Carilion Wants it Both Ways

The Roanoke region needs more health care availability according to Carilion, the area’s mega hospital.   It now recognizes a problem that other health care providers have long known – the Roanoke area is underserved and has inadequate access to many important health care services.  And, of course, Carilion wants to fill this need.

Yet, for years Carilion has fought against allowing competing health care providers to expand or add services.  It has lobbied against reforming current Certificate of Public Need (COPN) laws that favor hospital monopolies and it has used this outdated law to stifle competition.  These COPN laws require state approval for additional health care facilities and services and hospitals have an undue influence in stopping competition.  The Federal Trade Commission has urged states to get rid of these anti-competitive laws.

Carilion’s approach to blocking competition even garnered the attention of the Federal Trade Commission (FTC). Several years ago, the FTC challenged Carilion’s acquisition of two competing outpatient clinics in the Roanoke area – the Center for Surgical Excellence (CSE) and the Center for Advanced Imaging (CAI) — stating in a unanimously-passed administrative complaint on July 24, 2009 that this acquisition would result in a “violation of federal antitrust laws,” higher health care costs, and reduce incentives for those facilities to maintain quality care. 

Ironically, before Carilion tried to buy these two competing clinics, it worked to block their COPN applications. Carilion’s eventual acquisition of CAI occurred five years after that competitor opened an advanced imaging center offering services similar to Carilion, but at a lower price. CAI’s quality, convenience, and low cost presented a serious threat to Carilion’s business. The mega-hospital recognized this threat when opposing CAI’s application for additional MRI equipment, noting that “CAI’s introduction of a second scanner threatens the viability of our [hospital] system.”

After success with its first facility, CAI sought to open an independent outpatient surgical center that it subsequently named CSE. The facility was finally awarded a highly-contested Certificate of Public Need (COPN), an outpatient surgical hospital license from the Commonwealth of Virginia, and an ambulatory service center (ASC) certification from Medicare. But despite the clear need for this facility, Carilion opposed this expansion.  

The FTC concluded in 2009, that “Carilion acknowledged that it would increase post-acquisition prices for CAI and CSE services” and “the acquisition will directly and substantially harm patients by increasing their out-of-pocket costs.” It cited Carilion’s plan to increase out-of-pocket costs for a brain MRI as high as 900% — from $40 to $350. Carilion eventually agreed to divest from the clinics that restored them as viable, independent competitors to settle the FTC charges.  

Another example of the results of Carilion’s use of the COPN law is the 2012 tragedy where a mother, 24 weeks pregnant, went to a hospital in Salem after she experienced a placental eruption. Much to her shock, doctors informed her that they were unable to treat her because they lacked a neonatal intensive care unit (NICU).  They quickly called a special ambulance to transport her six miles away to the nearest NICU at Carilion Medical Center.

However, the ambulance to take her to Carilion was out on another trip and, as a result, her child died.

The hospital in Salem had tried twice for approval to build a NICU and had garnered widespread community support. But, they were denied each time in large part, according to those who are familiar with this case, due to Carilion’s opposition. In fact, this writer is told that Carilion was the only voice to oppose this needed NICU during public hearings. 

Now Carilion wants to expand Roanoke Memorial because they’re currently turning away patients.  Could this be because it has, for years, blocked serious competition in its own back yard?  A strong case can be made for exactly that.

Luckily, reform of our COPN laws is gaining steam and could happen next year. One bill, House Bill 2337 sponsored by Dr. John O’Bannon of the Richmond area, would eliminate the burdensome COPN process for operating rooms, NICUs and other important facilities and services. As noted by the FTC, that would mean quality care at lower out of pocket costs.  

Let’s hope our state legislators get serious about COPN reform and remember that a supposedly nonprofit system like Carilion shouldn’t be able to fight against patients and other health care providers by using COPN laws to stifle competition and then want to expand services that are needed in the area.

(Michael W. Thompson is the President of the Thomas Jefferson Institute.  The opinions expressed here are his and do not necessarily reflect those of the organization or its Board of Directors.  Mr. Thompson can be reached at info@thomasjeffersoninst.org)

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Immigration Reform: “Redirect, Not Reduce”

President Trump last week endorsed legislation introduced by Senator Tom Cotton (R-AR) and Representative David Perdue (R-GA) that would reform legal immigration in America through a “merit-based” system and slash immigration based on family ties – for a 41 percent reduction in legal immigration the first year alone.

They’ve got it about half right.

We need only look north to see that a merit or employment-based immigration system would be far preferable to America’s current process. Although Canada’s inflow of immigrants as a percent of population is twice the rate of the United States’, immigration is far less an issue there. As Gary Shapiro, president and CEO of the Consumer Technology Association points out, sixty percent of visas in Canada are assigned to those judged most capable of helping Canada. Here in the United States, 66 percent are granted entrance based on family connections.

In fact, the American system of immigration is out of line with international norms. Western nations focus on identifying and bringing in immigrants who want to work and add to their economic growth; America’s system emphasizes family members, refugees – even a special “diversity” category from “low-admission” countries.

Employment or skills-based immigration is what we should want. Here in Virginia, 17 percent of all business owners are foreign-born, generating $3 billion in total net business income. Nationally, about 25 percent of technology and engineering firms started in the last decade had at least one immigrant founder. About half of technology startups worth at least $1 billion had immigrants as their founders. U.S. immigrants are responsible for a higher than ordinary number of international patent applications.

So when smart people want to come to America, we should encourage it. Those smart people are either going to contribute to our economy or to some other economy.

But the Cotton-Perdue-Trump proposal takes a wrong turn in slashing legal immigration overall and placing far too great an emphasis only on highly skilled workers.

Limiting employment-based immigration will abandon huge swaths of the American economy desperately in need of foreign workers to fill jobs it appears Americans won’t take. For example, in 2011, the North Carolina Growers Association had roughly 6,500 jobs available in that state. Of the 268 U.S. natives who applied, only 163 showed up for work and only seven completed the growing season. In contrast, 90 percent of the Mexican farm workers hired remained through the end of the season.

That same year, a Georgia law giving police the authority to demand immigration documentation drove off harvest workers, creating labor shortages that triggered an estimated $140 million in agricultural losses. Georgians, it seems, don’t want to work in the fields, nor do they have the skills: those who do are deemed “low-skilled” by federal definition but, according to Dick Minor, president of the Georgia Fruit and Grower’s Association are “pretty much professional harvesters.”

And when American growers can’t find legal workers to cross the border, the companies cross the border instead, taking their resources elsewhere. Since 2000, U.S. direct investment in Mexican agriculture has increased seven-fold and U.S. companies now farm more than 45,000 acres in Mexico, employing 45,000 workers. Economic growth ends up somewhere else, not in the U.S.

To build the American economy, the Cotton-Perdue-Trump bill should expand the number of legal immigrant and non-immigrant (those not seeking to stay) workers, not reduce it – because we are going to need those workers.

According to a report from Wells Fargo Securities, “Growth in the U.S. labor supply has been slowing for decades due to weaker population growth and lower labor force participation.” In fact, notes the report “foreign-born workers have accounted for half the growth in the labor supply over the past decade.”

But the alphabet soup of categories for admission are a system only a government bureaucrat could love. With more than 50 immigrant and non-immigrant visa categories, navigating the system is both lengthy and expensive, and the product of special-interest lobbying, crony capitalism, and the “swamp” President Trump says he wants to drain.

A simpler solution would be to abolish all the quotas, categories and government attempts to determine how many workers each business needs, replacing it with just one visa employment category for potential workers, and letting American business and American economic demand decide whether we need more tomato pickers, scientists or “fashion models of distinguished merit and ability” (an actual visa category today).

The Cotton-Perdue-Trump plan moves in the right direction when it argues for a merit-based system as a means of building the American economy. But it defeats its own purpose by slashing immigration levels and making work permits too limiting.

The answer lies in redirecting our immigration numbers, not reducing them.

What America needs is simply to make legal immigration easier, stop incentivizing illegal immigration and encourage the kind of immigration that will – as somebody once said – make America great again.

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Autonomy and Accountability in Higher Education – Part 3

The General Assembly enacted the 2005 Restructuring Act with the idea of holding public universities accountable to a set of performance metrics. Many measures have fallen by the wayside.

This is the third of four articles exploring higher-education accountability in Virginia since enactment of the 2005 “Restructuring Higher Education Financial and Administrative Services Act.”

Upon becoming governor in 2002, Mark Warner made higher education a top priority. An entrepreneur who had made his fortune in cell phones, he saw Virginia’s colleges and universities as vital institutions for preparing a technology-ready workforce and for creating R&D-based innovation centers. He arranged a $900 million state-backed bond initiative to pay for a college building program, and he pushed through a tax increase to offset the spending cuts he’d enacted previously to balance a recession-hammered budget.

Warner paid keen attention to higher ed issues. In 2003 Virginia became one of five states to join the National Collaborative for Postsecondary Education Policy. The ensuing discussions brought another priority to the fore — the gap in access to higher education experienced by different races and ethnic groups. African-Americans and Hispanics lagged the population in college attendance, and given the increasing proportion of minorities in the college-bound population, lawmakers worried that the disparity in access could get even worse.

At the same time, Virginia’s public universities had their own agendas, which entailed winning more freedom from regulation and less state meddling with tuition. In 2005, Warner and the higher-ed establishment struck a grand bargain enshrined in the “2005 Restructuring Act” — universities would get more autonomy, and Warner would get more accountability.

“Restructuring was a historic effort by the Commonwealth to establish a new relationship that would both help to ensure the viability and the effectiveness of public higher education for the citizens of the Commonwealth,” says Peter Blake, director of the State Council of Higher Education for Virginia (SCHEV).

The legislation enshrined eleven goals, to which a twelfth was added after the 2007 Virginia Tech massacre. Public institutions would:

  1. Ensure access to higher education, including meeting enrollment demand.
  2. Ensure affordability, regardless of income.
  3. Provide a broad range of academic programs.
  4. Maintain high academic standards.
  5. Improve student retention and progress toward timely graduation.
  6. Develop uniform articulation agreements with community colleges.
  7. Stimulate economic development.
  8. Increase externally funded research and improve technology transfer.
  9. Work actively with K-12 to improve student achievement.
  10. Prepare a six-year financial plan.
  11. Meet financial and administrative management standards.
  12. Ensure the safety and security of students on college campuses.

The 2005 Restructuring Act put the Governor and Secretary of Finance in charge of developing financial and administrative measures, and tasked SCHEV with devising and tracking metrics for the other goals. SCHEV would publish an “Assessment of Institutional Performance” every year that ascertained whether or not institutions met the goals. Falling short would jeopardize a college’s access to revenue sources estimated in 2008 to be worth about $60 million across Virginia’s higher-ed system. (The incentives have declined to less than $20 million in recent years.)

After the law passed, the state began diligently devising metrics and compiling data, some of which SCHEV had been collecting already, and Virginia’s public colleges and universities incorporated the state goals into their own planning processes. Several years later, the 2011 “Preparing for the Top Jobs of the 21 Century” act, modified the goals, establishing an objective of increasing the number of degrees awarded by 100,000 over 15 years. Top Jobs put an emphasis on STEM (Science, Technology, Engineering and Math) and health disciplines.

We saw in Part II of this series that the 2005 Restructuring Act has brought some tangible financial benefits to Virginia’s colleges and universities. In exchange, the state expected to hold them accountable for achieving the 12 state goals. How did those goals translate into metrics? How carefully did the state keep track of those metrics? And what happened if and when institutions fell short?

While outside observers hoped that the new covenant between the Commonwealth and its higher-ed system might provide a new model for the nation, administering the 2005 Restructuring Act proved more difficult than anyone anticipated. The accountability-by-metrics piece bogged down in a legislative-bureaucratic morass.

SCHEV and the Secretariat of Finance still monitor student enrollment and degrees granted, and they track an array of financial and administrative measures for the institutions that have signed Level II and Level III autonomy agreements. SCHEV compiles these limited metrics in biennial performance reviews for each institution. Further, SCHEV maintains a rich database of higher-education statistics, much of which is relevant to the 12 state goals, and it publishes metrics for a strategic plan, the Virginia Plan for Higher Education.

But changes implemented over the years have undercut accountability. Hewing to directives from governors and the General Assembly, SCHEV no longer sets benchmarks or monitors metrics for all 12 state goals at each college and university. If institutions fall short of metrics that SCHEV does track, they suffer no public rebuke. Most significantly, while Virginia’s higher-ed system continues to meet some state goals, the apparatus put into place by the 2005 Restructuring Act has proven unable to rein in tuition cost increases or prevent a crisis of middle-class affordability.

The JLARC report. Since enactment of the Restructuring Act  in 2005, the Joint Legislative Audit and Review Commission (JLARC) is the only state entity to have taken a comprehensive look at the accountability question. In 2008 the law was still fresh in the minds of lawmakers and administrators, stakeholders were taking it seriously, and progress was being made in implementing it. The 2008 review of Level III institutions (those with the most autonomy) found that SCHEV had devised “fully developed performance measures” for seven of its goals but not for the others.

The most detailed accounting came from the secretariats of Finance and Administration, which devised 17 metrics showing compliance with state financial and administrative standards. Some metrics were simple. Did an institution have an unqualified opinion from the auditor? Did it have a AA- bond rating? Did it comply with Small Women and Minority (SWAM) procurement guidelines?

Other metrics required data collection and analysis. Was voluntary employee turnover comparable to that of state employees? Was an institution using the state’s Internet-based procurement system for at least 80% of its purchases? Did an institution pay competitive rates for leased office space? Did it limit project change orders to 2% of the guaranteed price?

While the JLARC was generally positive about the progress made in implementing the 2005 Restructuring Act, the report acknowledged that considerable work remained to be done. One of JLARC’s recommendations would prove prophetic:

The oversight process needs improvement to address concerns quickly and ensure the transfer of institutional memory between gubernatorial administrations. A restructuring advisory committee or an expanded leadership role for [SCHEV] could improve the oversight process.

That recommendation was never acted upon. No advisory committee was formed. The General Assembly never gave SCHEV more resources. But administrations did change.

Complications and delays. When SCHEV embarked upon the task of developing metrics and benchmarks for the state goals, complications quickly arose. Initially, staff thought to set up standardized goals that applied to everyone, recalls Jim Alessio, who worked eight years as SCHEV’s in-house “Restructuring Act” expert. But it quickly became apparent that setting identical goals would be unfair to certain institutions.

For example, says Alessio, the University of Virginia had a six-year graduation rate exceeding 90%. Norfolk State University’s graduation rate hovered around 30%. The two universities had radically different student bodies and widely disparate resources. UVa’s graduation rate was so high, it was almost impossible to improve; if it fell a percentage point, it was still a stellar performer. By contrast, NSU needed dramatic gains in student retention. Accordingly, SCHEV began negotiating goals with each institution.

Other problems arose from the built-in time lags involved with selecting metrics, establishing benchmarks, and then measuring against the benchmarks. The Restructuring Act went into effect in July 2005. It took a year for SCHEV to develop and approve base-line metrics. But because the 2006-2007 academic year had already begun by then, it it did not seem appropriate to develop challenging targets that year.

By then, Tim Kaine was governor, says Alessio. The new team knew little about the Restructuring Act. A key provision of the law needed to be ironed out to allow universities to apply for Level II status and gain more autonomy for IT, capital projects and procurement. Amid the administration’s other priorities, that task fell between the cracks for two years, says Alessio. Consequently, institutions could not apply for Level II status those two years, as the legislation had allowed.

Meanwhile, SCHEV was trying to apply the metrics that people could agree upon. The first year, the Council set easy goals on the grounds that everyone was still getting familiar with the process. “The first year was more of a run-through,” says Alessio. Every institution passed.

In 2008, SCHEV tightened the standards. Four institutions — Longwood University, Virginia Commonwealth University, Virginia State University, and the University of Virginia at Wise — failed one or more of the measures. Alessio took the data to the Council, and heated discussions ensued. Some members were reluctant to sanction the colleges: Withdrawing resources would only make their job harder.

Institutions began arguing that they couldn’t meet the goal because of factors beyond their control. When the Council gave special dispensation to one college, that made it harder to refuse to cutting another institution slack. For instance, says Alessio, one university missed its enrollment target because a key manager had suffered a series of personal crises. The institution’s local delegate successfully pleaded its case to SCHEV. The other legislators began standing up for their institutions as a constituent service.

Instead of taking a hard-line approach, SCHEV began requiring institutions to submit improvement plans for measures in which they had fallen short. SCHEV contends that the approach has worked out well.

Top Jobs. By 2011 the business community had developed a consensus that the state needed to make a sustained investment in the higher-ed system. Governor Bob McDonnell established a Governor’s Commission on Higher Education Reform, Innovation and Investment and loaded it with prominent business leaders, educators and elected officials.

The commission’s report, “Preparing Virginia for the Top Jobs of the 21st Century,” enumerated new higher-ed goals that would be incorporated into the so-called “Top Jobs Act” of 2011. The new law set a goal of having Virginia’s public colleges and universities confer an additional 100,000 degrees over the next fifteen years. Special attention would be given to high-demand, high-earning disciplines such as STEM (science, technology, engineering and mathematics) and healthcare.

While signing on to the STEM priority, the McDonnell administration had very different ideas about how to hold state colleges accountable — and they did not involve SCHEV.

G. Gilmer Minor III, the soon-to-retire SCHEV chair, was appointed to the council in 2009, just before Governor Bob McDonnell took office. The Council’s survival was precarious. “Literally, the Secretary of the Commonwealth said, ‘We’re appointing you to SCHEV but we can’t promise it’s going to survive,” Minor recalls.

Having served as chair of the Virginia Military Institute board, Minor knew first-hand the low regard SCHEV was held in at that time. A series of executive directors had served short terms, he says, and the Council was perceived as adversarial. It had lost the confidence of the universities and policy makers. “At VMI,” he says, “SCHEV was not the partner, it was almost the enemy.”

There was a strong sentiment in Republican circles for shrinking state government, and the unpopular SCHEV looked expendable. But the state couldn’t just cut the colleges loose. The only alternative was centralizing authority with a board of regents, and that wasn’t palatable either. At the end of the day, says Minor, “McDonnell said, ‘let’s make a more effective SCHEV.’”

In time, SCHEV’s status as a state agency did stabilize, and the agency regained credibility with lawmakers. While the administration was thinking through SCHEV’s future and establishing its own educational priorities, however, it put the original 2005 Restructuring Act metrics “on hold” for two years, says Alessio. Legislators retained the 12 higher-ed goals articulated back in the Warner administration, but they pared the number of academic-related measures in half.

For purposes of compiling the Assessments of Institutional Performance, SCHEV then began tracking performance against only six goals for each college and university, the first five of which applied to in-state students:

  • Undergraduate enrollment
  • Associate and bachelor degrees awarded
  • STEM-H degrees awarded
  • Upper-level, program-placed FTE students
  • Two-year transfers to four-year institutions
  • Degrees awarded to under-represented populations

SCHEV had to establish new base-lines, and then wait another year to gather data to compare. Alessio departed SCHEV in 2013 just as the organization was beginning to evaluate the data. In 2014, nine years after the enactment of the 2005 Restructuring Act, SCHEV finally published its first Biennial Assessment of Institutional Performance. The Council published its second assessment in 2016.

The missing metric. The second goal listed in the legislation was to “ensure affordability, regardless of income.” Early on, the focus was on achieving affordability for lower-income students, which several public institutions have addressed by raising funds available for financial aid. But as colleges aggressively raised tuition — in part to pay for the financial aid — legislators have become agitated about affordability for the middle class.

You’d think “affordability” would be a simple term to define — how much do you charge, says Tony Maggio, a fiscal analyst for the House Appropriations Committee who is sympathetic to the concern about higher tuition.

But how much do you charge for what? A four-year degree? If so, he asks, how do you account for a 2+2 program covering two years in community college and two more in a four-year institution? (In the 2014-15 school year, nearly 12,000 community college students transferred to four-year institutions.) What about dual high school/college enrollments? It gets complicated, he says.

Another complication is measuring the cost of attendance before and after financial aid. In 2015 Virginia colleges and universities doled out $188 million in financial aid (not including grants, loans and scholarships from private and government sources). That need-based assistance went mostly to lower-income students. So, the question becomes, affordability for whom?

Adding complexity to any calculation is the reality that not all four-year degrees are created equal. Does the University of Virginia offer the same educational value-added as, say, Virginia Military Institute or Norfolk State University? “Each one has their own value proposition,” says Minor. “How much is that worth? What am I getting for the cost? Nobody talks about that. “

These dilemmas stymied SCHEV and legislators alike. SCHEV did develop an affordability measure, which it applied for the the first and last time in 2011. The Top Jobs Act put the metric on hold, and it never resurfaced as part of the performance evaluations.

And SCHEV does publish an annual Tuition & Fee Report (see the 2016-2017 report), which shows system-wide trends. The chart below, taken from that report, shows that average undergraduate charges have consumed an increasing share of Virginians’ per capita disposable income since 2000, reaching 47.6% last year.

 

The same report lists tuition, fees, room and board for individual colleges and universities , and the Virginia Plan for Higher Education also describes metrics for “affordability” and “price” for the state system as a whole.

SCHEV Director Blake insists that the system does hold institutions accountable for tuition increases. It is true “in a very linear sense” that there are no formal accountability measures for individual institutions, he says. But policy makers can access extensive sources of data on affordability and cost. These data surface in behind-the-scenes discussions between governors, legislators and university presidents that the public never hears about.

But SCHEV does not hold individual institutions accountable to affordability benchmarks. The Council undertakes no formal review, passes no judgment and enacts no sanctions. State code states clearly that setting tuition is the sole prerogative of the Boards of Visitors of colleges and universities themselves.

“No one is tackling affordability because no one wants to touch the third rail, tuition,” says Maggio, the House fiscal analyst. “No one is willing to say, what are you charging, and are you charging too much?”

Shifting, toothless goals. Jim Alessio administered the 2005 Restructuring Act for eight years as a one-man show with assistance from other SCHEV staff members. He started with great enthusiasm but became disillusioned as he encountered endless delays and setbacks. New governors brought new priorities and staffed their administrations with new people who had little institutional knowledge.

Priorities change. The goals that animated Warner in 2005 were of little interest to McDonnell in 2011. And who is going to remember McDonnell’s priorities in 2025, asks Alessio. “Some new governor will come along and look at this differently. Will anyone care if the 100,000 additional degree goal is met?”

Also, he asks rhetorically, “Is anybody watching? Is anyone going to the institutions and saying they aren’t moving fast enough?”

No, they aren’t, he answers. The law has no teeth. “There’s nothing in there to say what happens if we don’t make the goal.”

In the fourth part of this series we will explore what the data tell us about enrollment, affordability, access, retention, research and other key goals.

(This first ran in Bacon’s Rebellion on July 12, 2017)

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Getting to Yes on Mileage-Based User Fees

Here are two recent headlines about efforts to begin the transition to paying for highways based on miles driven rather than gallons of fuel:

Senate Votes to Prohibit Mileage Tax,” Connecticut Post, May 25, 2017
States Considering Taxing Drivers by the Mile Despite Privacy Concerns,” Politico, June 8, 2017

Both articles suggest serious problems with public and political perceptions of what this transition is all about.

The difficulty is also reflected in a June 2017 report from the Mineta Transportation Institute (at San Jose State University), summarizing eight years of an ongoing national survey on federal tax options to support highways, transit and local roads. Given a choice among 10 tax increase options—eight versions of a federal gas tax increase, a new federal transportation sales tax, or a national mileage tax of one cent per mile—the last-place finisher was the per-mile tax, with only 23% support.

A common element in all three cases is presenting a per-mile charge (1) as a tax rather than a user fee, and (2) as a net tax increase (rather than as an initially revenue-neutral change that would not lose purchasing power in coming years, as fuel taxes will do).

A sometimes-insightful report last year from the Congressional Research Service, “Mileage-Based Road User Charges,” does use better terminology, but begins with the premise that the way forward is a single national MBUF that would replenish the Highway Trust Fund and also deliver revenue directly to the states. That’s exactly backwards from what most transportation researchers and state DOTs envision. Almost everyone sees the transition as being led by states that reach consensus on replacing their fuel tax with MBUFs, thereby working out ways of gaining political acceptance that other states—and perhaps eventually Congress—can learn from.

I suggest that one problem in gaining public acceptance is the confusion between a tax and a fee. As the CRS report points out, “A road user charge that funded both highways and public transportation might arguably be seen more as a tax than a user fee.” It goes on to cite legal cases on the differences between the two. Over many decades, at both federal and state levels, gas taxes that began as pure user fees—paid only by highway users and spent only to benefit highway users—were gradually converted into all-purpose transportation taxes. The original idea of a highway trust fund was basically a promise to highway users that all the money they paid in highway use taxes would be spent for their direct benefit—users-pay/users-benefit. What we have ended up with is a very different model: highway users pay/everybody benefits. And that, I believe, is one reason why a large fraction of the population is so resistant to gas-tax increases.

Instead of replicating that built-in flaw as we design the gas tax’s replacement, we should consider a different way forward. What if people’s monthly highway bill was as transparent and straightforward as their mobile-phone bill, electric bill, water bill, and cable or broadband bill? With all those utilities, you are charged based on the services you use; the funds go directly to the provider of the service; and the money is used solely for the capital and operating costs of the infrastructure used. We don’t have major political battles over a mobile-phone rate increase because the system needs to add more cell towers or upgrade to 4G or 5G. Or the need to increase water rates because the pipes have to be replaced.

Changing the way we pay for our highways and bridges (by shifting from per-gallon to per-mile) offers a once-in-a-century opportunity to rethink how this vital infrastructure is managed, as well as how it is paid for. Unlike the predominant U.S. model of investor-owned utilities, what the 20th century gave us in highways is a set of state-owned enterprises, funded by taxes and governed politically. Most of Europe’s utilities were also state-owned enterprises prior to the 1980s, when Margaret Thatcher privatized electricity, natural gas, telecoms, water and wastewater, airports, and seaports—and much of the rest of Europe then followed suit (including the tolled motorways of France, Italy, Portugal, and Spain). De-politicization of those sectors led to increased and better-justified investment, better customer service, and in some cases, competition where there had only been monopoly.

Yes, I know—that would be a massive paradigm shift, probably far too much to be done all at once. So let me suggest a possible first step. We already have well-accepted technology and procedures in place to do per-mile charging on one portion of our highway system: limited-access Interstates and urban expressways. Converting those highways, state by state, from fuel taxes to state-of-the-art all-electronic tolling (AET) would be comparatively simple, since we already have two working organizational models in operation: public-sector toll agencies and long-term P3 toll concessions. We already do variable pricing using AET, without raising Big Brother privacy concerns. The capital markets know how to invest equity and debt (toll revenue bonds) to finance major improvement projects, such as replacing obsolete bridges or adding dedicated truck lanes We are also close to having 50-state electronic tolling interoperability—and this already exists for trucking, via Bestpass and PrePass.

The Interstates alone handle 25% of all vehicle miles of travel; including non-Interstate expressways and other limited-access facilities might bring the total to 30%. That would be a serious start on the transition from per-gallon to per-mile—and the user fees would be paid directly to the roadway providers, thereby de-politicizing the process, making it more like all the other utilities we use.

States could then work to develop simple, low-tech ways of replacing the fuel taxes used for other roadways, while being relieved of having to support the ongoing capital and operating expenses of the limited-access highways, now supported instead by per-mile tolling.

I’ve left out a lot of details in this brief sketch, but I’m happy to tell you that I’ve recently completed a book-length treatment on this new paradigm for highways. 21st Century Highways will be out next spring from the University of Chicago Press. I will keep you posted as we get closer to the publication date.

(This article first ran in July’s issue of Surface Transportation Innovations)

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U.S. Appeals Court supports EPA and Farmers

The U.S. Court of Appeals for the 9th Circuit handed farmers another win on July 18, 2017. The Natural Resources Defense Council (NRDC) and the Pesticide Action Network North America (PANNA) challenged EPA’s decision not to restrict or eliminate the use of the pesticide chlorpyrifos, used to kill a number of pests, including insects and worms.

NRDC and PANNA had attempted to revoke pesticide tolerances and cancel the pesticide registrations for chlorpyrifos.

By pounds of active ingredient, chlorpyrifos is the most widely used insecticide in the country. Environmental groups were hoping to destroy a crop protection product used by hundreds of thousands of farmers. Chlorpyrifos is used on tree fruits, nuts, small fruits and vegetables, grain/oilseed crops, cotton, ornamental and agricultural seed production, non-residential turf, industrial sites/rights of way, greenhouse and nursery production, sod farms, plywood production, pulpwood production, wood protection, and public health.

Cost-effective choice

“For some of these crops, chlorpyrifos is currently the only cost-effective choice for control of certain insect pests,” said EPA in its decision denying the environmental groups’ petition to destroy all uses of the pesticide.

EPA Administrator Scott Pruitt signed the Order on March 29, 2017 (Chlorpyrifos: Order Denying PANNA and NRDC’s Petition to Revoke Tolerances). He issued a 45-page decision which lays out EPA’s reasons for denying PANNA and NRDC’s petition to eliminate the use of chlorpyrifos.

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