Aunt Virginia Needs You (As An Election Officer)

The EPB! (Electronic Poll Book)

One of the sheets of paper taped on the wall in Richmond’s Maple Avenue Fire Station Tuesday was a recruiting poster seeking additional qualified people to become “one of the elite!”  Not Marines, not Green Berets or fire fighters – election officers.  Uncle Sam and Aunt Virginia need you for this job, too.

The various disputes in House of Delegates races last fall reminded me that I had always wanted to try working inside the polls.  For many years I was doing precinct work on the outside, taking care of the GOP signs and giving voters a handout or final harangue, and sometimes I watched the count process as a party observer.  That’s not happening in the Age of Trump so I wanted another way to get involved.

This year brought some certainty that I could keep the days of the primary and general elections free, so Tuesday at five a.m. I stumbled into the firehouse for my rookie effort.  Given it was an abysmal-turnout primary (GOP ballot only in Richmond) and the voters would be few and far between, it was a perfect practice run.  A few general observations:

First, I really would encourage you to try this assuming you are up to a 15-16 hour day with a good bit of time on your feet.  It is vital that people who respect the election process are conducting it, because it is still very hands-on and open to error.

Second, somebody needs to put in a bill that gives local electoral boards full powers of eminent domain for election days.  Finding the right locations with sufficient parking is also important as long as we continue one-day, in-person voting.   Yours truly failed in his morning mission of protecting a few parking spaces in the nearby public lot as reserved for voters, and suddenly there was only one space open.  I chased many non-voters out of it.  I’m semi-serious that a short term grant of eminent domain might help secure locations and parking.

Third, changing precinct lines should be hard to do and happen very seldom.  It breeds great confusion, and we had scores of voters complaining “but I’ve always voted here!” and “I never saw any notice!” when they were turned away.  The new electronic poll books automatically generate actual driving directions to the correct polling place, printed on a slip to hand to the unhappy voter.  That helps.

Fourth, it’s amazing how many voters remain unaware of which candidates match their districts.  That part of Richmond used to be in the Seventh Congressional District, Dave Brat’s district, and a few years ago was moved by court order to the Fourth District, now represented by Donald McEachin.  We had another subset of voters, larger than the group coming to the wrong poll, who wanted to vote in the Seventh District Democratic primary.  Some got all the way checked in before realizing they didn’t want to vote in the GOP primary.

This problem is on the voters, and to some extent on the parties who could consider at least one pre-election mailing to each registered household with that basic information.  We started stressing to people at the door that our precinct had no Democratic primary.  It will happen again in November because of the spirited race coming in that neighboring district.

Electronic poll books, paper ballots that are automatically assessed and counted by the voting machine, a new machine for the visually impaired which we didn’t need – the technology is great, but at the end of the day civility and humor and patience keep the flow moving and human eyes need to confirm that the person standing there is indeed who they say they are, and that the numbers on the poll books, on the paper ballot tally, and on the voting machine all balance.  We check every 15 minutes.

It was a breeze Tuesday.  When five or six times that many voters come in November, it will be more problematic.  Think about joining us.

A Trump-Stewart Republican Party?

Map credit: Virginia Public Access Project

What do we make of Corey Stewart’s nomination as Republican candidate to run against Tim Kaine for the U.S. Senate seat? Does Stewart’s narrow victory portend a reshaping of the Republican Party of Virginia along more populist, Trumpian lines?

I think a fundamental political realignment could be occurring, but the outcome hinges on events yet to unfold. A lot will depend on what happens to President Trump. If his administration collapses in scandal, as it very well could, so does the populist movement within the Virginia GOP. If, on the other hand, Trump is vindicated in the “Russia collusion” concoction, if the machinations of the Deep State are revealed for all to see (see the release today of the OIG report), and if the economy continues to boom, many people will forgive his character flaws and rhetorical abominations, and Trumpism could very well take lasting root in the party of Lincoln, McKinley and Reagan.

The prospect of a realignment also depends upon how successful Stewart will be in what he promises to be a “vicious campaign” against Kaine, who, whatever one thinks of his politics and his off-putting performance during 2016’s vice presidential debate, is widely regarded as a likable person and the antithesis of vicious. It was one thing for Trump to run a nasty campaign against Hillary Clinton, who had more baggage than Kim Kardashian on a trip to Cannes, and quite another to run one against Mr. Clean. I further question whether Virginia voters, after two years of watching the politics of personal destruction in Washington, D.C., have an appetite for more of the same closer to home, so I am skeptical that Stewart’s pledged scorched-earth campaign will resonate. Indeed, I expect that it will fail spectacularly, in which case Stewart will be repudiated and the GOP could become safe once again for moderates and libertarians.

But my opinion may not count for much. I’m an educated suburbanite, and Stewart isn’t appealing to people like me. He’s hoping to mobilize the forgotten men and women of the white working class and middle class — those who feel alienated from elitist culture and the structures of power.

There may have been enough such voters to capture a GOP nomination, but are there enough to win a statewide U.S. Senate campaign? Stewart won only 45% of the Republican vote in a relatively low turnout primary. If he can unite the party, he has a remote chance of winning the election. If he can’t, he has zero chance. He drew disproportionate strength from the predominantly white localities west of the Blue Ridge Mountains, moderate support in Northern Virginia and the southern Piedmont industrial quadrangle (Roanoke, Lynchburg, Danville, Martinsville), but little anywhere else.

Here’s his problem. While nearly all Republicans and many independents recoil from the Democratic Party’s identity politics, they are divided about how to respond. Stewart answers the rhetoric of minority grievance and resentment with the rhetoric of white grievance and resentment. In a demographically diverse state like Virginia, that’s a losing proposition. Nick Freitas and E.W. Jackson, Stewart’s primary opponents, staked out more inclusive positions of opportunity for all. That’s a fundamental philosophical dividing line.

In the current political environment, I see three big buckets of voters — (1) those who hew to the Democratic tribe emphasizing grievances based on color, gender and sexual orientation, (2) those who hew to the Trump-Republican tribe emphasizing white working/middle-class grievances, and (3) those who eschew tribal identities altogether and see people as individuals with cross-cutting identities and priorities. The third group, I would suggest, overlaps significantly with a voting bloc I have referred to in the past as “natural libertarians” with a tolerant live-and-let-live philosophy — and that includes many Republicans who didn’t vote for Stewart.

The logical home of the natural libertarians, I would suggest, is within the Libertarian Party — if only the LP could broaden its appeal beyond its core base of intellectual purists by finding a large demographic constituency. In case you missed it, the LP has fielded a U.S. Senate candidate, Matt Waters. With a platform that includes ending the federal income tax, however, it’s hard to imagine voters taking him seriously.

Where Are the Consumer Rights Advocates When You Really Need Them?

Consumer rights advocates work themselves into a wrathful froth over the misdeeds of banks, payday lenders, credit card companies, and mortgage lenders. But what about the truth-in-lending abuses perpetrated by institutions of higher education? We don’t hear so much.

With the cost of attendance of a four-year degree routinely exceeding $100,000, selecting a college can be one of the biggest financial decisions that Americans can make — probably the biggest decision for low-income families that never purchased a house. But the financial terms and conditions provided in acceptance letters are notoriously opaque, finds a study by the New America think tank and financial-counseling firm uAspire.

The two outfits published a study last week based upon an examination of 11,000 award letters sent in 2016 by more than 900 colleges. Summarizes NewAmerica’s Kevin Carey in the Wall Street Journal: “It found most of them use obscure terminology, omit vital information, or present financial calculations that appear deliberately deceptive. Many letters are confusing in their own unique ways, making it difficult for students to compare colleges.”

Of the 515 colleges that awarded them via nonstandard letters, more than a third provided no information about how much attending school would cost. The letters highlighted grants and scholarships as a way of convincing students to enroll, but without listing tuition or explaining how much money students would owe. …

The letters that did disclose costs were inconsistent. Some listed only tuition. Others included room and board. Others added books and estimated living expenses. … Seventy percent of colleges with nonstandard letters created further confusion by lumping together grants and loans, as if both were freebies.

Carey cited a letter sent by the University of Arizona that told a student that the cost of attendance was $48,200 a year, then subtracted $5,815 in grants, $5,500 in work-study opportunities, and $26,885 in loans. “Net Costs After All Aid” were “$0.00.”

A used car dealer who delivered a pitch like that would be slammed with a fine and driven out of business.

Many (not all) public colleges and universities engage in practices that would make a payday lender blush. It all makes sense when you understand that higher-ed institutions are, beneath the lofty rhetoric about justice and equality, mechanisms for the extraction of wealth from students and taxpayers, the pursuit of status and prestige within the academic community, and the remuneration of elite faculty and administrators.

Feeding the system requires inducing as many students as possible to enroll, which is becoming increasingly difficult as the cost of attendance continues to outpace incomes and financial aid.

How can lower-income Americans be protected from the higher-ed racket? New America recommends requiring colleges to use a standardized award letter that explains expenses, grants and loans clearly so recipients can easily compare offers by competing institutions. The Department of Veterans Affairs already mandates this kind of transparency for students benefiting from the GI Bill. Congress should require a standardized letter for all institutions receiving federal money.

And if Congress doesn’t act, I would suggest, the Commonwealth of Virginia could require a standardized letter for all state institutions — or, at the very least, for institutions offering state-funded financial aid. Colleges and universities should be free to determine the substance of their own financial aid packages, but there should be full transparency in how those packages are presented to students and their families.

Being Dealt A Losing Hand That Lingers

There are times in life when four aces is a tough hand to hold.

Common themes on this public policy forum include poverty and its causes and cures, school failure and related discipline matters, health problems and the difficulty understanding why these conditions remain so widespread in this great nation and commonwealth.  I invite you to temporarily suspend your preconceived notions and examine some hard data that upset some of mine.

My quick summary is not doing this work justice but this is a blog, not the New Yorker.

More than twenty years ago two researchers on opposite sides of the country were feeling their way toward explaining strong correlations they observed between childhood experiences and later physical diseases.  One noted that people who dropped out of obesity treatment were often sex abuse victims.  A collaborative study was funded by the Centers for Disease Control and Kaiser Permanente.  About 17,000 people were asked to fill out a simple 10-question survey on various adverse childhood experiences (ACEs) and then the results were correlated with their health records.

Here, take the test yourself.

The results were astounding.  Adults who had high ACE scores also were substantially more likely to have – decades later — a number of health problems up to and including early death. People with a score of six or more were potentially looking at lifespans of 20 fewer years.  From the summary I linked:  “Compared to an ACE score of zero, having four adverse childhood experiences was associated with a seven-fold (700%) increase in alcoholism, a doubling of risk of being diagnosed with cancer, and a four-fold increase in emphysema; an ACE score above six was associated with a 30-fold (3000%) increase in attempted suicide.”

It was widely known that children who were physically or sexually abused were more likely to become offenders themselves, and the concept of psychosomatic illness is ancient.  We’ve long talked about the cycle of poverty.  But here was hard proof in a simple and easy to replicate study.  It then led to brain studies that discovered that trauma and the resulting floods of cortisol and adrenaline actually change physical brain structures.  The how is becoming clearer.

This initial group was not a low-income population.  Heart disease, depression, family violence, drugs and learning problems are not limited to poor neighborhoods.  But the work has sparked a slowly spreading revolution in education and social services.

Consider the implications of simply changing the question “What is wrong with this child?” to “What has happened to this child?”  When you make that mental shift, does it change the way you think about the argument over long suspensions for primary school students with control issues?  Do you really think sitting out of school for a long period (unsupervised) is going to change anything?  Do you worry a little bit more about the impact on a child of a being evicted a series of times?  Are you a bit more interested in providing Medicaid to the whole family instead of just the children?

Source: CDC

Continue reading

The “Energy Cloud” — Buzzword or the Future?

To get an idea of how people outside of Virginia are thinking about energy policy, I listened two days ago to a webinar produced by Navigant Consulting on the emerging “energy cloud.”

The energy cloud, says Navigant, will come from applying digital technologies to the electric grid, shifting from a one-way flow of electrons on power lines to a multi-directional flow and moving from large, central power stations toward Distributed Energy Resources (DER). “A cleaner, intelligent, increasingly mobile, and more distributed grid is just around the corner.”

After decades of relative stability, Navigant opines, the U.S. is entering a period of great change. “New value will be created and captured across highly dynamic and disruptive Energy Cloud platforms. … Energy incumbents, especially utilities, have less than 5 years to reorient their products and business models around fast emerging technology ecosystems like iDER, Smart Cities, and IoE (Internet of Everything) or risk becoming a fringe player in the emerging energy economy.”

Now, I recognize that Navigant charges exorbitant fees for business-intelligence services by persuading people that its consultants and analysts perceive the onrushing future with greater clarity than anyone else. The firm touts the Next Big Thing and makes the case that disaster will befall anyone who gets left behind. That said, Navigant talks to a lot of people, including those with potentially disruptive technologies and business models, not just established players wedded to the status quo. It would be unwise to dismiss its prognostications out of hand.

Distributed energy will be as disruptive to the electric power industry as solar and wind power, Navigant says. For example: Electric-powered vehicles, which operate on batteries and plug into the grid, will be huge. Over the next 10 years, distributed energy resources — which includes fleets of electric vehicles that can feed into and draw down from the grid at will — will grow at eight times the pace of central-station generation, the firm predicts.

Also, says Jan Vrins, managing director-energy for Navigant, the industry is moving away from one-size-fits-all electric power to highly personalized products and services. “Energy providers are providing what customers are looking for. As energy and electric power becomes more important to our society,” he says, “there’s a significant opportunity to go after new revenue streams around transportation, around industrial and commercial customers.”

Mary Powell

The Un-utility. One of the presenters was Mary Powell, CEO of Green Mountain Energy, a Vermont utility. “I don’t view DER as a threat,” she says. “We see opportunities to create deeper, more substantial relationships with our customers. We have a customer-obsessed culture. … Three or four years ago, we began to focus on how do we accelerate the consumer-led revolution to distributed resources.”

Vermont customers are politically progressive, and they want a different energy future. A decade ago the emphasis was on solar energy and putting solar on rooftops. The conversation has evolved since to smart grids, demand-management, energy efficiency, energy storage, and flattening the peak in energy demand. “We’re not just attacking the peak, we’re crushing it,” Powell says.

Reinventing itself as the “un-utility,” Green Mountain Power has transformed its corporate culture. Instead of thinking about how to grow demand for electricity, the team has asked, “What happens if we lost 40% of our traditional revenue over 10 years? How do we create a new value stream?” The approach has been to experiment a lot. “Try something in a nimble, gritty, low cost way,” says Powell. “Don’t take massive bets. Make lots of small bets, and lean into the ones that offer great value for customers.”

How’s that all working out for Vermonters? The webinar didn’t get into that. Vermont’s electric rates are about 50% higher than Virginia’s. But then, electric bills are lower. Vermonters don’t need air conditioning, and they typically use gas or oil to heat. Can lessons learned in Vermont apply to Virginia? That would make an interesting discussion.

Paula Gold-Williams

Utility-scale solutions in an era of DER. CPS Energy, which supplies electricity to the San Antonio, Texas, area, serves a very different customer base. Energy customers aren’t as politically driven in Texas as in Vermont, but they are changing, and CPS Energy is changing with them, says CEO Paula Gold-Williams.

Some customers want the kind of personalized electricity described in the Navigant playbook. But, Gold-Williams says, “I have customers on the other end of the spectrum who say, ‘I don’t even want to think about it. I don’t want to think about technology. You’re the energy expert, you do what you think is right.'” Continue reading

What the 2018 Tax Cuts Mean for Virginia

How will the tax cuts from the 2018 Tax Cuts and Jobs Act impact Virginia households? The results vary considerably by income bracket, according to a tax calculator published by the Tax Foundation. Higher income households, making over $200,000 per year, will get the biggest income tax breaks as measured in absolute dollars and by percentage of income.

But, despite the hand-wringing over the elimination of the tax deduction for state and local taxes, there is only modest variance among high-income households between high-tax Northern Virginia and other parts of the state.

To illustrate the impact by income category, I selected Congressional District 7, which stands at the geographic center of the state and encompasses a range of higher-income suburban households and lower-income rural households. As seen in the table above, there is very little in the tax package for people making less than $25,000 per year. Of course, given the highly progressive structure of the tax code, people making less than $25,000 per year pay almost no taxes to begin with.

The tax act is fairly generous to working-class and middle-income Virginians but most generous to those making over $200,000 per year. If your No. 1 concern is sticking it to the rich, this bill doesn’t do it. In fact, the Tax Foundation data makes the tax act look like a giveaway to the rich — more or less as its Democratic Party critics described it.

Unfortunately, this static analysis obscures as much as it reveals. By eliminating many deductions employed by the wealthy, tax reform should flush considerable income out of tax shelters into the taxable open. One can predict several things: (1) that taxable income will rise, which (2) will induce hysteria among the social justice warriors obsessed about income inequality without appreciating the difference between gross income and net (taxable) income, and (3) will result in higher tax payments than would be predicted by static analysis. If your No. 1 concern is ensuring that the rich shoulder an increasing share of the income tax burden, then such an outcome is entirely possible under the tax plan — although we won’t know for sure until the data comes in.

Another thing that static analysis overlooks is the impact of the tax cuts on the economy. At a minimum, lower taxes will create more disposable income, some proportion of which will be plowed back into the economy in the form of increased consumer spending. If the money isn’t spent, it will be used either to pay down debt (a good thing) or invested (also a good thing). It seems pretty clear that Democrats’ fears of an economy cataclysm resulting from the tax cuts are not being borne out. In the short run, the cuts clearly are boosting the economy. They’re also boosting deficits, however, which does aggravate the long-term problem of endemic deficit spending and make a Boomergeddon scenario all the more likely.

There is some geographic variability in tax cuts for top-earning households ($200,000 and up), as can be seen in the chart to the left, but it is modest. Fears fanned by critics that high-income earners in high-tax districts might be losers do not appear to be panning out in Virginia. Northern Virginia districts 8, 10, and 11 don’t get tax breaks as big as their high-income earners in other districts, but they do get tax breaks. Big ones. If anyone has a problem, it’s Maryland’s 4th and 5th districts east of the District of Columbia. There, top income earners get tax breaks averaging only $9,000 per household. Is that a big enough difference to induce some to move across the Potomac? We’ll see.

Murders, Arrests and the Politics of Racial Grievance

Baltimore. Orange patches represent “low arrest” areas, blue high-arrest areas.

The Washington Post had what could have been an interesting idea: Map more than 52,000 homicides and arrests in major American cities over the past decade. Sadly, the newspaper floundered with the data, unable to identify any meaningful trends other than the entirely predictable finding that some cities do a significantly better job of clearing its murders than others. Why that might be, other than some vague talk about the level of trust between police and inner-city populations, the Post had no clue.

Two cities were highlighted graphically in the WaPo’s analysis: Washington’s metropolitan neighbors Baltimore and Richmond. Baltimore stands out as a city dominated by “areas of impunity,” where murders go unsolved and murders are rarely caught. Richmond shines nationally as an example of a city where most murders are solved. Comparing policing practices and community attitudes in the two cities might have been instructive, but the WaPo took a different path.

There are no one-size-fits-all explanations for the variation in arrest rates across all cities, but I will nominate one factor that plays an outsized role: the politics of racial grievance.

Baltimore and Richmond are ideal test cases. Both have large populations of poor African-Americans living in highly segregated neighborhoods. Both have black-majority city councils. Both have black police chiefs and public prosecutors. Richmond has a black sheriff — I’m not sure what the equivalent position is in Baltimore, but whatever it is, I’ll wager that a black politician occupies the post. Thus, we can’t explain away the difference in arrest rates by the suggestion that, say, Richmond doesn’t have same kind of poor, inner city neighborhoods as Baltimore. Nor can we can’t blame the indifference of a white-dominated political class, as might be the case in other cities.

The difference, I submit, is political ideology. In Baltimore the death of Freddie Gray while in the custody of Baltimore police escalated into a highly emotional and widely publicized controversy that fed into the Black Lives Matter narrative of endemic racial injustice. Egged on by the media, Baltimore’s politically progressive mayor and prosecutor appealed to the black population’s resentments and grievances and lambasted the performance of the police. The resulting polarization sowed mistrust between police and blacks. In such a toxic environment, the police enjoy little cooperation from the black population, making it exceedingly difficult to track down murderers and close cases. As a consequence, the murder rate soars.

Richmond’s African-American leaders are notable for their moderation and pragmatism. They don’t stoke racial grievances. While they clearly represent the interests of their poor constituents, their rhetoric supports the idea that “we’re all in this together.” They don’t see politics as a zero-sum game. They see prosperity as a rising tide that lifts all ships. As a consequence, the racial polarization that poisons police-community relations in Baltimore is far less of a problem in Richmond. The payoff is a much higher rate of arrests and convictions of murderers, and safer streets for law-abiding minority residents. Bottom line: By eschewing radical progressive rhetoric, Richmond’s black politicians get better results for their constituents.

Needed: The Right Parking Policies for a Growing Richmond

Photo credit: Richmond Times-Dispatch

by Stewart Schwartz

Editor’s Note:  The City of Richmond has launched a parking study focused on seven distinct areas of the city and is holding seven public meetings this week. Meeting dates and locations.

Parking is perhaps the most important aspect of a city to get right if we are going to address traffic, make housing more affordable, and create a sustainable, walkable, bikeable city. The City of Richmond is growing, but if it’s to grow without making traffic really bad, we need to get parking right. Too much parking, especially free or underpriced, will lead to more driving and traffic. Too much parking can also drive up building costs and housing prices, making it harder to provide housing affordable to the full range of our workforce.

As we grow, we need to provide good alternatives by expanding our transit system and adding more dedicated bus lanes over time, and adding bike lanes — especially protected ones, and make walking safer and interesting. Combine these with car sharing like Zipcar and Car2Go, taxis, and ride hailing like Uber and Lyft. With all of these options, you may not need a second car, and for some people, any car at all.

Cities around the U.S. are adopting a range of creative parking policies that combine both market-oriented and regulatory approaches to managing parking. These include:

1) Setting the right price for parking on the street so that there is good turnover in retail districts and 20% of spaces are rotating open at any one time.

2) Using residential parking permit programs but pricing the parking passes appropriately and adding car sharing options to the neighborhood.

3) Dropping use of parking minimums and putting in a maximum limit on number of spaces, while exempting small buildings from having to have any parking. Today our city actually has many zoning districts which actually do get parking right — without requiring too much.

4) Sharing parking between users — one example is daytime office parking used for nighttime entertainment parking.

5) Pricing all off-street parking in lots and structures and separating the rental of parking spaces from the apartment lease or condo purchase price, and from the office lease. This makes clear the high cost of providing parking and always results in lower demand.

6) Equalizing employee commute benefits — instead of just offering free or subsidized parking, an employer should also offer a transit pass benefit, or even a “parking cash out” where an employee offered a parking space can “cash it out” for an equal value in a transit pass + cash, or cash + walk or bike to work.

For a comprehensive presentation on modern parking policies, I recommend this presentation to the City of Portland, Oregon by Jeff Tumlin of Nelson\Nygaard. Jeff is one of the premier national experts in parking policy. Or for the scientific and technical basis for changing a city’s parking policies, see UCLA Professor Donald Shoup’s “The High Cost of Free Parking.”

If Richmond wants to maintain its quality of life as it grows, the city needs to get parking right. Hopefully, the ongoing study will lead to the adoption of the best combination of market-rate and policy solutions for our community.

Stewart Schwartz is a board member of the Partnership for Smarter Growth and executive director of the Coalition for Smarter Growth.

The Virginia529 Board Should Be Lauded, Not Criticized

Participation in Virginia 29 pre-paid tuition plan has declined in recent years as measured by the number of accounts and semester-units sold. Graphic credit: Joint Legislative Audit and Review Commission.

State government, local government, universities and independent authorities in Virginia are larded with debt and unfunded liabilities. No one, to my knowledge, has compiled a total inventory of public institutions’ exposure to pension obligations, leases, maintenance backlogs, infrastructure debt, economic development loans, and other long-term obligations. Institutions’ exposure to the vagaries of the economy and fluctuations of interest rates is largely hidden from public view.

One fund operating in the shadows is Virginia529’s tax-advantaged, pre-paid college tuition program. In contrast to the many entities that take on unwarranted risk, however, Virginia529 is a rare instance of sterling governance. The $2.7 billion fund for the prepaid tuition plan is defensively invested to guard against market downturns. It makes a conservative assumption about future returns on its investment portfolio — only 6.25% annually rather than 7.0% for the Virginia Retirement System. And rather than being chronically underfunded as the General Assembly has allowed the VRS to be, Virginia529 is 138% funded. Indeed, the plan is in such solid shape that actuaries judge that it has a 98% likelihood of meeting future obligations to the parents who are trusting that it will deliver on promises to pay for their children’s educations.

Apparently, that’s a problem.

In a review of the 529 plan, the Joint Legislative Audit and Review Commission (JLARC) suggested that the plan is too conservatively run. Its intolerance of risk means that has built up unnecessarily large reserves that make the program unnecessarily expensive. By reducing the size of the pricing reserve on future contract sales from 10% to 7%, JLARC says, Virginia529 could lower the price of an eight-semester contract by $1,851.

Key lawmakers strongly favor the JLARC recommendations, reports the Richmond Times-Dispatch, and they have pressured Virginia529 CEO Mary Morris to adopt the recommendations. Said Senate Majority Leader Tommy Norment, R-James City ominously: “Sometimes there’s a very thin line between defiance and supreme independent confidence.”

True enough, the cost of participating in the Virginia529 plan has surged as the cost of college tuition has consistently outpaced inflation and income growth — a fact that can be attributed (a) to the General Assembly’s cutbacks in support for higher education, and (b) administrative bloat, mission creep and other policies pursued by colleges and universities themselves. Rather than price its plans over-optimistically as, say, long-term care insurers did a decade or two ago only to increase their premiums in order to maintain plan solvency, Virginia529’s governing board prices its product based on the conservative — one might say, cynical — assumption that tuition and fees at Virginia four-year institutions will increase by 5% in the 2018-19 academic year and by 6.5% each year thereafter.

Also true, participation in the plan has declined in the past 10 years as the price has risen, as seen in the chart above. Since fiscal 2009, the number of plan participants has declined from 71,800 to 63,900. Meanwhile, participating families are buying less coverage. The number of annual “semester units sold” has tanked 43% from 18,800 to 10,700 over the same period. Admittedly, that is a disappointing trend.

Virginia529’s investment performance has lagged industry benchmarks over one-, three- and five-year time horizons, says the JLARC report, although it has met or outperformed benchmarks for the 10-year period. “Virginia529 staff, the investment advisory committee, and the program’s investment consultant indicate that the fund is defensively positioned with the intention of protecting assets in down markets and periods of market instability.”

The JLARC report seems to accept that explanation. Staff has a bigger problem with Virginia529’s large pricing reserve. The pricing reserve is a portion of the contract price in excess of the amount needed to pay future contract benefits; the reserve generates surplus revenue to protect the fund against risk. JLARC recommends a guideline that would reduce the pricing reserve as long as the Virginia529 fund has assets in excess of 130% of liabilities. “Reducing the pricing reserve from 10 percent to seven percent would improve affordability of Prepaid529 contracts but would have only a minor impact to the fund.”

Virginia529 staff disagrees. First, reducing the pricing reserve on future contracts creates equitability concerns for those who already purchased contracts. In effect, risk would be shifted to people who paid higher premiums so newcomers could enjoy lower premiums. Second, future dips in portfolio performance could affect actuarial soundness and necessitate returning the reserve to a higher percentage, creating contract pricing volatility. And third, reducing the pricing reserve would have only a modest impact on contract prices. Slashing the reserve to 7% would reduce the price of an 8-semester contract of $67,880 by only $$1,851.

Bacon’s bottom line. Here’s what JLARC and Virginia legislators seem to miss: Virginia529 signs a contract with Virginia families locking in college tuition at a certain price. Virginia529 doesn’t promise to “try real hard” to fulfill the terms of the contract. It will fulfill the contract. It doesn’t have the luxury of raising taxes, or diverting revenue from other programs, or literally borrowing from its investment portfolio and promising to pay it back later, as the General Assembly has done with the VRS. The program should be applauded for adopting an actuarial gold standard.

While JLARC raises reasonable points worthy of discussion by the Virginia529 board, legislators need to butt out. They have no skin in the game. They don’t pay a price if Virginia529 fails to fulfill its promises. If lawmakers want to make college tuition more affordable, they should either (a) increase state funding for public institutions, or (b) do the really hard work of driving costs out of the higher-ed system. Otherwise, brow-beating the Virginia529 board is cheap grandstanding.

No Contract, No Pulse… No Riders, No Sympathy

What a clever way to introduce Richmonders to their new Bus Rapid Transit service, Pulse, when it is scheduled to commence in less than two weeks — a drivers’ strike.

The Amalgamated Transit Union has been negotiating with the GRTC Transit System since September 2017 over a new contract, and apparently union members are getting impatient about the lack of results. Now the union is using the Pulse roll-out as leverage in the talks. Bus drivers have been wearing buttons that say, “No Contract, No Pulse,” reports the Richmond Times-Dispatch.

Said Local 1220 president Frank Tunstall III: “We wanted to get GRTC’s attention that it’s very important we have a contract before the Pulse starts. That would be to everybody’s advantage, and when I say everybody, I mean passengers, the company and the union members.”

The union may or may not be justified in its contract demands, I really don’t know. What I do know is that in other transit systems, such as the Washington Metro, transit workers have successfully used the threat of strikes to negotiate contract terms so favorable that they damage the integrity of the transit enterprise. Washington Metro faces a multibillion-dollar backlog of maintenance projects due in considerable part to its expensive and unproductive union workforce.

But there’s a big difference between a strike by Washington Metro workers and a strike of Pulse workers. Without a functioning Metro, transportation in the Washington region would gridlock, causing massive economic dislocation and pain. That gives the union power. Without a functioning Pulse, Richmonders wouldn’t notice or care — the region is doing just fine without the BRT service at the moment, and it will do just fine if it doesn’t start on time. A strike would do nothing but get prospective riders irritated at the union, generate red ink for the GRTC — and give people an argument for investing in roads instead of mass transit.