VACostCutting

Thursday, April 27, 2006

Gas Prices: Necessity and Opportunity

I'm surprised that despite skyrocketing gas prices, I have not seen any directives for state employees to curtail vehicle travel for non-essential trips, or any requests for agencies to consider plans for reducing travel by using technology. If anything, from my keyhole vantage point, I'm seeing more car travel.

The price of gas will undoubtably impact the state budget. I would think it necessary, assuming no additional appropriations, to reduce travel to stay within the current budget. I also think the gas price situation gives us an opportunity to rethink how we do business long-term, replacing travel by car with phone and internet contacts.

Tuesday, April 25, 2006

Is this really our education model?

A. Barton Hinkle at the Richmond Times Dispatch had an interesting article last week, and while its primary focus was on NCLB, it did make some very good points that shed some light on the government's role in K-12 education generally.

First, a story:

Aleksei Grigorievich Stakhanov was a Russian coal-miner in the 1930s. The Five-Year Plans of Soviet Communism set quotas for industrial production, and one day Stakhanov not only met his quota, he exceeded it 14 times over by digging 102 tons of coal in under six hours. Pravda noted the feat the next day, and (with a little help from the Communist Party) a movement was launched. Workers across the land were encouraged to emulate the heroic laborers who had reached new heights in the completion of their scheduled tasks. Industries quickly began reporting astounding feats of individual production. Stalin boasted of socialism's advance in the realm of productive capacity.

It was, of course, a sham.

Stakhanov did not set his remarkable record through super-human energy and diligence, or because of his great love for the workers' paradise Stalin supposedly was building. The mine's bosses shifted Stakhanov's usual tasks to other workers, freeing him to do nothing but dig. They rigged the system to present a false picture of performance.

Which leads to this insight from Mr. Hinkle:

…America's public school system looks a lot like the old Soviet economic model: The state controls the means of production, determines what the output should be, decides who should work, and assigns a quota of students per teacher. There is no competition, and not much reward for performance. In most places concepts such as merit pay are anathema. School choice is condemned as practically obscene; charter schools are viewed with suspicion, and even ability grouping is controversial.

Not surprisingly, performance remains mediocre -- despite enormous increases in school spending. In 1960 the average per-pupil expenditure was $375 -- about $2,376 in today's dollars. The per-pupil expenditure in 2005 was $8,554 -- a 260 percent increase in constant dollars. Yet every few years Washington rolls out another reform aimed at correcting the lamentable fact that Johnny can't read.



So the question is, do we really want to trust our children’s future to a failed Soviet model?

~whitney

Sunday, April 23, 2006

Reducing high spending, not justifying it

William Goodwin, who serves on Mayor Wilder's education advisory committee hits the nail on the head with his comments on Richmond City's higher than state-average per pupil education spending.

From Saturday's "Week's End" in the Richmond Times Dispatch...

"Goodwin said energy should be spent looking at ways to reduce high spending, not attempting to justify it."

The full article ran earlier this week.

~whitney

Friday, April 21, 2006

VDOT Annual Payroll

After receiving a letter from high ranking VDOT officials, I placed a call to verify the amount of money spent at VDOT annually on payroll.

Care to guess how much is spent annually? Multiply that by two and you have the biennial amount. I know DUH. But it presents an interesting question vis a vis the current debate on transportation.

I think there ought to be a contest on this. So, the first person who gets it right by posting it here will get $50.00 from yours truly.

Tuesday, April 18, 2006

What's going on in our schools?

Riley, Not O’Reilly over at Virginia Virtucon brings to light some serious concerns about education in this post.

He references this Washington Post article.
~whitney

Monday, April 17, 2006

Putting Bills in the Drawer

So with all the transportation plans being discussed, there has been some talk about net job growth. Well, here’s a little something to consider when looking at the number of government jobs being created by the Senate and the Governor according to the Beacon Hill Institute analysis of their respective plans.

Governor: 4,362 new government jobs by 2010
Senate: 10,382 new government jobs by 2010
House: 2 (TWO) net new government jobs by 2010.

Well, new jobs are good, right? But not so fast. The Kiplinger Letter (March 24, 2006) reports that while 45 of 50 states are currently running budget surpluses, "huge pension obligations" will "pinch" states "just over the horizon."

So while all those new government jobs might look good initially on paper, what kind of fiscal trouble are they creating for us long-term? We already know that state retirement plans, such as VRS here in the Commonwealth, are starting to feel the pinch as baby-boomers look towards retirement. Is continuing to create more government jobs really going to help the situation?

As it is now, by the end of the decade, state and local governments will be facing a 44% increase in pay to retirees over what they paid in 2004—totaling more than $170 Billion a year!

Remember: “We have always done it this way” + “Bills in the drawer” = “We have ALWAYS put bills in the drawer!”

The Senate says they are worried about burdening “our children” with future debts to pay if we take out very low interest bonds to pay for road construction to pay for roads that those same children will utilize. Yet, they somehow seem to not be phased by the future burden they’re placing on “our children” by adding to an already strained retirement system.

Doesn’t sound like fiscal responsibility to me.

~whitney

Thursday, April 13, 2006

Indiana Toll Road Deal Heads to Court

Back in February, Geoff Segal had this post about Indiana's effort to generate billions of dollars in new money by leasing the Indiana Toll Road to a private company.

Well, it seems some people really don't like that idea. And they've taken their fight to court:

Opponents argued it violates the state constitution and have sued. They said the constitution requires that the proceeds from the sale of any public works be used to pay off state debt. The Daniels administration said the arrangement is not a sale but a lease.

The state hopes to close the deal and transfer the highway to the consortium by June 30.

The lease authorization passed in the Republican-controlled General Assembly by the bare minimum of votes. All but two Democrats opposed it, saying the state should not turn over a major asset to a private, foreign entity, and noting the consortium would reap billions of dollars through toll revenue and rate increases.

So the state should not accept nearly $4 billion dollars and save on maintenance costs associated with a depreciating asset because some believe a private entity might try to turn a profit on the deal.

The business acumen of some politicians is staggering.

The Scary Truth

In his article in Bacon’s Rebellion earlier this month, Geoff Segal asks about transportation “Do We Need it All?”

A good question, and one that deserves a little more examination that the knee-jerk reactions and scary rhetoric.

Luckily, University of North Carolina-Charlotte Professor David Hartgen and the Reason Foundation aren’t so quick to buy-into the mentality that we really “need” it all, and instead have done their own research into Virginia’s transportation needs.

Some of their findings, being distributed as talking points to legislators may be shocking.

Their research shows that the cost to relieve severe congestion in Virginia is actually only about $8.5 billion over 25 years! That’s only 15% of the MPO’s Long Range Transportation Plans (read: “Wants”) that call for spending at least $57 billion.

It should be noted that right now, only TWO MPOs to have congestion relief as a stated goal in their LRTPs—Fredericksburg and Harrisonburg. While other plans might include indirect mentions to congestion relief, they do not make it a specific goal or include measurable outcomes. Sadly, the researchers found that other areas simply accept congestion as “an inevitable consequence of urban life” and go on to include strategy outlines to allow for increased congestion levels into the future.

Knowing that there is already ample money in the system to address the severe congestion, without a tax increase, it comes down to, of course, how the money is allocated. We must look at how funding should be reallocated to addressing these severe congestion problems.

What they’re really saying is that we need to be spending money the right way!

“The Virginia legislature needs to make the relief of congestion a major priority. Other regions are already beginning to make congestion relief a key priority. Atlanta has recently changed its project weighting procedure to raise the weight placed on congestion relief from 11 to 70 percent and adopted a TTI goal of 1.35 by 2030. (Currently, the Atlanta area TTI is 1.44.). Texas state and local governments have recently assessed the impact of congestion on their situation and are setting congestion reduction targets. Once congestion relief is established as planning priority, and specific measurable goals developed, then VDOT can realistically hold MPOs accountable for goal achievement.”


In the end, what Professor Hartgen and the Reason Foundation have found is that “there is ample money currently in the system to make significant inroads in the alleviation of congestion, if only goals were established to do so and money allocated to support those goals.”

Surely this news will come as quite a shock to those who are just chomping at the bit to raise our taxes yet again. But I guess, sometimes the simple truth is scary.

~whitney

Monday, April 10, 2006

RTD on DTR

Sunday's RTD editorial on the Dulles Toll Road is spot on. I've posted the entire piece rather than summarize.


Follow the Rule
Richmond Times-Dispatch
Sunday, April 9, 2006

Governor Tim Kaine has said he favors what he calls the "Yellow Pages Rule": If government is providing a service that two or more private companies also offer, then government ought to get out of the business. As is often the case, however, his actions deviate sharply from his stated beliefs.

A salient case in point: the Dulles Toll Road (DTR). The Governor has signed a memorandum of understanding to hand over operation of the DTR to the Metropolitan Washington Airports Authority (MWAA), which operates Dulles International and Reagan National Airports. The MWAA made a bid for the DTR in December, after five private groups had submitted their own proposals and after four of them had cleared the first stages of state review. Despite being a late-comer to the process and despite being an enterprise that knows how to run airports, not roads, the MWAA evidently won the Governor's favor because it controls the land beneath the road and because it commits to completing the Metrorail extension from Falls Church to Loudoun.

Neither of those important considerations should be brushed aside. Nor should they constitute the only factors determining the future of the DTR. If the MWAA had made the best proposal, that would be one thing. But it is not clear whether the MWAA did. An advisory panel that normally would have judged competing private-sector offers never was established, because the MWAA does not fall under the umbrella of Virginia's Public-Private Transportation Act (PPTA). Nor have there been public hearings on the MWAA deal, nor legislative scrutiny. (By contrast, House Speaker Bill Howell notes the state cannot hand over even a couple of miles of riparian water rights in the York River without an act of the General Assembly.) The selection of the MWAA seemingly short-circuited more thorough review.

Indications suggest, however, the state could have gotten a better deal. Dulles Express -- a group headed by a developer and part-owner of the Dulles Greenway -- says it could achieve the same goals sought through the MWAA plan and build four express toll lanes valued at $300 million parallel to the DTR, and make a cash-on-the-barrelhead payment of half-a-billion dollars to the Commonwealth for other transportation enhancements. That amounts to $800 million for roads Virginia might walk away from if it carves the MWAA deal in stone. The figure could climb considerably higher if private entities were able to compete for the right to run the DTR. The leasing of roads in other states has reaped astounding sums -- ranging from $2 billion to nearly $4 billion.

To be sure, going the private-enterprise route would involve complications the Virginia Department of Transportation evidently feels unprepared, or ill-equipped, to address -- such as the many layers of environmental and federal review new roads would require, numerous rights-of-way purchases, additional road construction elsewhere to prevent simply moving congestion a few miles down the pike, and so on. What's more, the MWAA shares the state's keen enthusiasm for Metrorail extension, even though the completed rail line ultimately will carry only 48,000 riders -- a small fraction of the corridor's commuters. The MWAA has a long-standing institutional enthusiasm for completing the rail line, and perhaps a practical reason to want it as well: the thousands of airport employees who have to get to Dulles daily to do their jobs.

The Commonwealth has to work with the MWAA because of its property interest in the DTR land, but it should not confuse the MWAA's best interests with the state's. Why should the Commonwealth cast aside both the degree of review normal to the PPTA, and the potentially major improvements to its road network, simply because doing so represents the quicker and easier way? Why should it abandon the Kaine Yellow Pages Rule in a matter so momentous as this?

According to gubernatorial spokesman Delacey Skinner, "The Governor has confidence in the airports authority to do this. That's kind of the end of it."
It shouldn't be.

Wednesday, April 05, 2006

Dulles Toll Road: MWAA v. Private

Having just reviewed the MOU between the Commonwealth and the MWAA concerning the Dulles Toll Road, and the talking points distributed by Secretary Homer, nothing in them invalidates the concerns raised by the Speaker.

a) The talking points claim that the Airport Authority has agreed to consider the four previously submitted proposals. If so, they did not bother to include that in the MOU.

b) The talking points are almost certainly wrong in asserting that MWAA's management of the rail project is the least-cost way to bring it about. First, they have zero expertise in rail projects, only in airport projects. Second, they have tax-exempt bonding ability, but so does VDOT. Third, if what is meant is lowest cost to taxpayers, it's not clear that some form of least-subsidy concession might not require less taxpayer subsidy that the contemplated plan.

c) Regarding which option would lead to lower tolls, either the Speaker is wrong or the talking points are wrong. The Speaker has presented an argument for his position, which the talking points do not attempt to refute; they simply assert their position and provide no evidence to suggest otherwise.

d) SB666 assures that revenue from concession agreements will be spent in the region. The Governor has yet to act on that. In addition, it is true that only 34% of Indiana is going into the corridor (about $1.1 b); however, the operator has agreed to invest at least another $1b in capital upgrades over the life of the agreement – and upwards of $400 million immediately. Certainly the same would likely hold true in the case of DTR. Further, VDOT could designate any or all revenues into that region. Indiana made its own political decision about how to allocate and spend the resources it generated, as should the Commonwealth. To suggest that Indiana is not a model because only 34% of revenues were then directed into the region is ridiculous and short sided (considering it leaves out a huge piece of the equation).

e) Negotiations between private and MWAA would be no different with the exception that the MOU gives MWAA broad authority with respect to the tolls. The active private proposals are all based on certain assumptions about the toll rates i.e., they would not have the ability to fully capture costs. If the bidders had this ability, their offers would be much higher, thus likely to be better deals for the state.

f) The MWAA is not accountable. They’re a board of political appointees, including three slots for the president. Even if they were to sign a concession deal for the roads, as noted in “a,” where would the revenue flow? To the state or to MWAA? If the latter the state would be passing up a golden opportunity.

g) According to the MOU the MWAA can raise tolls to meet the cost of construction and operation of the Metro rail extension – this will be a huge number. They may have to hold meetings and be “transparent” but this does nothing to their broad ability to simply raise tolls to cover the costs. The full costs will be large and will serve such a small percentage of commuters. Further, toll road users will be subsidizing the construction and operation of rail—that they will not use. Where is the fairness in that?

h) One question this agreement raises is whether it fully complies with the rather detailed restrictions on how airports can spend their revenues, under the terms of the detailed grant agreements they must sign as a condition of receiving federal AIP grants. This is a question that I'd love an answer to.

Future Costs of Higher Ed

The RTD has an article on some trends in higher ed costs.

Check it out here.

Tuesday, April 04, 2006

House calls save money

Check out this story on the front page of the USA Today.

Quote or Motto?

"So there will be no misunderstanding, it is not my intention to do away with government. It is rather to make it work - work with us, not over us; to stand by our side, not ride on our back. Government can and must provide opportunity, not smother it; foster productivity, not stifle it."
-Ronald Reagan First Inaugural Address 1981.

25 years ago.

Monday, April 03, 2006

Throwing Millions, if Not Billions Away

It seems that the Kaine administration will do anything to get its way. Including giving away the Dulles Toll Road to the Washington Airports Authority. While the merits of even building rail out to Dulles is suspect by itself, the thought of giving control of one of the Commonwealth's most valuable resources is unconscionable.

Speaker Howell put it best when describing the governors' actions this way, "multibillion-dollar road giveaway with a stroke of the governor's pen."

Perhaps a little background. Under the Commonwealth's Public-Private Transportation Act several private firms offered bids to operate the Dulles Toll Road under a concession agreement. The proposals varied significantly, but all of them offered a large cash payment to the state, at least 30 years of maintenance and operations of the road, and significant capital expenditures in the region including adding additional lanes. In each of these, the concessionaire had agreed to not raise tolls beyond scheduled hikes already approved by the board.

In fact, there were four proposals that had been advanced for further consideration. The Commonwealth could have received upwards of $1 billion in addition to the capital build out. But the value goes beyond that - VDOT was spending millions to maintain and operate the road each year - the private operator would be responsible for these costs, a direct and immediate benefit to the state's bottom line.

So the state would have received:
1. a large cash payment upwards of $1 billion
2. capital upgrades in the region at no cost to the state
3. a reduction in VDOT operating costs

The deal the governor struck with the airport authority would forgo all of that to get the rail to Dulles "built faster." Its this kind of thinking that got us in our transportation mess to begin with. Spening a huge percentage of our resources to benefit a small percentage of commuters - or focus on projects that will do little or nothing to relieve congestion. I explore both of these issues in my Bacon's Rebellion column. Further, the House had been talking about PPP's this entire year and pointing to the Dulles Toll Road as a huge opportunity for the state to capitalize on their resources. They wanted to use it as a model for their vision - the Governor, I believe, pushed this deal through to get it off the table, to further make the case for his adopted (i.e., Senate) transportation plan. Its a bold political move, however, one that takes us a step backward not forward.

Bacon's blog has some pretty good coverage too.