Time to Call a Truce

As an undergraduate political science major, the grounds upon which a Supreme Court Justice should be considered was made clear to me in my Constitutional Law course:  Integrity, experience, temperament, and intelligence.  One thing not to be judged was politics.  Not to be asked were “How would you rule if …” questions.  Those types of queries would politicize an independent judiciary.

Then came Robert Bork.

Opposition attacks on Bork began within 45 minutes after his nomination when Senator Ted Kennedy took to the Senate floor to claim Bork would force women “into back-alley abortions, blacks would sit at segregated lunch counters, rogue police could break down citizens’ doors in midnight raids …” Fact checkers have long since demonstrated that none of it was true, and New York Times reporter Ethan Bronner has declared “Kennedy’s was an altogether startling statement.  He had shamelessly twisted Bork’s world view …”

Writing in The Washington Post, retired U.S. district judge James Robertson recently noted that three decades ago he had led a team of young lawyers opposing Bork’s nomination, doing what might be called “opposition research.”

Today, Robertson says, “I regret my part in what I now regard as a terrible political mistake…. the treatment of Bork touched off a Thirty Years’ War on judicial appointments.  We have politicized the judicial confirmation process far beyond historical norms and undermined public confidence in the judiciary.”

Indeed.  And it has gotten worse with every passing year.  It ratcheted up when then Senate Minority Leader Harry Reid argued that “Nowhere does it say the Senate has a duty to give presidential nominees a vote,” following it up (along with then-Senator Barack Obama) with an attempted filibuster of Justice Samuel Alito.  And it happened again when Republicans took Reid at his word and refused to consider Obama’s nomination of Merrick Garland.

Now, Senate Minority Leader Chuck Schumer, responding to overtly political pressure from his liberal base, has promised a filibuster against Gorsuch.  If necessary, Republicans will celebrate the 100th anniversary of cloture by ending it and the requirement for a three-fifths majority for Supreme Court nominees, moving on to approve Gorsuch.

But at what cost?

Of Gorsuch, Robertson notes, “Judge Neil Gorsuch is superbly well-prepared and well-qualified to serve as an associate justice of the Supreme court.  There is no real dispute about that. … Does his record support the label ‘extremist’?  Certainly not.  ‘Ideologue’?  No.  ‘Conservative’?  Yes, of course – but elections do have consequences.”

But these are exactly the words used by Gorsuch opponents.  Senator Diane Feinstein calls Gorsuch an “extremist.”  Senator Al Franken called his opinions “absurd.” Other liberal leaders use the words “dangerous”, “ideologue” and “radical.”  In other words, deploy every political distortion and smear available as if negative TV ads were being devised.

Where once we demanded Supreme Court Justices exercise intelligent analysis of the facts, Senate liberals oppose Gorsuch because he refuses to say how he would vote on hypothetical cases – before the facts are even known.

The effect of all this is devastating in the long run:  Lower court Judges will increasingly decide cases not on the evidence, precedent, and law but on the politics.  Those who trim to the political winds will be rewarded.  And an increasing politicization of the Supreme Court will lower even further public belief that the Court decides objectively.
Lloyd Cutler, White House counsel to President Clinton made the same point to the Senate Judiciary Committee when he testified “to make ideology an issue in the confirmation process is to suggest that the legal process is and should be a political one.  That is not only wrong as a matter of political science; it also serves to weaken the public confidence in the courts.”

Fifteen years ago, an attorney in private practice noted this degradation of the judicial confirmation process when he wrote, “Politicians and pressure groups on both sides declare that they will not support nominees unless they hew to their own partisan creeds,” he continued.  “When a favored candidate is voted down for lack of sufficient political sympathy to those in control, grudges are held for years, and retaliation is guaranteed.”

The author?  Neil Gorsuch, who now must bear the weight of those grudges … and the retaliations.

Elected officials love to proclaim their actions as non-partisan, and Virginia Senators Tim Kaine and Mark Warner now have an opportunity to back up those claims with actions.  Both can play a major role in reversing this trend of judicial confirmation partisanship.  Regardless of their vote on Gorsuch himself, they can claim the mantle of non-partisanship by voting for cloture and allowing a vote on the merits.

They can be among the first to call a truce to the War on judicial appointments.
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Probing the Limits of Tuition Hikes at VCU

Virginia Commonwealth University is pondering a tuition increase of between 3% and 5% — over and above a 2.8% increase for the current academic year — to compensate for an $8 million reduction in state appropriations and a 3% salary raise authorized by the General Assembly, reports the Richmond Times-Dispatch.

Meanwhile, the university plans to hire a firm to recruit more international students to bolster revenue with lucrative out-of-state tuition payments. (The total cost of attendance for an out-of-state student is about $19,000 higher than for an in-state student).

If the VCU board of visitors OKs the tuition hike, Virginians will get to observe an interesting experiment in higher-ed economics — how high can a second-tier university push tuition before diminishing enrollment? Is there an upper bound to the cost of attendance at which point students say, “No more!”?

VCU has increased its tuition aggressively over the past decade. By the 2015-16 academic year, the Richmond university had the second highest in-state cost of attendance of any public, four-year institution in the state: $26,700. That was higher than the University of Virginia’s and second only to the College of William & Mary’s. Likewise, VCU’s out-of-state cost of attendance, at $48,500, was the third highest. (I draw these numbers from the SCHEV’s higher education database.)

Two Virginia universities with stellar national reputations, the University of Virginia and the College of William & Mary, arguably have the latitude to boost their tuition & fees should they choose to do so. Perceived as near-Ivy League in quality, they likely could get away with charging near-Ivy League prices. Virginia Tech is not quite in the same league, but its undergraduate engineering school is one of the top rated in the country, so the institution probably has some pricing leeway, especially considering that its cost of attendance is lower than the state average.

Although VCU has a rising reputation among state universities, it has not reached the rarefied atmosphere where it can charge top dollar. Demand for a VCU education is more “elastic,” meaning that students are more sensitive to price increases. Here’s my question: Will higher prices at VCU push down enrollment by discouraging students from applying?

The chart below compares VCU to two peer institutions — big research universities located in large metropolitan areas — George Mason University and Old Dominion University — and adjusts the sticker price by the amount of financial aid provided.

 

“Financial aid per student” was derived by dividing total in-state financial aid by total in-state undergraduate enrollment. All numbers are for undergraduate students.
VCU is not a bargain: Its net cost of attendance per year is almost $2,500 higher than George Mason’s and about $11,000 higher than Old Dominion’s.

Now consider that VCU draws from a less affluent demographic base than, say, UVa or W&M. Sixty-eight percent of its students graduate with debt. Indeed, 29% of VCU students receive federal Pell grants reserved for lower-income students. Needless to say, these students are highly price sensitive.

How much in higher expenses can VCU’s less-affluent demographic absorb? At what point will enrollment numbers start declining? VCU’s board of visitors seems determined to probe the outer limit.

The economics of admitting international students are different. Let’s start with the cost of attendance.

Judging by the net cost measure for out-of-state students, VCU looks somewhat more competitive than for in-state students. Although its sticker price is higher than GMU’s and ODU’s, the net cost of attendance after adjusting for financial aid is a little lower than GMU’s. On the other hand, it remains significantly more expensive than ODU.

According to the Times-Dispatch, VCU had 1,600 foreign students enrolled last fall, with the largest groups coming from Saudi Arabia and China. These students are highly desirable from a revenue perspective because they pay out-of-state tuition, in effect creating a profit for the university — according to a statewide rule of thumb, they pay roughly 60% more than they cost to educate. But international students aren’t committed to Virginia. They are motivated to shop around internationally for the best educational value.

The VCU board is considering hiring a recruiting firm to land more international students. Here’s the trick: Typically such firms receive 80% to 90% of the student’s first-year payments. (It’s not clear from the T-D account if that is 80% to 90% of tuition or the total cost of attendance, which includes fees, room, board, textbooks and other expenses.) Payments of that magnitude would cut sharply into any surplus revenues VCU would derive from the students.

The VCU board faces hard decisions — decisions it didn’t ask for. But the choice to close the shortfall by raising tuition instead of cutting spending is fraught with risk. If higher tuition leads to a decline in enrollments, VCU may not get the revenue boost it’s looking for. In a worst-case outcome, further revenue declines could start a vicious cycle. Buckle your seat belts!

Virginia Commonwealth University is pondering a tuition increase of between 3% and 5% — over and above a 2.8% increase for the current academic year — to compensate for an $8 million reduction in state appropriations and a 3% salary raise authorized by the General Assembly, reports the Richmond Times-Dispatch.

Meanwhile, the university plans to hire a firm to recruit more international students to bolster revenue with lucrative out-of-state tuition payments. (The total cost of attendance for an out-of-state student is about $19,000 higher than for an in-state student).

If the VCU board of visitors OKs the tuition hike, Virginians will get to observe an interesting experiment in higher-ed economics — how high can a second-tier university push tuition before diminishing enrollment? Is there an upper bound to the cost of attendance at which point students say, “No more!”?

VCU has increased its tuition aggressively over the past decade. By the 2015-16 academic year, the Richmond university had the second highest in-state cost of attendance of any public, four-year institution in the state: $26,700. That was higher than the University of Virginia’s and second only to the College of William & Mary’s. Likewise, VCU’s out-of-state cost of attendance, at $48,500, was the third highest. (I draw these numbers from the SCHEV’s higher education database.)

Two Virginia universities with stellar national reputations, the University of Virginia and the College of William & Mary, arguably have the latitude to boost their tuition & fees should they choose to do so. Perceived as near-Ivy League in quality, they likely could get away with charging near-Ivy League prices. Virginia Tech is not quite in the same league, but its undergraduate engineering school is one of the top rated in the country, so the institution probably has some pricing leeway, especially considering that its cost of attendance is lower than the state average.

Although VCU has a rising reputation among state universities, it has not reached the rarefied atmosphere where it can charge top dollar. Demand for a VCU education is more “elastic,” meaning that students are more sensitive to price increases. Here’s my question: Will higher prices at VCU push down enrollment by discouraging students from applying?

The chart below compares VCU to two peer institutions — big research universities located in large metropolitan areas — George Mason University and Old Dominion University — and adjusts the sticker price by the amount of financial aid provided.

“Financial aid per student” was derived by dividing total in-state financial aid by total in-state undergraduate enrollment. All numbers are for undergraduate students.
VCU is not a bargain: Its net cost of attendance per year is almost $2,500 higher than George Mason’s and about $11,000 higher than Old Dominion’s.

Now consider that VCU draws from a less affluent demographic base than, say, UVa or W&M. Sixty-eight percent of its students graduate with debt. Indeed, 29% of VCU students receive federal Pell grants reserved for lower-income students. Needless to say, these students are highly price sensitive.

How much in higher expenses can VCU’s less-affluent demographic absorb? At what point will enrollment numbers start declining? VCU’s board of visitors seems determined to probe the outer limit.

The economics of admitting international students are different. Let’s start with the cost of attendance.

Judging by the net cost measure for out-of-state students, VCU looks somewhat more competitive than for in-state students. Although its sticker price is higher than GMU’s and ODU’s, the net cost of attendance after adjusting for financial aid is a little lower than GMU’s. On the other hand, it remains significantly more expensive than ODU.

According to the Times-Dispatch, VCU had 1,600 foreign students enrolled last fall, with the largest groups coming from Saudi Arabia and China. These students are highly desirable from a revenue perspective because they pay out-of-state tuition, in effect creating a profit for the university — according to a statewide rule of thumb, they pay roughly 60% more than they cost to educate. But international students aren’t committed to Virginia. They are motivated to shop around internationally for the best educational value.

The VCU board is considering hiring a recruiting firm to land more international students. Here’s the trick: Typically such firms receive 80% to 90% of the student’s first-year payments. (It’s not clear from the T-D account if that is 80% to 90% of tuition or the total cost of attendance, which includes fees, room, board, textbooks and other expenses.) Payments of that magnitude would cut sharply into any surplus revenues VCU would derive from the students.

The VCU board faces hard decisions — decisions it didn’t ask for. But the choice to close the shortfall by raising tuition instead of cutting spending is fraught with risk. If higher tuition leads to a decline in enrollments, VCU may not get the revenue boost it’s looking for. In a worst-case outcome, further revenue declines could start a vicious cycle. Buckle your seat belts!

(This article originally appeared in Bacon’s Rebellion on March 23, 2017)

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Environmental organizations attack large-scale livestock farmers

A petition to substantially increase regulation of CAFOs was filed on March 9, 2017, with EPA. Environmental groups claimed in the petition that “Decades after passage of the CWA, CAFOs remain a significant – and substantially unregulated – source of water pollution throughout the United States.” Environmental groups also declare “EPA has significant authority to revise its approach and strengthen its oversight of industrial livestock pollution, and Petitioners believe that EPA has an obligation pursuant to its CWA duties to do so without further delay.”

Food and Water Watch, Arkansas Rights Koalition, Association of Irritated Residents, Des Moines Water Works, Dallas County Farmers and Neighbors of Iowa, Iowa Citizens for Community Improvement, Moms Across America Eastern Shore Chapter of Maryland, and numerous other environmental groups filed a 58-page petition condemning all CAFOs as pollution point sources and for allowing the spreading of manure on fields and runoff into waters of the United States.

Interesting charges
The petition makes a number of interesting charges. It claims EPA’s current CAFO regulations are insufficiently strong, do not require water quality monitoring, do not prohibit practices which harm water quality, ignores pollutants discharged into water, and places manure waste management into the hands of “weak” state agencies.

The petitioners say they represent millions of citizens across the United States including those adversely impacted by CAFO water pollution.

The Petition asserts that CAFO waste disposal practices have created harmful water pollution and claim “Twenty-nine states have specifically identified Animal Feeding Operations (AFOs) as contributing to their water quality impairments, and states with high concentrations of CAFOs experience on average 20 to 30 serious water quality problems per year as a result of manure management problems.”

The sources of all this pollution are production areas, land application fields, spills, runoff and intentional discharges which come from manure lagoons, pits, stockpiles, ventilation fans, and mortality management areas.

The environmentalists’ petition claims manure from CAFOs “…pose substantial threats to human health and the environment.” The threats from manure waste include “…nitrogen, phosphorus, pathogens, salts, heavy metals, trace elements, antibiotics, and hormones.” In fact the environmental groups claim that manure waste from CAFOs “…can cause symptoms such as diarrhea and an increase risk for severe illness or death.”

A parade of horrors
The parade of horrors goes on. It claims “EPA has previously found that heavy metals including arsenic, cadmium, iron, lead, manganese, and nickel,…are commonly found in CAFO manure, litter, and processed waste water.” To make matters worse, CAFO manure waste is alleged to contain large quantities of hormones. The petition cites one study which estimates “…that approximately 722,852 pounds of naturally-produced estrogens, androgens, and progestogens were excreted by cattle, swine, and poultry in 2000; accounting for all synthetic hormones in manure, the use of which does not have to be reported, would drive this figure even higher.”

The petition claims these hormones and their metabolites are found in streams and creeks and waters downstream from cattle feedlots. Environmental groups cite EPA claiming “…40% of CAFOs are currently regulated under the NPDES program…” The environmentalists also claim “EPA [is]…unwilling to stand up to CAFO industry pressure…”. Several pages are devoted to criticizing EPA for failing to represent America’s farmers and their CAFOs. (Strange that the petition never mentions Congress and the specific exemptions given to agriculture’s stormwater runoff.)

I will close with the specific requests made to EPA by the 34 environmental groups:

  1. EPA should establish an evidentiary presumption that certain CAFOs discharge and are either subject to NPDES permitting or must rebut the presumption by demonstrating they do not discharge;
  2. EPA should revise its interpretation of agricultural stormwater exemption such that no discharges resulting from CAFO activities are exempt as non-point source pollution’
  3. EPA must ensure that integrators who meet the CWA definition of owner or operator are co-permitted with contract producers, as the statue has always required;
  4. EPA should revise certain definitions in the CAFO regulations;
  5. EPA should revise the requirements applicable to all CAFOs, including by requiring water quality monitoring in CAFO NPDES permits to ensure compliance with the CWA and permit terms; and
  6. EPA should revise the CAFO ELGs to address additional CAFO pollutants of concern, prohibit practices known to harm water quality, and otherwise strengthen existing requirements.

EPA needs to team up with USDA to answer the charges made in this petition. With a new Secretary for USDA in Governor Perdue, I suspect he is tough and knowledgeable enough to take on the environmentalists’ charges and discredit them.

(This article first appeared in Farm Futures on March 14, 2017)

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Rights and Wrongs of Interstate Tolling

Rights and Wrongs of Interstate Tolling

The prospect of a $1 trillion federal infrastructure program has led to numerous hands out for pieces of the action. Some officials are presenting the mismanagement of their highway systems (“years of under-investment” in South Carolina; “crumbling roads” due to underfunding in Mississippi) as a reason why someone else should pay to upgrade their highways.

In sharp contrast, states with competent toll agencies—such as Florida, Illinois, Kansas, Oklahoma, New Jersey, Texas—have well-funded programs to extend and widen critically important Interstate highways and bridges. Not surprisingly, then, a growing number of governors and legislatures are looking anew at toll financing.

Last month Fitch Ratings issued a thoughtful report, “U.S. Interstate Tolling Merited but Warrants Caution.” Tolls are a quintessential user fee, assuming the proceeds are used to benefit those who pay them, notes Fitch. But its report acknowledges that “the current tolling framework across the U.S. seems to have no sustainable, policy-based rationale,” with cross-subsidies and little transparency to the citizen. And on nearly all toll roads, customers must pay tolls in addition to fuel taxes, leading to concerns about “double taxation.”

From my own reading and research, here are some of the problems with 20th-century tolling that will need to be addressed in order to build public and political support for something as bold as toll-financing the replacement of 20th-century Interstates with their 21st-century successors:

  • Toll roads as cash cows: The most blatant example is Pennsylvania’s infamous 2007 Act 44, which forces the Pennsylvania Turnpike Authority to diveret $450 million per year to the state DOT for roads and transit statewide, leading to large annual toll rate increases that are essentially a tax solely on Turnpike customers.
  • Temporary tolls: This is the 20th-century idea was that tolls are a necessary evil, to be removed as soon as the initial bonds are paid off. (This is about to happen in West Virginia.) That implies that a toll road does not need regular maintenance, future lane additions, and eventual reconstruction. With fuel tax revenue on a long downhill slide toward extinction, per-mile tolls should be part of the permanent replacement of per-gallon fuel taxes.
  • Sticking outsiders with paying tolls: “Border tolling” keeps cropping up in states considering Interstate tolling—e.g., last-decade proposals in Virginia and current discussions in Connecticut and elsewhere. Any such tolls would assuredly be shot down in federal court as discriminatory on interstate commerce grounds.

Fitch’s valuable report reminds us that any plan that broadens the use of tolling “will need to be perceived as fair.” And that means any new framework must demonstrate value for money to those asked to pay for improved replacement highways and bridges. Among other things, that means the “double taxation” concern must be addressed. Fitch notes that targeted credits and [fuel tax] rebates to offset inequities could be ways to address the perception of double taxation. In addition, “Tolling only at state lines will have adverse implications for travel and the perception of fairness.”

As I read news reports on current discussions of tolling involving governors and legislators, I’m worried by a lot of what I see. All too many public officials seem to be envisioning a program that would put tolls on Interstates in order to use them as cash cows for the entire state DOT’s under-funded budget. This idea has particularly colored many of the discussions in Connecticut and also seems to be West Virginia Gov. Justice’s rationale for keeping tolls on the West Virginia Turnpike for a few more years after the bonds are paid off—but only charging them at state borders!

A growing number of governors and legislators are eyeing the federal pilot program that permits three states to each toll-finance the replacement of a single aging Interstate highway. Discussions or studies that would lead to such an application are under way in Arkansas, Connecticut, Indiana, Michigan, Oregon, Pennsylvania, Wisconsin, and even Wyoming. As of now, there appear to be only two vacant slots in the program (assuming Missouri’s request for a six-month extension of its slot is granted by FHWA).

From what I read and hear in these states, few of their officials seem to understand that the pilot program requires all the toll revenue generated by the rebuilt Interstate to be used for the capital and operating costs of the Interstate in question, not spread around statewide. In addition to reading the language Congress agreed to (it’s the Interstate System Reconstruction and Rehabilitation Pilot Program), they should read Fitch’s thoughtful report. It offers wise counsel not just for Pilot Program applicants but also for longer-term use of toll financing for 21st century Interstates.

(This article first appeared in Surface Transportation News on March, 2017)

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Gillespie tax plan makes good sense

Ed Gillespie, one of the candidates running for Governor this year, has proposed a major tax cut that makes a lot of sense.

Its key provisions would cut individual income taxes by 10 percent across the board over a three year period, and would accelerate reform of an antiquated system of local business taxes that now depresses economic growth and job formation.

The current tax rates were established in 1972 and have never been changed.  The results are startling.

Low income Virginians pay a huge penalty because 45 years of inflation have not been reflected in our tax code.  When the current income tax brackets were established, Virginians paid the lowest tax rate on their first $3,000.  But if the brackets had been adjusted for inflation, the lowest tax bracket would apply to Virginians’ first $17,483.

The same is true at the highest tax bracket.  In 1972, the top rate kicked-in at incomes over $17,000.  If that highest bracket had been adjusted for inflation, the top rate would not be imposed until incomes exceeded $99,000.  With inflation, everybody gets hurt.

The 10% tax cut proposed by Gillespie helps reduce this 45 year impact from inflation.

And the Gillespie tax cut will be paid for from the projected growth in the current state budget. No state program will have its current funding reduced under this plan.

The Gillespie tax plan was run through the sophisticated tax model developed for the Thomas Jefferson Institute.  This model, known as a State Tax Assessment Modeling Program (STAMP), is unique to Virginia and has been used in the past with high marks from Republicans and Democrats.  It was vetted in public meetings by two General Assembly business commissions.

The Thomas Jefferson Institute has promoted the idea of income tax cuts and the elimination of the anti-business taxes that have vexed our businesses for years – the BPOL tax which is a tax on gross revenues rather than profits, the Machine and Tool Tax that puts us at a significant disadvantage compared with states such as North Carolina, and the Merchants Capital tax which is a tax on inventory and one that many business avoid by moving assets to other counties without this tax on “inventory day.”  We are proud that much of what we have promoted is in this plan by Ed Gillespie.

Our tax model projects that Gillespie’s proposed 10% income tax cut will create 53,000 more jobs than would otherwise be the case.  That is 25% above what the state currently projects in job creation.  New jobs increase the amount of goods and services purchased by our taxpayers.  More goods purchased means more sales tax revenue for the state and localities. More jobs mean more people are paying income taxes.

An additional $304 million in business investment will also be generated under this plan. These investments will help create the additional 53,000 jobs.

This tax plan will create a stronger economy.  More Virginians will find employment as the private sector grows and creates more jobs.  This means Virginia can reverse the recent trend of dropping lower and lower on various business rankings.

And this tax cut will bring $1285 a year in additional disposable income to the average household in our state from tax savings and the dynamic impact of the tax cut.  Skeptics say this “is only $25 a week” in extra spending.  But that $25 a week adds up as the annual $1285 clearly shows.  This money will buy clothes, groceries, and will pay for more nights out at dinner and the movies.

The counties that now impose the unfair gross receipts tax (BPOL), Machine & Tool Tax, and the Merchants Capital Tax will be required to sunset those anti-business taxes within three years.  They can renew these taxes or not after a full debate or choose alternatives to replace these anti-business taxes with something less onerous.  Available alternatives will be determined by a group of experts in cooperation with the General Assembly.

The endorsements of this tax plan by top economists, the Virginia Chamber and leaders of key tax committees in the General Assembly show that these ideas have credibility by those who understand how taxes impact our business climate.  And it is our business climate that must improve if Virginia is to once again be on the top, or near the top, of the various business rankings where we have been falling dramatically over the past few years.

If Virginia is to reverse its recent downward spiral in these business ratings and thus improve the private sector job environment, then this tax plan makes a lot of sense.

(This column is reprinted by from the Richmond Times Dispatch)

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