozen niche agricultural products like mushrooms, and we could see a rural revival in the state.

Just a thought….

Bringing Social Science Rigor to Jailhouse Programs

Sarah Scarbrough interacts with Richmond city jail inmates. Photo credit: Style Weekly.

Richmond Sheriff C.T. Woody spent his early career as a policeman and detective putting people behind bars. As sheriff, he has made his mark by trying to keep people out of jail.

One of the smartest things Woody did was bring on Sarah Scarbrough as director of internal programs at the city jail to deliver programs that give inmates the life skills needed to cope on the outside. One of the smartest things that Scarbrough has done is to subject the jailhouse programs to rigorous social scientific analysis to determine what works to reduce recidivism and what doesn’t.

A recent study by a University of Richmond professor, Lisa Jobe-Shields, found that inmates who enroll in the city’s Recovering from Everyday Addictive Lifestyles program have shown a demonstrably lower rate of recidivism than those who don’t. But the study had an important caveat — the results apply only to those who participate for more than 90 days, reports the Richmond Times-Dispatch.

Nationally, recidivism runs between 60% and 70%. In Richmond, where Woody has long emphasized learning and self-improvement programs in the jail, the rate is lower. The Jobe-Shields study found that the rate for inmates who participated in the Addictive Lifestyles program for more than 90 days is lower still: Only 30% re-offended within a year of release, compared to 55% who didn’t. There was no difference in the rate for those who took party for fewer than 90 days.

As the Times-Dispatch describes the program, it “treats jail life like a full-time job where male and female inmates complete classes ranging from remedial math and creative writing to anger management, parenting and drug abuse treatment through a 40-hour week.”

The study provides feedback for improving the program. Noting that the city jail is a short-term facility, some inmates don’t stay long enough to complete the program. Scarbrough said she plans to add evening and weekend sessions to extend the program beyond a 40-hour week. She also would like to provide support to inmates who were released from graduating from the program.

Bacon’s bottom line: I’m not saying that Woody and Scarbrough have devised the nation’s best anti-recidivism program — there may well be programs in other parts of the country that do just as well, or even better. But they are going about the job the right way, and results should improve over time as they incorporate feedback and make continual improvements to the program.

The sociological reality is that many jail inmates come from shattered families and dysfunctional subcultures of poverty, and had no one to teach them basic skills required to function successfully in life. In the Woody-Scarbrough paradigm, jail does far more than keep criminals off the streets — it provides an opportunity for inmate to learn life skills that will enable them to function successfully in society as workers, parents, family members and members of the community.

It is a truism that jails and prisons can be incubators of crime — inmates learn how to be more successful criminals. Likewise, it is a truism that society should invest in giving inmates the skills they need to become productive members of society. Jails offer many programs run by noble-minded people with ideas of how to help. But which skills are most needed to function on the outside? What is the best way to inculcate those skills? Which programs work the best, and what traits make them successful? Virginia sheriffs can’t reliably make those judgments based on anecdotal evidence.

Finding reliable answers requires social scientific rigor. By nudging government programs toward what works, social-scientific insights can save thousands of inmates from lives of crime — and, as a worthwhile bonus, save taxpayers millions of dollars.

In Placid Session, VCU Board OKs 3.8% Tuition Increase

The Virginia Commonwealth University Board of Visitors approved a 3.8% tuition & fee increase for in-state undergraduate students today, which, along with increases on out-of-state students and dentistry students will yield a 6.4% increase in overall tuition & fees — an increase of $25.7 million.

The increases help offset an $11 million reduction in state support in the 2017-2018 budget and cover other rising costs. The budget provides a $5.1 million increase in financial aid to students, $12 million for a 3% raise for faculty and staff, $8.3 million in “unavoidable” operational and academic costs, and millions more in “highest priority” needs.

“This is a lean budget that addresses unavoidable and operational costs and focuses on our highest priority needs,” said VCU President Michael Rao in a prepared statement. “We are mindful of the cost and burden on students and their families and have increased the amount of university financial aid to students. We are also mindful that we must provide a quality education expected by high-performing students at a major public research university. This is what our students expect and deserve.”

The tuition increase will add about $494 to the annual cost of attendance for a full-time in-state undergraduate student. Smaller increases in dormitories, dining and parking will add even more.

Robert Holsworth, a former dean of the College of Humanities and Sciences, was the only board member to question the tuition increase. Referring to the budget presentation by Karol Kain Gray, vice president of finance, he noted, “There hasn’t been a slide that deals with student debt. We now have the largest student debt of any public university in the state. Other universities have done a better job with affordability.”

VCU is “doing a lot of good things,” Holsworth said, but “I am concerned that we’re … losing our commitment to affordability.”

There followed a train of comments by other board members deploring tuition increases and high student indebtedness but justifying the hikes as necessary to maintain academic quality in the face of state budget cuts and increasing expenses.

The one concrete proposal from that exchange came from G. Richard Wagoner Jr., former CEO of General Motors. Instead of budgeting in one-year cycles, he suggested, perhaps VCU could adopt a longer perspective and ask what kind of tuition policy it wants to have. “What’s a desirable policy?” he asked. Zero increases in tuition? Tuition increases that keep place with inflation? Tuition increases that equal inflation plus two percent?

“I could not agree with you more,” said Rector John A. Luke, Jr., former CEO of MeadWestvaco, although he noted that over the long term the increase in tuition “almost mirrors exactly” cuts in state support. He said VCU needs to find a way to avoid being “held hostage” to the state’s budgetary needs.

William M. Ginther,  a retired banking executive, suggested that VCU needs a “business strategic plan” to accompany its budget plan to develop new revenue options and identify cost-cutting opportunities.

No action was taken on any of these ideas. But the board did vote to adopt the budget and tuition increases. Holsworth voted no.

Bacon’s bottom line: I have attempted to fairly describe the meeting highlights above. Now for some analysis. The board meeting saw little substantive discussion about the budget. Other than Holsworth, not one board member pushed back on the administration’s presentation of the budget or its justification for raising fees. I did not attend the earlier finance committee hearings in which the budget was examined in greater detail, but no one alluded to any disagreements in those meetings either.

VCU’s “unavoidable costs.” Click the thumbnail for a legible image.

The administration almost pre-determined the outcome by the way it framed the budget presentation. The FY 2017 budget was taken as a baseline — nothing was questioned — and new costs and programs were layered on top. Click on the thumbnail to the left to see the list of $8.3 million in “unavoidable” costs: everything from shuttle service and library journals to faculty promotions to operations & maintenance on new buildings.

Highest-priority needs. Click for legible image.

To those costs VCU added “highest priority needs” such as $1.8 million in merit-based financial aid, $3 million in need-based financial aid, and implementing a 3% increase in salary and compensation for faculty and staff. These and other priorities amounted to $19.3 million.

VCU picked a tuition increase — 3.8% — that closed most of the gap. A $3.8 million budget shortfall remains, which will be addressed “at the unit level across the university,” according to the press release.

VCU administrators provided data showing how state funding is chintzy compared to that of other states — as, in fact it is. Virginia’s $4,930 per student ranks 44th among the states, far less than the $6,966 national average.

But in a nearly $1.2 billion budget, there are many ways that VCU did not explore to make up the loss of $8 million in state support. For example, the administration provided no analysis of what private businesses would call product line profitability. VCU supports a wide variety of schools and departments — academic product lines — but the public, and board members, have no way of telling whether the courses are fully subscribed or ill attended. Businesses sell or shut down unprofitable product lines. VCU’s approach to the budget effectively treats every budget and department as sacrosanct. Continue reading

Another Dead End in Bacon’s Never-Ending Quest to Explain Runaway College Tuition

This post gets a little wonkish, but hang in with me. Useful conclusions are reached by the end. The heart of the scientific method is to propose falsifiable hypotheses. You frame a hypothesis, make a prediction, and check the data to either verify or falsify the prediction. In my own clumsy, untutored way, that’s what I do when I can in the messy realm of public policy.

So, I’ve been working on a series of articles on the success, or lack of it, of higher education policy in Virginia since the enactment of the watershed 2005 Restructuring Act. I am asking whether Virginia’s system of higher education has met the goals articulated in that legislation — in particular, of primary interest to me, the goal of ensuring affordability and accessibility. What are the drivers of higher ed’s ever escalating costs?

One working theory is that the expansion of Virginia’s higher-ed system to accommodate increasing enrollment might have been a significant factor. Between the fall of 2005, the year the restructuring act went into effect, and the fall of 2016, the most recent year for which we have data, enrollment at Virginia’s public four-year colleges and universities increased 10.9% — reaching 215,700 students. By necessity, growing enrollment by more than 22,000 students over 11 years — roughly the equivalent of adding a James Madison University to the system — requires hiring more faculty, erecting new classrooms and dormitories, expanding student services, and hiring new administrators, all of which adds expense to the system. Have higher-ed institutions financed the expansion in part by aggressively raising tuition?

I expected the answer to be yes. I ran the numbers. It appears that I was wrong.

This chart, based on State Council for Higher Education in Virginia data, shows how enrollments surged between 2005 and 2001, then leveled off through 2016.

For each of Virginia’s public, four-year colleges and universities, I plotted the percentage increase in enrollment and percentage increase in annual tuition between 2005 and 2016, as can be seen in the scatter graph below.

The trend line shows virtually no correlation between the two. The R² of .0134 suggests that almost none of the variability in tuition increase over the time period is explained by enrollment increase.

Next, I observed that almost the entire enrollment increase occurred between 2005 and 2011. Could there have been a strong correlation during that period, which was washed out by subsequent years? To see, I plotted the data for enrollment and tuition increases between 2005 and 2011.

The data shows a marginally tighter correlation, with an R² of .0691, suggesting that about 7% of the tuition increase between 2005 and 2011 can be explained by the surge in enrollment. It would be hard to make the case from this data that expanding enrollment had more than a weak, secondary effect on tuition.

If enrollment didn’t drive tuition higher, what did? We know that declining state support per student put tremendous pressure on university administrations to boost tuitions, accounting for half or more of the increase. Everyone knows this to be the case, so there’s nothing new to uncover. Of greater interest is what internal university forces have been driving tuitions higher? One likely contributor has been a push to bolster financial aid for lower-income students. Another possibility I’ll examine is the imperative among research universities to win more external research contracts. One might hypothesize that universities have raised tuition in part to build the expensive labs, hire the star faculty and recruit the promising graduate students it takes to win more contracts.

I don’t know the answer to those questions yet. But I’ll keep digging.

Fifteen Nucleii for the Rebirth of Southwest Virginia

Stephen Moret, CEO of the Virginia Economic Development Partnership. Photo credit: Roanoke Times

Southwest Virginia is on track to lose 1,000 residents each year for the next decade, Stephen Moret, chief of the Virginia Economic Development Partnership, told attendees of the Southwest Virginia Economic Forum in Wise, yesterday. The region needs to add 250 new jobs per year over and above the new jobs already coming just to stay stable.

Achieving a 1% annual growth rate will require adding three times the number of new jobs each year, he said, as reported by the Roanoke Times. “Yes, it’s a big challenge. Yes we’re up against a lot nationally, but this is something we can achieve if we’re focused enough, aggressive enough, committed enough.”

Moret proposed a six-point plan to jump-start the region’s economy. As summarized by the Times, he recommends:

  • Expanding computer science programs at higher education institutions.
  • Increasing workforce development training to match business needs.
  • Altering Virginia’s tax structure to reduce taxes on technologically advanced manufacturing businesses.
  • Offering higher incentives to companies willing to relocate or expand in rural Virginia.
  • Spending money to market rural Virginia — something the commonwealth doesn’t currently do.
  • Creating mixed-use developments attractive to young professionals as a way to improve quality of life factors.

You can download a copy of Moret’s presentation from Google Docs. The presentation begins his aspirational goals for Virginia and VEDP, then places Virginia’s rural development challenges in a national context, and ends with a few ideas to advance economic development in the coalfield region (i.e., far Southwest Va.)”

Bacon’s bottom line: These ideas all sound reasonable… but five of the six require more money, either directly through higher expenditures or indirectly through tax breaks. Unfortunately, there’s not a lot of extra cash floating around, either at the state level or the local or regional levels. Perhaps the Tobacco Region Revitalization Commission, which has an annual budget of about $30 million, is in a position to fund the workforce training initiatives, incentives and marketing programs. Perhaps the higher-ed sector can reallocate funds to expand computer science programs. But it won’t be easy finding the resources for new initiatives.

The most original idea — indeed it’s such a departure from the usual thinking about rural economic development that it slaps you like a mackerel across the face — is the recommendation to create mixed-use development attractive to young professionals. This notion has much to commend it, not the least of which it doesn’t require subsidies or tax breaks, and is fully within the power of local governments to implement, subject to market constraints.

I would like to expand upon the idea. By my count there are four cities — Bristol, Radford, Galax and Norton — in Southwest Virginia and more than 40 incorporated towns. The towns range in size from Blacksburg (population 44,200) to Clinchport (population 67) in Scott County — both the largest and the smallest in the Commonwealth. Many of these cities and towns have walkable Main Streets or downtown districts capable of supporting mixed use development.

Blacksburg is a unique case. Its vibrant downtown district is an extension of Virginia Tech, an economic powerhouse unmatched elsewhere in the region, and its success cannot be replicated. But I have frequently referred to the example of Abingdon, which I believe can serve as a template for communities not endowed with a major research university. Abingdon has built an attractive, walkable downtown around the nucleus of the historical Barter Theater, the Martha Washington Inn and a stock of historic brick buildings. The town has become not only a place where people want to visit but where people want to live.

Counties, cities and towns need to fundamentally shift their thinking — as embedded in zoning codes, comprehensive plans, and capital spending plans — from subsidizing rural sprawl to creating walkable urban nucleii. Capital spending plans should invest in expanding the grid street networks from their Main Street/downtown cores. And if they have any cash to spare, municipalities should invest in sidewalks and streetscapes (and, if demand exists, cycling lanes) with the goal of making streets more hospitable to pedestrians. But they need to do it right. Place making is a complex discipline, and investments should be guided by the principles of Smart Growth or New Urbanism. Finally, cities and towns need to get comfortable with the idea that mixing offices, retail and residential is a good thing — it’s what more and more people want.

The big challenge is overcoming stagnant or shrinking populations. It’s hard to justify investing in new buildings in walkable, mixed-use districts if there is little demand. That’s where a regional marketing plan could prove invaluable. But instead of spending marketing dollars on trying to attract light industry (as I presume Moret intends), or even young people, who will be a hard sell without abundant jobs, I would suggest spending it on attracting retirees looking for inexpensive places to spend their leisure years. Such a campaign should not aim at retirees generally but (a) emigres who may have sentimental or family attachments to the region, or (b) retirees seeking to live an active, outdoors lifestyle.

By my hasty, back-of-the-envelope calculation, Southwest Virginia has at least 15 communities of sufficient scale to create small, intimate, walkable places where people with significant disposable income might be willing to live. (My list is hardly definitive, and likely would need to be revised, but the guiding idea is sound.) These are the potential nucleii for rebirth. These are where the tobacco commission should be investing in broadband, where the state and counties should be funneling infrastructure dollars, and where institutional assets such as schools, colleges, museums, libraries, community centers should cluster.

Southwest Virginia needs to reinvent itself for the 21st century economy. Light industry, data centers, solar farms, call centers and back-office operations are all part of the equation. But creating places where people actually want to live is indispensable as well. Kudos to Moret for raising the issue.