Immigrants Add to our State’s Economy

Virginia is honoring our immigrants with a well-deserved “Immigrant Heritage Month” as declared by Governor Terry McAuliffe.

With that in mind, I want to review some important facts and figures about the impact our immigrants have here in Virginia and then highlight a few immigrant stories.

Virginia has about 900,000 people who were foreign born – just over 11% of our population.  The number immigrants moving into Virginia grew by almost 58% between 2000 and 2010, and continues to grow today.And the immigrant population is a large part of any economic growth we will see in the future.  You see, 17.5% of the business owners in Virginia are immigrants. Over $3 billion in business income is generated by these businesses.  And between 2006 and 2010 almost 54,000 new businesses were formed by our immigrant neighbors.

So as we debate what to do with our immigration policies in this country, let’s remember that legal immigration is a huge positive in our country and we need to keep that in mind.  What to do with the illegal residents in our society is going to be debated over the coming months and we need to figure this out in a rational and reasonable and firm manner.

In the meantime, I want to highlight three Virginians who were either born in foreign countries or their parents were born overseas.

Mohammad Siddique Sheikh came to the United States from Pakistan 50 years ago with $10 in his pocket.  Through hard work, focus and determination he has built a conglomerate of wide-ranging business the anchor of which are more than a dozen gas stations.  He is one who believes in giving back to his community.  He was appointed by Governor Bob McDonnell to the Board of Visitors of George Mason University, Virginia’s largest institution of higher learning.  He has served on a number of state and Fairfax County community boards and commissions and was recently appointed as a board member of BB&T Bank, nationwide.  Believing the influence that many can have when banding together, he established the Pakistan American Business Association which has thousands of members who are successful business leaders.

Raul “Danny” Vargas is a noted business and community leader, media commentator, and marketing/public relations professional.  His mother came to the States from Puerto Rico and Danny grew up on the streets of New York City.  His mother worked long and hard and now, thanks to her dedication and love, Vargas is now a well-respected and noted business and community leader.  He has been an executive at AOL, France Telecom, Global One and Raytheon.  And he was appointed by Virginia’s Governor as Chair of the Virginia Board of Workforce Development.  He was Chairman of the Dulles Chamber of Commerce, the first Hispanic to chair a mainstream Chamber in Virginia.  Vargas ran for the House of Delegates as the Republican standard bearer.  This second generation American citizen is an example of why immigration is so important to our nation.

Puneet Ahluwalia came to the U.S. from India in 1990.  He worked long and hard and learned about real estate investments.  He built a successful mortgage loan business catering to the broad citizenship of Northern Virginia but with a real focus on the immigrant population – helping folks who, like him, came to this country looking for freedom and financial security.  That business was a casualty of the housing crisis in 2008.  Using his networking capabilities and his love for public policy issues and the political rivalry here in America, he is now working full time as a political consultant in Washington DC working our partnerships with overseas companies and organizations that want to do good works by combining American financial support with those who are trying to help people in South Asia better their lives.  He was recently elected to the State Central Committee of the Virginia Republican Party. Puneet Ahluwalia is truly a proud American citizen.

Let’s remember that although we face a necessary and difficult discussion about those “illegal residents” who came to this country unlawfully, most came here for the same reasons as those legal immigrants.  They came to provide a better life for themselves and their families.

Soon we are going to have a robust debate on immigration reform when Congress finally decides to take up this important issue. Let’s have that debate in a reasonable manner looking at the entire immigration policies of this country. We should calmly discuss who we want to come to this country and what these folks can do to build our economy over the long haul.

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Posted in Immigration | 51 Comments

Expand Pre-K Access by Expanding Private Scholarships

The latest annual report from the National Institute for Early Education Research ranks Virginia #29 in early education access for four-year-olds – a statistic comparing unfavorably to the Commonwealth’s surrounding states.

Some argue that increasing early childhood education access can come only by spending a lot more money; others dismiss early education – even for educationally at-risk children — as “baby sitting.”  The truth is in between.

It’s true that too many studies claiming near-miraculous accomplishments from early childhood education looked only at relatively small “boutique” programs that would be far too expensive to replicate.  But the reality is that low-income children too often get to education’s starting line of kindergarten far behind their wealthier peers.  Among other indicators, by the age of three, children from low-income families will have heard 30 million fewer words than their peers in “professional” families, missing out on the formative stages of language and reading.

However, large scale studies of the Virginia Preschool Initiative (VPI), serving educationally at-risk children, have shown that children attending VPI are more likely to meet early literacy benchmarks, score higher on the third grade Standard of Learning tests, and are more likely to be promoted on-time to eighth grade.

It’s not just “babysitting.”  But it’s also not just “more money.”  The state of North Carolina spends 41 percent more per child than Virginia on early education, without a major difference in access:  North Carolina ranks #25; Virginia, #29.

The Virginia Preschool Initiative has more than 7,000 unfilled slots that could be used to serve eligible at-risk four-year-olds.  More than 6,000 of these are in just 13 school divisions, and another 400 are in 11 divisions that do not participate in VPI at all.  There are three primary reasons for this:  An inability or refusal to meet the required local funding match, insufficient space, or too few eligible students spread too thinly to create critical mass in rural locations.

The question is:  “How do we reduce the number of unserved at-risk students in Virginia, lower barriers to pre-k services, and provide additional data that might be useful in measuring Early Childhood outcomes in order to inform future programs?”

Few non-public providers are involved in the delivery of VPI because of a barriers identified by the Virginia Child Care Association, and this limits expansion.  Among those barriers are decisions by local school systems to simply not include center-based providers; a high, expensive and arguably unnecessary requirement for licensed teachers; limited and confusing communications; and a complex funding mechanism.

The state recently issued a second round of “Mixed-Delivery Preschool Grants,” in order to expand preschool access in five jurisdictions.  But the grants remain top-heavy with regulations, limited in their scope, and have an automatic sunset in two years – at which point funding will go away and localities will likely revert to the current status quo.

A far more effective method would be expansion of the Virginia Education Improvement Scholarship Tax Credit (EISTC) to include pre-k students.  Currently, private donors to scholarship foundations receive a 65 percent state tax credit if it’s used to offer scholarships for K-12 students to attend a school that is a better placement for the student.

This year, the program will raise $10 million to provide 4,000 low-income K-12 students with new private educational opportunities – at no cost to the state taxpayer, since the state is now relieved of the expense of educating the students.

Opening up the EISTC program to offer scholarships equal to the state share of VPI funding would provide additional opportunities for hundreds, if not thousands of additional at-risk students.  The inability or refusal of local jurisdictions to match state funding or have space available would no longer be a barrier.  Parents would simply choose the qualified local provider best fitting their child’s needs.

The proposal would also provide additional data on which to base future decisions.  A deficiency of current studies is the inability to differentiate between students who attend different programs or no program at all.  We know what works in a public pre-k setting; we do not necessarily have the data to compare with a non-public pre-k setting.  Following students who attend non-public pre-k settings through their public school career would add considerably to our knowledge about what works, and incorporating the data would inform us further about what is effective and what might be more efficient.

To be sure, the private schools should have to meet certain minimal requirements:  A minimum half-day program; a curriculum aligned with Virginia’s Foundation Blocks for Early Learning; a teacher-child ratio of no more than 2:20; a teacher development program ensuring early learning teachers are proficient in establishing social-emotional warmth, creating high-quality teacher-child interactions, and delivering high-quality instruction based on the standards and curricula.

Legislation introduced this year by Senator Bill Stanley (R-Moneta) would do just that.  His bill, SB 1427, passed the Senate by 39-0, with one abstention, although it died in the House Finance Committee.

But his bill to expand the EISTC program would increase access for at-risk students and allow us to better measure what works and what doesn’t, and Virginians should hope he re-introduces it and continues the fight next year.

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Posted in Education | 27 Comments

Community Banks: Help is on the Way

In the wake of the financial meltdown in 2008, Congress passed and President Obama signed the Dodd-Frank law which was intended to regulate big banks and address the causes of the financial crisis. As so often happens with legislation, despite good intentions, bad consequences have flown from the Dodd-Frank law, hereinafter Dodd-Frank. Our community banks, defined as those with less than ten billion dollars in assets, have been taking it on the regulatory chin. They have seen their compliance costs soar and there has been a huge wave of consolidations leaving customers with fewer options, fewer choices in banking services, and loans more difficult to find for small businesses and start-ups. But, help is on the way.

Congress and the Trump Administration are aware of the problem and are taking steps to correct the problems caused by Dodd-Frank. The U.S. House Financial Services Committee Chairman Jeb Hensarling (R-TX) said, “Community financial institutions are being crushed by Washington’s ‘one-size-fits-all’ regulatory approach. We are losing, on average, one community financial institution each day – and they are not dying from natural causes but from the sheer weight, volume, complexity and expense of Washington’s rules. So our plan requires financial regulators to tailor regulations so they fit a bank or credit union’s business model and risk profile. This allows America’s small, hometown banks and credit unions to focus their time and resources on serving their customers rather than the dictates of Washington bureaucrats.”

The Virginia Association of Community Banks, representing roughly ninety-five financial institutions in Virginia, has pushed the Trump Administration to make the Financial Choice Act a priority. Earlier this year a larger umbrella group of community bankers, including a representative from Virginia, met with president Trump and other members of his administration to stress the need for relief from the burdensome regulations imposed on them by Dodd-Frank.

According to a study by the Mercatus Center at George Mason University, community banks have seen compliance cost sky-rocket and the number of compliance officers double to handle the increase in regulations. The study also found that the regulations were forcing community banks to discontinue a number of services including elimination of residential mortgage lending. Nearly twenty-five percent of the banks were considering mergers.

A study by the Kennedy School for Government at Harvard, says adding just two members to the compliance department would make one-third of the smallest banks unprofitable. The country cannot afford to lose it small banks because, as the study indicates, small banks account for three-quarters of all agricultural loans and half of all small business loans. These small, generally well-run, banks were not the source of the financial crisis but now bear the brunt of the regulations designed to address failures by the big banks that were deemed “Too Big to Fail.”

The House Financial Services Committee reports that in 2010, the year Dodd-Frank was enacted into law there were 7,658 banks but by the end of 2016 that number had declined to 5,980. The loss of banks was not off-set by new start-ups. The Committee, citing the Richmond Federal Reserve, indicates that while there were 170 banks chartered each year in the country between 2000 and 2008, that number dropped to less than one bank chartered each year since the enactment of Dodd-Frank.

The House Financial Services Committee reported the Financial Choice Act, H.R. 10, to the full House of Representatives on May 4, by a vote of 34-26. In an effort to provide relief to financial institutions with a special focus on small, community banks and their role in growing the economy, the House of Representatives debated the Financial Choice Act the week of June 5, 2017. The bill passed the House on June 8, by a vote of 233-186 and now moves to the Senate for further action before going to the president’s desk and an expected presidential signature into law.

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Posted in Economy | 27 Comments

Could Asset Recycling Be the Answer for Trump Infrastructure Plan?

In my April column in Public Works Financing, I pointed out that the Trump Administration faces a dilemma in its quest for a $1 trillion infrastructure program based largely on private capital investment via public-private partnerships (P3s). Any such program must be enacted by Congress, and therein lies the problem.

Most Democrats and many Republicans from rural states insist that a significant portion of the $1 trillion must be net new government spending. This is partly because the kinds of P3 projects investors are interested in have user-fee revenue streams—and few such projects are likely in rural states or for infrastructure like school buildings and new city halls that many legislators would like included. On the other hand, fiscal conservative members will insist that any net new federal spending must be paid for (generally by spending cuts), rather than being added to the national debt. So where is net new money for non-revenue-producing infrastructure going to come from?

One idea getting increasing attention is “asset recycling,” as pioneered several years ago in Australia and now under serious consideration in Canada. The basic idea is for governments to sell or long-term lease existing revenue-producing infrastructure (airports, bridges, highways, seaports, etc.) and use the up-front proceeds to invest in other infrastructure that does not have its own revenue stream. An example I used in the PWFcolumn is the Gateway Project in the New York metro area: new Amtrak and commuter rail tunnels under the Hudson River whose price tag (including various connections on both sides of the river) is $24 billion. Since neither Amtrak nor commuter rail does more than cover its operating costs out of the farebox, this project could not be financed as a revenue-based P3.

However, the lead agency—the Port Authority—owns revenue-positive transportation assets that it could sell or lease, as governments worldwide have been doing in recent decades. My January 2017 study for the Manhattan Institute estimated the market value of the PA’s three major airports as $16.4 billion, the bridges and tunnels as $28.2 billion, and the seaports as $3.3 billion, for a total of $47.9 billion.

What the federal government could do is to encourage state and local governments to engage in this kind of asset recycling, while making sure federal laws and regulations don’t stand in the way. One form of encouragement would be to provide incentive grants to such governments on condition that the net proceeds from sale/lease transactions be spent solely on needed infrastructure. A possible source of funding for such grants would be a portion of one-time federal revenues repatriated by corporations in response to proposed lower corporate tax rates.

Australian states (such as New South Wales and Victoria) have been doing this for years, most recently selling or long-term leasing (under P3 concessions) major seaports and electric utility enterprises. For several years, Australia’s federal government offered states a 15% bonus payment on net asset proceeds if those proceeds were all invested in needed infrastructure. Canada’s federal government is seriously considering a similar asset recycling program, with Toronto’s Pearson International Airport as a potential first candidate. In Brazil, the Sao Paulo state government just closed a deal under which Abertis agreed to pay $453 million up-front for a 30-year P3 concession to expand and modernize 250 miles of existing toll road, with the state government using the proceeds for other infrastructure.

Could such a plan actually gain traction in this country? Consulting firm McKinsey has urged both the Canadian and U.S. governments to pursue such a course. And last month Steven Ross, co-chairman of the President’s infrastructure task force, at a Bloomberg panel discussion, expressed interest in Australia’s asset recycling program, as described by fellow panelist John Schmidt of law firm Mayer Brown. At the forum, Schmidt also pointed to the long-term lease of the Indiana Toll Road as a U.S. precedent for asset recycling, in which the net proceeds were used for a 10-year program of highway capital investment in the state. Around the same time, the CEO of Blackstone Group, Steve Schwartzman, suggested in a TV interview that the United States emulate the Australian model.

Over the last five years, the 50 largest global infrastructure investment firms raised $250 billion, according to data compiled by Infrastructure Investor. Many would eagerly invest in U.S. airports, bridges, highways, and seaports if only there was a pipeline of projects open to revenue-based P3 investment. So would a great many domestic and overseas pension funds. They don’t want or need a tax credit (as proposed by the Trump campaign last fall). All they need are projects open to P3 concessions. Congress could open the door to such a pipeline of projects.

(This article first ran in the May issue of Surface Transportation Innovation)

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Posted in Transportation | 41 Comments

Study Questions Ethanol’s Image

The Heritage Foundation Blueprint for Agriculture includes a lengthy chapter on U.S. biofuels policy and the renewable fuel standard (RFS). Heritage concludes that ethanol and other current biofuels are harmful to agriculture, the environment, and consumer.

My first two reviews of Heritage’s positions on ag, found here and here, may have concerned you; I suspect the charges made by Heritage against ethanol will anger many of you.

Heritage claims the U.S. biofuels policy “is a case study in the unintended consequences of government intervention.” For example, biofuels have created higher livestock prices for livestock farmers and ranchers. Heritage suggests biofuel policies, over a 30-year time frame, have diverted over $35 billion in taxpayer money to agriculture. It goes on to conclude renewable fuel mandates have assisted corn growers at the expense of livestock producers. (I suspect my friends in the livestock community are not complaining about corn prices now.)

Higher food prices?

The report claims “The renewable fuel standard has certainly contributed to increased prices [in food].” To support this charge, Heritage quotes the USDA Economic Research Service, which writes, “Increased corn prices draw land away from competing crops, raise input prices for livestock producers, and put moderate upward pressure on retail food prices.”

Heritage also claims that diverting food to fuel has hurt both rural America and the world’s poorest citizens. I suspect there is some dispute over this assertion.

The report relies on the 2012 summer drought to assert that existing subsidies for ethanol and other biofuels “needlessly” diverted food to fuel. Although the report does accurately state “The magnitude of the ethanol mandate’s effect on corn prices and overall agricultural products is difficult to determine, partly because of the uncertainty of estimates regarding how much ethanol would be used for fuel absent a mandate…”

Heritage claims biofuel programs and the renewable fuel standard create unintended adverse environmental consequences. Heritage cites the United Nations’ Intergovernmental Panel on Climate Change (IPCC). IPCC asserts that United States biofuel policies negatively harm the lives of the poor and divert land to produce biofuels and suggests biofuels have “…dubious climate impacts.”

EPA is also quoted. Regarding renewable fuels, EPA writes, “…that increased renewable fuel would result in higher emissions of air pollutants such as particulate matter and nitrogen oxides while adversely impacting water quality.” (A dubious claim.)

Heritage has specific recommendations to the new farm bill relating to biofuels such as ethanol and biodiesel. For example, it believes the Renewable Fuel Standard (RFS) has promised a great deal but delivered little. Heritage believes “…bioenergy policies have hurt taxpayers, energy consumers, the environment, the world’s hungriest citizens, and the large segment of the agricultural community that does not profit from subsidies and the RFS.”

Repeal all energy programs in farm bill
Heritage would have Congress repeal all of the energy programs in the farm bill set forth in Title IX as well as those in Title VII. It further requests that the new farm bill repeal the renewable fuel standard in its entirety and have consumers determine how much biofuel they want to buy at the pump. It wants Congress to repeal not only the corn-based ethanol requirements but also get rid of the cellulosic requirements.

Heritage has a valid point in asking Congress to eliminate the cellulosic ethanol requirement. For example, the RFS mandates that 16 billion gallons must be created by 2022. In 2010 the U.S. was to “create” 100 million gallons of cellulosic fuel. In 2010 only 6.5 million gallons of cellulosic fuel was refined. Clearly this requirement is nonsense. For example, in 2016, the nation was to create 4.25 billion gallons of cellulosic biofuels. EPA mandated 230 million gallons and the production is so insignificant Heritage doesn’t even give a number. This nonsensical requirement does require the refiners to spend millions of dollars because they cannot comply with EPA’s minimum volume requirements because the fuel does not and cannot exist. These fines on the refiner, imposed by EPA, are passed on as costs to the consumer. As on so many issues, cellulosic requirements are simply out of touch with the market.

Again it is important to read and understand what the Heritage Foundation is advocating which may have an impact on your bottom line.

(This article first appeared in Farm Futures on June 8, 2017)

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Posted in Agriculture, Energy | 31 Comments