Ideas for the Next General Assembly

The elections this fall brought a philosophical sea change to the General Assembly.  The dynamics have changed.  But critical issues remain and good ideas can hopefully prevail if the goal is to truly improve Virginia in a few critical areas.

Medicaid expansion will be major issue confronting the General Assembly. This program aimed at the most needy and most vulnerable in our society needs to better managed. And reforms that Virginia might bring to that program could become a template for other states. There are a number of creative ideas being discussed. And with an Administration in Washington seemingly willing to move more responsibility for this program to the states, the General Assembly should ask for the authority to truly reform the system. Virginia could ask for the ability to create a better and more efficient program. Many feel that the current Medicaid program could be much more efficient and offer better health care to those who qualify. Virginia could prove this can be done. It should ask for that authority.

Several reforms to the health care system will be outlined in a soon-to-be-published “Handbook on Healthcare Reform” by the Thomas Jefferson Institute.  This Handbook outlines several reforms that can be considered to improve our current healthcare system regardless of what happens to Obamacare down the road.

And just as President Nixon was the right person to “open up China” in the early 1970’s, our incoming Governor would be the ideal person to take the lead in restructuring our antiquated tax system here in Virginia.  This can be done in a revenue neutral manner that can eliminate the remaining tax on groceries, eliminate the bottom two tax brackets (helping those most in need) as well as eliminating the impact of the job destroying gross receipts (BPOL), machine and tool, and merchants capital taxes.  Our tax system needs to reflect today’s service-oriented economy and not the economy that existed in 1971, when the current system was established.

Our growing economy needs a reliable energy supply and getting both major new gas pipelines constructed needs to be a top priority if we are to have the necessary power required in a growing economy.  This can be done in an environmentally sensitive manner.  There are tens of thousands of miles of pipelines in this country and they are a safer way to transport natural gas than by truck or train.

Job training has become a major issue here in Virginia.  There are many jobs that do not need a college degree and these jobs are, in many cases, pretty well paid.  Let’s focus on developing these jobs.  One way to do that is to bring a serious analysis to those state funded job training programs that exist today.  There are some 22 or more government job training programs today.   How much per graduate do these programs cost?  How many graduates of these programs actually secure a job and have that same job three months later?  Once we have those numbers, then the least effective programs can be eliminated and those funds put into the more effective ones.

Continued expansion of our road network is needed if we are to try to relieve the congestion in the major population centers of our state – most particularly Northern Virginia and Hampton Roads.  How to do that and the costs need to be carefully considered.  Ten years or so ago, the Reason Foundation did a fascinating study about the road network that needs to be built over a twenty year period to confront the projected population increases we face.  This study outlined the road “skeleton” that could be built and where it is needed.  The idea is simple:  built the major skeleton that is needed – the major highways – and commit to get this done and commit the money over those years that will be prioritized in the state budget.  Then, if and when more money is available at the state and local level, build the connecting roads needed.  This is a good idea if we want to stay ahead of the population increases and not always be playing “catch up.”  A long term transportation plan focused on the major road requirements, properly funded, makes a lot of sense.  And the budget projected by Reason to get this done was quite reasonable.

Finally, there are at least two “Bernie Sanders” ideas that could well come up that need to be defeated if Virginia is going to truly grow our economy and encourage folks to move to Virginia.

One is the idea of a $15 per hour minimum wage. That will deny young, new-to-the-job- market employees from getting that first step on the ladder toward a better future.   Automated food ordering in some fast food establishments is just one example of what will happen more quickly with a minimum wage that employers simply cannot afford for entry level jobs.

And the other “Bernie Sanders idea” is “free” community college education.  Of course, there is no such thing as “free education” as everyone knows who pays property taxes in this state.  Much of those taxes on our homes and apartments go to “free” K-12 public education.  And if community college education is “free” it only means that our taxes will have to be significantly increased in order to pay for this new entitlement.

Our state legislature convenes next month and our new Governor will be sworn-in soon afterwards.  In the General Assembly’s two month “long session” a lot of bills will be considered.  How our elected leaders handle these ideas and others will help determine what our states looks like in a few short years.

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Holiday Sales Look Stronger This Year

The holiday selling season got off to a strong start on Black Friday but the results were mixed when comparing online versus in-store sales.

Online spending for Black Friday, the traditional start of the holiday selling season, was up 16.9 percent compared with the same day in 2016, according to Adobe Digital Insights, which tracks online spending in the nation’s 100 largest retail websites.

On the other hand, data from research firm ShopperTrak shows Thanksgiving Day and Black Friday foot traffic at brick-and-mortar stores fell when compared to the same days in 2016. Shopper traffic at stores just on Black Friday has essentially been unchanged for the last two years, but flat foot traffic doesn’t necessarily translate into flat revenue.

So how will overall holiday sales fare during this time of year that represents about 20 percent of the retail industry’s total sales?

One method for predicting holiday spending is comparing back-to-school spending during the same year.

For instance, back-to-school spending in August 2012 increased 2.9 percent, while holiday spending — defined as sales in November and December of the same year — also rose 3.1 percent. The retail spending figures exclude food and auto sales.

The relationship between back-to-school and holiday sales is not perfect, and sometimes back-to-school sales are a bit higher than holiday sales (as what happened in 2011, 2013 and 2014) or a bit lower (as in 2015 and 2016).

But back-to-school spending generally is a reliable gauge of holiday spending.

This year’s August back-to-school sales rose 4.3 percent over 2016 sales, suggesting strong growth in holiday sales this November and December. And that’s great news for retailers.

Recent announcements by some national retailers and online sellers to hire more seasonal workers than last year supports an optimistic outlook for the upcoming holiday selling season.

Results from Cyber Monday also point to a good year. According to Adobe Analytics, Cyber Monday was the biggest U.S. online shopping day ever, with a record $6.59 billion spent, up 17 percent from last year.

The National Retail Federation, the nation’s largest retail trade group, predicts an increase in holiday sales between 3.6 to 4 percent, including online business, to $678.8 billion compared with $655.8 billion in 2016.

Global financial services firm Deloitte is more optimistic, looking for this year’s holiday sales to rise between 4 percent and 4.5 percent from November through January compared with the same period a year ago.

Economic reports also point to higher sales this year. Employment in the nation is picking up and the jobless rate is declining.

Personal income is up 3.4 percent for the 12 months that ended in October, or by $539 billion. American consumers like to spend, so much of that increase in income will translate into purchases.

Based on the most recent economic figures, retailers in Virginia and the Richmond region also should do well.

Nonfarm employment grew 0.9 percent in Virginia during October compared with a year ago. During the same period, employment increased 1.3 percent in Richmond and 1.5 percent in the nation.

Virginia’s seasonally adjusted unemployment rate remains below that of the nation and at 3.6 percent in October, it is at its lowest point since March 2008.  The U.S. rate stood at 4.1 percent in October.

For the Richmond region, the seasonally adjusted jobless rate rose slightly from 3.7 percent in July to 3.8 percent in October.

The latest retail sales figures reflect some strength as well in Virginia and the Richmond area.

A seasonally adjusted six-month moving average of retail sales in Virginia shows 3.1 percent growth from a year ago in September.

The Richmond area has seen an average retail sales increase of 5.6 percent over the same period.

With the potential for federal tax cuts in 2017 or early 2018 and a more optimistic outlook for national growth, a 3.5 percent to 4 percent growth in retail sales in Virginia and around 6 percent growth in the Richmond region this holiday selling season compared with last year is possible.

But, then again, sales in Virginia will suffer if a federal government shutdown occurs in early December.

(This article first ran in the Richmond Times Dispatch on December 4, 2017.)

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Before Expanding Medicaid, Examine the Program’s Outcomes

When Virginia lawmakers start cranking up the old Medicaid-expansion jalopy in January, they would be well advised to pay attention to a new study out of California — not exactly your reddest of red states, so this is not Republican propaganda.

The study, published in the Journal of the American Medical Association Oncology, used a California data registry to compare cancer survival outcomes of insurance over two decades (1997–2014). Summarizes the Federalist: “Improvements in survival rates during the time period the survey examined came almost exclusively from individuals with private insurance or Medicare. “[F]or patients with other public [i.e., Medicaid] or no insurance, survival was often stubbornly unchanged, or, in some cancers, declining.”

While survival falls short of that achieved by patients with private insurance, public insurance such as Medicaid does confer a survival benefit over no insurance for breast, prostate, and lung cancer. However, there was little or no benefit of public insurance over no insurance for colorectal cancer or melanoma, and the lack of improvement in survival is a concern. These findings suggest that the health care provided to publically [sic] insured patients with cancer in California is not adequately meeting their needs.

Got that? Medicaid is somewhat better than zero insurance for some cancers but no better for others. And in some cases, the study implies, it’s worse.

Meanwhile, debates are raging over whether Medicaid expansion has led to an increase in opioid addiction, and whether or not emergency-room usage has declined, as envisioned by the architects of the Affordable Care Act.

The assumption behind Medicaid expansion is that any health coverage, no matter how crappy, is better than none at all. But Medicaid reimburses physicians far less than private insurance and Medicare do, with the result that (a) many physicians don’t take Medicaid patients, and (b) some physicians may not provide the same quality of treatment. Also, one must consider the nature of Medicaid patients. By definition, they are poor, and poor people may interact with the health care system differently than the non-poor.

The California study inevitably will be cited by Virginia opponents to Medicaid expansion. And just as inevitably, supporters will find reasons to criticize it. Here’s how it works in early 21st-century America: Pick your desired political outcome, choose the study to justify it, and then shoot holes in opposing studies. Medical science becomes politicized just like everything else in our society that is mediated by the political class — but, of course, it’s all the other side’s fault.

(This article first ran in Bacon’s Rebellion on December 8, 2017.)

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Express Toll Lanes Expanding Rapidly

Despite populist opposition in Charlotte, NC and parts of Texas, 2017 has been a banner year for express toll lanes (ETLs). At least eight new facilities opened to traffic this year, another dozen are under construction (or about to be), and at least another dozen new projects have been announced in eight states.

The largest project financed in 2017 was the $3.5 billion I-66 project in northern Virginia, whose ground-breaking was held in November. And by far the largest announcement was Maryland’s $7.6 billion plan to add express toll lanes to its portion of the Capital Beltway (I-495) and I-270. Two other potential new ETL states are Oregon and South Carolina. In Portland, Oregon DOT is planning some kind of value pricing for congested I-5 and I-205—either ETLs or some form of all-lanes-priced. And in Charleston, SC, the state DOT is considering congestion-relief improvements to I-526, and ETLs appear to be a lot more feasible than HOV lanes.

Georgia DOT is back in the public-private partnership (P3) business, with that form of procurement planned for major projects to add ETLs to the Georgia 400 and the northern portion of the Perimeter (I-285) in Atlanta. The Maryland and Virginia projects noted above are also P3s, given their very large costs and the ability of toll financing to cover large portions of their costs.

As I’ve previously reported, Texas is now suffering from a moratorium on new highway P3 projects and restrictions on developing more ETLs. Yet as the nation’s fastest-growing state, it will need toll-financed P3s for such projects as a massive $7 billion reconstruction of I-45 in Houston and the $8.1 billion reconstruction of I-35 through downtown Austin, plus the $1.8 billion LBJ East project in Dallas. Fortunately, new congestion relief will be provided by previously approved projects including the recently opened $1.4 billion I-35E project in Dallas and the new MOPAC ETLs in Austin, plus the $1.1 billion P3 project that is constructing ETLs on SH 288 in Houston.

A growing number of ETL projects are under way in Florida, including the $2.6 billion I-4 reconstruction in Orlando, ETL additions to I-75 in Broward County and SR 826 in Miami-Dade County, extensions of the I-95 ETLs through Broward County and into Palm Beach County, Jacksonville’s first ETLs on I-295, and Tampa’s first project announced as ETLs on the replacement Howard Frankland Bridge. Under construction in California are new ETLs on I-15 in Riverside County and I-405 in Orange County. Georgia has ETLs under way on I-85 (extending existing ETLs) and I-75/I-575 in northwestern Atlanta. And the I-77 project’s construction continues north of Charlotte (despite continuing populist opposition), where officials have recently recommended a second ETL project on I-77 south of downtown.

If past experience is any guide, opposition to ETLs in metro areas where the first project is under way generally fades within the first year of that project opening, as people learn that (1) it is a new option, in addition to the choices they had before, (2) in certain circumstances, the value of paying the variable toll is far more than the cost of arriving late, and (3) that the lanes are not “Lexus Lanes” but are used by a broad cross-section of motorists.

Speaking of the value proposition, the I-495 express lanes in northern Virginia last month celebrated their fifth anniversary. Over those five years of operation, concessionaire Transurban estimates that its 3.5 million customers making 67 million trips have saved more than 5 million hours of travel time.

(This article first ran in the December 2017 issue of Surface Transportation Innovations.)

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Missouri scrambles California’s eggs

Egg production costs soar nationwide, thanks to California’s cage regulations. Now other states are fighting back.

Yesterday, the Attorney General of Missouri filed a Motion for Leave to File a Bill of Complaint in the United States Supreme Court, charging California with violations of the Constitution.

The Bill of Complaint “…involves a single State’s (California) attempt to dictate a manner of agricultural production in every other State.” Finally other states are standing up to California’s bullying tactics. California, with its friends at the Humane Society of the United States, has increased enormously the cost of egg production in numerous states.

Twelve states have joined together to challenge California in the U.S. Supreme Court. The reason Missouri and eleven other states have sued in the U.S. Supreme Court is that Article III of the U.S. Constitution declares that disputes where states are parties and there is a controversy between the states, the Supreme Court shall have original and exclusive jurisdiction over such actions.

The States’ Bill of Complaint is composed of 101 paragraphs. The States want the Supreme Court to declare California’s regulations relating to the size of cages for hens be declared invalid under the Supremacy Clause because the regulations are preempted by the federal Egg Products Inspection Act (EPIA).

They also want the California egg cage size regulations declared invalid because they violate the Commerce Clause of the Constitution.
Many have never heard of the Egg Products Inspection Act (EPIA). The EPIA requires uniformity of labeling, standards, and other provisions which allow for free movement of eggs and egg products in interstate commerce. According to the complaint, the EPIA displaces any state or local regulation for eggs shipped in interstate commerce. The States believe the EPIA “preempts” any state or local law under the Supremacy Clause.

Remember Prop 2?

Proposition 2 went into effect in California at the start of 2015, and required that “a person shall not tether or confine any covered animal, including any egg-laying hen, on a farm, for all or the majority of any day, in a manner that prevents such animal from: (a) Lying down, standing up, and fully extending his or her limbs; and (b) Turning around freely.”

Proposition 2 imposed a $1,000 fine and 180 days in county jail if the regulation was violated.

California farmers immediately claimed Proposition 2 placed them at a competitive disadvantage compared to egg farmers in other states. The farmers feared their costs would be 20% higher on average than non-California farmers.

To remedy this inequity the California legislature passed a bill which imposed California’s Proposition 2 requirements on non-California farmers who shipped eggs to California.

As a result, on January 1, 2015, no egg farmer or producer could sell shelled eggs to California consumers if the egg-laying hen did not have a minimum 116 sq. inches of floor space per bird.

Missouri and other states claimed their farmers have already or will incur costs between $228 million to $912 million to comply with California’s regulation. Moreover, the Bill of Complaint claims “…egg prices have increased nationwide by as much at 1.73 to 5.12%.”

The states also claim that California’s regulations have cost U.S. consumers approximately $351 million per year, and that welfare recipients have had to pay $96.5 million more for eggs as a result of the California regulations.

California imposed these regulations on other states’ egg farmers to ensure a level playing field for California’s egg producers. Without these requirements, of course, out-of-state egg producers would have lower costs and the California egg producers would go out of business or be forced to move to another state.

It appears the sole purpose of California’s regulations was to discriminate against other egg producing states and to increase the burden of regulations on other states and their farmers without their consent. Protect the Harvest, a non-profit organization that attempts to defend farmers’ and ranchers’ agricultural practices, has been a leader in suggesting states such as Missouri, Indiana and others sue California to stop this burdensome and inequitable action against agricultural practices. Missouri and 11 other states have now stepped up to the plate to defend agriculture.  

(This article first ran in the December 5, 2017 issue of Farm Futures.) 

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