We will miss Harry Parrish

Just a quick note about Harry Parrish on the eve of his funeral.

He was without a doubt one of the nicest, most down to earth people that I have served with in my time in the legislature. Much has been said about him and his long life in public service and all of it is true. Two quick stories though.

One day in my third year during a very quiet Sunday, which is a good day to get work done, Harry popped his head in my door and said, "hey young man, getting some work done?" We both chuckled and I asked him about his career and life. I had no idea, at that point, that he flew the "Hump" in WWII but I was not surprised to learn of his role in that great conflict. Most people give you pearls of wisdom, some solicited and some unsolicited, but not Harry on this occasion. What sticks with me from that 15 minutes with him was that he was genuinely interested in me and what I was doing. He didn't have to stop by, but he did. So, stop by someone's office or house or just call to chat. It could make all the difference.

One other memory sticks out in my mind from this session. Everyone knew that Harry had been sick and it looked like he had fully recovered about a month ago. But at the age of 84, you have to think that it was taking its toll and that no one would have thought less of him if he missed a meeting or two. We were not surprised to see him, after all it was normal to see Harry. One meeting did surprise me though.

We had a Cost Cutting Caucus meeting to go over some transportation issues and a lot of the younger delegates were there ostensibly to learn more about transportation. Let's face it though, the younger delegates don't have as many meetings to attend because we/they are low on the seniority pole. The room was darkened to accomodate the power point by Geoff Segal from the Reason Foundation so seeing people was not at a premium. Questions were being asked and answered in the usual pace when all of a sudden I hear Harry Parrish ask a dead on question. I didn't know he was there, but he was. He cared enough about Virginia's transportation future, at the age of 84, to attend a meeting when he didn't have to do so. I still shake my head about that one. The guy was amazing. A charter member of the Greatest Generation.

Rest In Peace Harry. You are a good man and set a great example for all of us. You will be missed greatly.

Hope for the future

So I was going to post some comments on “debt” today, in light of the continuing back and forth over transportation funding.

It strikes me as odd that much of the 2004 debate was centered around “securing the AAA bond rating,” and to me the only need to “secure” it would be so that we could utilize the rating to fund projects. Yet, now that we have it secured, there are some folks in Richmond who don’t want to actually utilize that great bond rating (with rates so low that they’re are about half of prime) to fund road project, yet they’re more than happy to take on debt to pay for higher education or a statewide radio network, including commitments to about $1.3 billion in capital projects next year with no money attached to actually pay for it…

But I digress... more on that another time.

For now, I wanted to point out this article by Dan Lips from The Heritage Foundation on school choice and how the issue is finally starting to pick up some national momentum. President Bush’s 2007 budget includes funding for the Opportunity Scholarships for Kids initiative. This program would establish federal grants to local scholarship organizations to allow children to attend private schools, which is similar to legislation introduced by Delegate Saxman here in Virginia during this year’s session (HB1294).

“What works, say Feulner, Wilson and a host of others, is parents directing their children’s education and school systems providing choices to meet those needs.

Ask Catherine Hill.

As the guardian of three children who use opportunity scholarships to attend private schools in Washington, D.C., Hill understands the value of real choice in a school system.

Ms. Hill’s nephew, Eric, had reached age 8 without learning to read. School officials were preparing to send him to special education. But he received a voucher, transferred to St. Gabriel’s Catholic School and has been thriving in his new classroom. Now, he not only reads, he receives perfect scores on his spelling tests.

“He’s so proud,” Hill says. “He recently told me, ‘Auntie, this is the best school you could have put me in.’”

All kids deserve the chance to feel as proud as Eric.

~whitney

The Good News Report

We were back in Richmond Monday for the Special Session, and with so much focus being on transportation issues, I wanted to take a minute to give a brief update on some of the successes from the 2006 session that you may not have heard about.

First, HB 667 introduced by Del. Wardrup calls for the competitive bidding on all highway maintenance projects. This common-sense measure that has the potential to save the Commonwealth significant amounts on the ever-increasing costs of maintenance passed the House and Senate unanimously, and is now awaiting the Governor’s approval. This is an important component to address Virginia’s transportation needs immediately and long-term.

Del. Tom Rust’s HB458 also gained unanimous approval by the House and Senate. This measure affects the Virginia Public Procurement Act, and allows a public body to enter into cooperative procurements for professional services, even though the public body did not participate in the request for proposal or invitation to bid, if the request for proposal or invitation to bid specified that the procurement was being conducted on behalf of other public bodies.

Del. Lionell Spruill sponsored legislation, HB741 to require the state Comptroller to develop policies and procedures to reduce the costs of collecting debts owed to state agencies. It further permits state agencies to not collect certain debts if the administrative costs of collecting would exceed the actual amount owed. This was unanimously passed, and is now before the Governor for signature.

One big issue we focused on this session was Medicaid reform. Medicaid is currently one of the fastest growing area of the state’s budget, totaling more than $5 billion annually. Delegate Phil Hamilton introduced several important measures to reform Virginia’s Medicaid program, including HB759 to establish a public-private long-term care partnership program for Medicaid. This requires the Board of Medical Assistance Services to include, in the state plan for medical assistance services, a provision to establish a public-private long-term care partnership program between the Commonwealth of Virginia and private insurance companies that must be designed to reduce Medicaid costs for long-term care. HB759 was also approved with unanimous support.

Several other key bills have been carried over until the 2007 session, allowing us more time to educate legislators on their merits and benefits to the Commonwealth. HB1294, the Public-Private Education Investment Act, which would create scholarships for students to use for the education of their choosing, passed in the House of Delegates, and was continued to 2007 in the Senate Finance Committee.

Likewise, HB1295, which establishes the Council on Government Accountability and Efficiency as an advisory council to systematically identify waste and inefficiency, has been carried over by the House General Laws Committee to be taken up in the next session.

Another bill that was unanimously approved by the House, but left in the Senate Finance Committee was HB1473. This would add more requirements for inclusion in the executive budget that is submitted to the General Assembly in December. As a part of the continuation of our efforts to make the budget more transparent, these additional requirements would take another step to ensure that the information in the budget was relevant and understandable.

There were many other great bills introduced this session, and we have plenty of opportunities to continue pushing these issues to bring greater accountability, transparency and competition to our state government. In the coming weeks, I’ll be updating on some of those bills that we will continue to work for as we move forward.

Fix VDOT First

A novel concept. Fix the problem first.

Our Chairman at Americans for Prosperity-Virginia, Paul Harris, has commentary in this week’s edition of Bacon’s Rebellion detailing some key areas for transportation reform.

In addition to pointing out concerns about the rapid growth of state government and the ever-growing tax burden on Virginia families, he asks the real questions about whether simply increasing transportation funding can fix things with the current state of VDOT.

Paul notes continuing problems within VDOT, including the lack of a permanent Commissioner for almost a year, continued opposition to greater accountability and transparency, and continued underperformance. As we’re already pointed out, hundreds of millions of dollars in savings can be realized through already identified common-sense reforms.

Paul gets to the real question of whether some leaders would have us put the cart before the horse, asking

“Shouldn’t VDOT be fixed before we pour more money into that broken system?”

When the root of many of the problems continues to be inefficiencies and lack of accountability, can we really justify giving VDOT a 25% increase in their budget?

Why is raising taxes always the “better way"?

Let’s fix VDOT first.

~whitney

Imagine...

“Imagine an alternate universe where Virginia politicians expended as much energy devising ways to encourage entrepreneurial, free-market solutions to transportation problems as they did to raising your taxes.”

In this week’s edition of Bacon’s Rebellion, Jim Bacon challenges leaders to truly think outside the pavement when it comes to addressing Virginia’s transportation needs. In "Liberate Mass Transit," his focus is on mass transit solutions for congestion, but not in the way we have grown accustomed to thinking about mass transit.

Rather than the same old approaches of very constrained mass transit systems, Jim discusses how we might break the monopoly and create a free market system that allows consumers to direct the market. Through this kind of flexibility, we could see a wide range of alternative transportation options develop to meet consumers’ needs.

And this would truly be an important step in finding a better way to addressing Virginia’s congestion needs.
~whitney

Money Keeps Pouring In....

Wednesday the Governor’s office announced that state revenue has grown by over 10% from the last fiscal year. Wow. This is great! The state economy is taking off.

The article also mentions that we are expecting to end this fiscal year with a $1.4 billion surplus.

With all of this good news you would think the state of Virginia is in excellent financial shape. We are meeting our obligations and we still have money left to spend. Heck, many would say we have a windfall of new revenue. But, if you listen to the Governor and many in the administration we should not get comfortable—the state’s unprecedented economic growth will come crashing down soon.

What the Governor says is exactly right. Eventually the economy will slow and less revenue will enter the states coffers. Anyone who passed a basic business or economics course knows that economic growth does not continue at such a break-neck pace forever.

The problem with the Governor’s logic, and the logic of many that run our government, is they refuse to take the next step and realize you can not spend every dime in the bank account. When the state plans its budget it should take into account the slow times when less revenue will be produced by our economy, but instead of taking such a common sense course, they spend every dime taxpayers send to Richmond. This lack of vision seems to show extremely poor judgment and is a path that will surely repeat the budgetary woes Governor Warner experienced when he came into office.

So you ask, “Rob, how can we do things differently?”

There is a perfect example in our own state. Right here in the Commonwealth there is a jurisdiction that takes a long term approach to budgeting—Prince William County.

Now, I am of course biased due to my previous work with members of the Board of Supervisors and the fact that I grew up in the little town(at least when I was growing up) of Woodbridge. But, let’s look at the facts.

The Board of County Supervisors and the County staff take a long term vision when writing their budget—five years versus the two year budget plan for the Commonwealth. Each spring the Board and Staff looks at the previous year’s plan and the expenditure forecast. Some items are added, some deleted and a modified five-year plan is developed, but it very closely resembles the previous budget. This system is much like the amending of the biennium budget during the second years of the General Assembly session.

What the Prince William process does is establish long-term guidelines and direction for the county. At the beginning of each budget cycle the Board and Staff have a vision of where the county is going and what amount of revenue is necessary to accomplish these goals. With this long term vision they can adjust revenues to ensure that only the amount needed to fulfill the agreed upon goals enters the coffers of the county.

This model has led to over 20 new schools, $300 million in new roads, one of the lowest crime rates in the country and the coveted AAA Bond Rating.

On the surface there is a downside to this process—the average tax bill has grown by over 50% over the past five years. However, when one looks deeper they realize that this growth happened when the average home value increased nearly 200% in the county and surrounding counties have had their average tax bill grow at two to four times the rate of Prince William.

This vision has also allowed the Board to implement its own Tax and Expenditure Limitation of 5.9%. Last year the Board went even lower and stopped tax/revenue growth at 4.5%. While we at AFP-VA would like to see the cap closer to the population plus inflation growth model of a Taxpayers Bill of Rights it should be noted that Prince William is far beyond the state and any other locality on TELs. Right now nothing stops Richmond from spending every possible dime they can extract from your pockets.

The Commonwealth should look to developing a similar model when addressing its budgetary needs. The economy, and therefore the state treasury, will go up and down like the tide of the ocean. The major flaw in the current system is we set the states spending commitments based on the high tide dollar growth and we’re left shaking the piggy bank when the low tide growth happens.

If our leaders in Richmond simply spent on a consistent, long term and planned basis we would not have to discuss tax increases every two years while fulfilling the priorities of the state.

-Rob

Debt caps

There is a constitutional debt limit in the Commonwealth.

In Article X, section 9 of the Constitution of Virginia says that only 15% of the average of the revenue derived from income and retail sales tax for the three fiscal years preceding the incurring of the debt can be used to pay off debt. The constitutional limit is 15%.

Guess what the operating limit or internal cap is? Only 5%.

Want to know what the most recent interest rate is that Virginia got for a bond issuance is?
Try 3.7%.

Want to know how much capacity we have under the 5% cap? Try about 840 million per year for 10 years. The Senate legislation this year for higher education bonds, I think, use up some of that for the next fiscal year.

As a member of a small family business of 45 employees, I have grown up knowing the responsibility of paying off debt. I have also grown up knowing that sometimes it is okay to finance asset development. Naturally, I am not a fan of financing depreciating assets like automobiles and we always try for the shortest terms available on the trucks and cars at our company. Assets that appreciate at rates above the financing rates are usually a pretty good investment. Housing is highly profitable now for this very reason. Finance for x% versus ROI of 4x% is a pretty good deal.

In our business, we are building a new warehouse because of market growth in our northern branch. Because we do not have the cash sitting around to pay for this straight away, we are going to the bank for a loan. We would die for 3.7% rates, but there is less risk with government backed bonds and therefore VA gets better rates. We take that risk because we think that over the long haul, that investment will pay off for that part of our business. Recently, we have also added some very expensive capital equipment including a robot and that too was financed with our bank. Operating expenses are never financed as that is a BIG no-no.

So, what is the point? Virginia is a balanced budget state that does not finance operations with debt. This is not the federal government!

The Senate wants to issue debt for higher education and the House wants to issue some for transportation. Some areas are paid for with cash and some are not. The good news is that both plans have dedicated funding streams which will maintain the coveted AAA bond rating. Both will provide necessary improvements in our intellectual and transportation infrastructure.

If we are growing at rates that are consistently double and triple the prevailing lending rates, does it make sense that some, not all, of our financing can be accomplished with some debt? This will provide the necessary infrastructure that will continue to keep Virginia's economy growing. To be sure, interest rates that are in the 8-10% range would not be a wise move at this point, but 3.7% is still a great rate and should not be so quickly dismissed.

Never Satisfied

In today’s Richmond Times Dispatch, A. Barton Hinkle looks at the continuing debate over transportation funding in the Commonwealth.

He notes that there are those who are continuing to demand more revenue despite the fact that:

(1)THERE IS NO threat to the state's bond rating.

(2)The state enjoys a honking big surplus.

(3)The $61.3-billion budget that included Warner's tax hikes increased spending 19 percent.

(4)The current budget, at least $75.3 billion, will increase spending by another 22.8 percent.

(5)Transportation has claimed 12 cents of every new state dollar in the past decade.

(6)Also in the past decade, public-school enrollment rose 10 percent while inflation-adjusted direct state aid to education rose 42 percent.

(7)House Republicans, again, have agreed to raise another $500 million for transportation.

Isn’t it time to say “enough is enough?” There has to be a better way.

~whitney

More Transportation: Adding Value Through Public-Private Partnerships

In light of “Sunshine Week,” I was going to post on the need for greater accountability and transparency in the budget process in Richmond, however in light of the on-going transportation discussions, I opted for this article on the value of public-private partnerships for funding transportation and infrastructure improvements as a continuation of the discussion below.

Today’s RTD has an article by Neal Peirce, “Partnerships Offer Opportunity to Meet Infrastructure Needs.” (UPDATE: Link added.)

In the article, Peirce cites Mark Pisano, veteran executive director of the Southern California Association of Governments, as he discusses how the needed infrastructure improvements in states across the country can be funded.

“A glance back through U.S. history, notes Pisano, shows that the nation grew across the continent—from building canals and railroads to constructing subways and metro-area urban rail lines—with relatively modest upfront government spending. Instead, private firms paid most of the cost, then collected revenue based on their investment.

“The direct government spending that began in the New Deal, and reached its apogee in the interstate highway system with Washington paying 90 percent of the cost, can be seen as an aberration. Now, neither public opinion nor the weight of massive obligations that federal and state governments bear these days is likely to permit an all-government funding approach.”

Concluding the argument that in order to effectively fund transportation for the future, we must rely on public-private partnerships:

“ “The best disciplining isn’t ‘smart growth,'" says Pisano. “It’s having the market be a part of the review of investment activities—another lens on what we build.”

“It sounds like a good deal, as long as the new partnerships with business are negotiated professionally with an eye to long-term sustainability… Add in transparent terms, clear performance standards, and protection of the public against unfair charges, and the tapping of pools of private investment capital could prove one of the best deals of the century.”

~whitney

Reason Asks: “For Whom the Road Tolls”

In the comments section of Delegate Saxman’s previous post, he notes that significant private investment is needed in order for Virginia to truly be able to address her transportation needs.

The question is, is the money there?

Bob Poole says yes.

In his commentary for the February Edition of American City & County, Poole notes that in 2005 “… privately proposed toll projects worth $20 billion were under review.”

Here in Virginia, he points out that:

Last year, several proposals were made to add toll lanes to congested freeways and to develop new toll roads using the concession model. In the two winning bids in Virginia - High Occupancy Toll (HOT) lanes on the Washington Beltway and on 1-95 - the vendor offered 100 percent toll-supported financing, rather than relying on the state to partially fund the project. There, the investors were willing to put in a significant amount of their own equity, in addition to the borrowed amount, because at 50 years each, those were long-term concession projects.

The innovative ideas (and the funding) are available. Virginia’s leaders must be willing to think outside the box and not limit themselves to the mentality of “But we’ve always done it this way.”

That way didn’t work. We need to try to find something that does.
~whitney

Spending is caring

As we come to the conclusion, hopefully, of the 2006 General Assembly session, we will once again face a battle over the budget.

The battle always comes down to how much we are willing to spend to show that we did something for a particular area of the budget. Meaning, we often get into the trap of showing constituency "X" how much we care by giving them "Y"% more than the previous year in direct conflict with take your pick from the Senate/House/Governor. House says 3% for something and the Governor says 3.5% and so on.

Yes, there are many areas of "need" and there are areas of "want". Some are legitimate on the surface and others are not as legitimate. The problem is we do not know and the budget document and the government itself cannot show you what will actually happen with that increase so that you can determine whether or not it was worth the increase.

Recently, we have heard from top officials that while they cannot tell us how many people actually work for the state and that they physically cannot show you what they do, we need a lot more money in the meantime. Sadly, this has not been the focus of the debate.

What is the focus is that we need to spend more. Showing the people how well we did it is secondary because we have a massive surplus and we need to show that we care. The reality is that it is we try to spend wisely, we just don't know if we do.

Some of us really want to know if your tax money is actually doing the job well and we think that shows a real concern (caring) about the product and not the price. Would one pay $10 dollars for a bowl of Ramen noodles? Probably not.

Would one dramatically increase transportation spending if one was told by a very high ranking VDOT (no longer there) administrator that instead of the 9,300+/- employees that we really only needed about 5,000 to run the department efficiently?

During his confirmation hearing, Secretary Homer was asked about staffing reductions at VDOT and he said that he did not want to set any specific goals for that.

Instead we have to show the people of Virginia that we serious about solving transportation problems in Virginia and that involves spending not caring.

Competition not for human beings?

Free markets work. Competition produces better products and better services. At Americans for Prosperity, we believe that the free market is the best system to drive innovation, create opportunities and produce prosperity for all Americans.

As discussed previously here, one area of government monopoly desperately needs competition. Education.

John Stossel has another excellent commentary on competition improving education in TownHall.com this week.

In his piece, he quotes Ruth Holmes Cameron, the former teacher who brought the law suit challenging Florida’s school choice program that benefited special needs students. She says:

"To say that competition is going to improve education -- it's just not going to work. You know, competition is not for children. It's not for human beings, it's not for public education."

Not for human beings???

Stossel responds:

“Why not? Would you keep going back to a restaurant that served you a bad meal? Or a barber that gave you a bad haircut? Competition makes everything better. Why would schools be different? In the few places where vouchers have been allowed, like Milwaukee, the kids who used vouchers did better, and those who stayed in the public schools were not left behind.”

As I’ve said before, why should we assume government does it best? Competition is a good thing, not one to be feared. Even in education.

~whitney