Political observers size up election and McDonnell’s plansDecember 29, 2009 6:00 AM
Virginia Business invited five prominent observers of state politics to comment on the recent state election and the 2010 legislative session. The panel includes: Whitt Clement, a former state transportation secretary who is now a partner in the state government relations group at Hunton & Williams; Ben Dendy, a former senior staff member to two Virginia governors who now is president of Richmond-based lobbying firm Vectre Corp.; Hugh Keogh, president and CEO of the Virginia Chamber of Commerce; Christina Nuckols, an editorial writer for The Virginian-Pilot; and Rob Shinn, a former senior adviser to the state secretary of economic development who now is a partner at Richmond-based Capital Results, a public relations and government affairs firm. Here is an edited version of their comments. A full transcript of the discussion can be found at http://www.virginiabusiness.com.
Virginia Business: How does the business community view McDonnell’s win?
Keogh: I think the business community is very comfortable with McDonnell’s win. I think with the exception of [his] transportation package, he said pretty much all the right things about job creation, economic development and the business climate of Virginia. So I would suggest they feel very comfortable with it.
VB: Since we’ve touched on transportation, can you say why the business community isn’t comfortable with his plan?
Keogh: I think the business community considers transportation to be a front-burner issue and has for more than a decade. [Businesspeople believe a successful plan] will rely on some level of revenues to inject new transportation infrastructure improvements of the kind we sorely need to retain our competitiveness. The governor-elect has said very clearly, repeatedly, persistently that he’s not in favor of new taxes, so the business community does not expect new taxes, nor does it expect to approach the governor with some kind of an appeal that would fall on deaf ears. We have to make his plan work along with some new creativity from the affected businesses. But it remains a chief concern of the business community.
Dendy: [Virginia’s] six-year plan for transportation has $14 billion less than we had at the beginning of the Warner administration eight years ago. We’ve got derelict pavements, bridges that are close to falling down. I really think that if the state doesn’t address the transportation crisis, we’re at risk of losing this rating as the best managed state in the country. I just don’t see how we can be best managed unless the rest of the country is in an even worse situation.
Nuckols: And McDonnell did not leave himself any wiggle room along this issue. And, you know, Mark Warner also said he would not raise taxes. I guess the difference is people weren’t quite sure whether they believed Mark Warner on that. McDonnell’s history suggests that he definitely meant what he said on that.
And so the question is then what does he do when he moves forward? I think taxes are off the table, probably for four years, certainly for the first two. That leaves him with spending a lot of energy trying to get the federal government to give [the state] toll booths, or try to get the federal government to [give the state] oil royalties, and trying to get the legislature to give him more general funds at a time when we’re cutting all of our general fund programs. And once the revenues turn around, then at least half of the revenues that are for general fund are going to have to go into the “Rainy Day Fund.” So again, his solution for transportation there is extremely limited.
Clement: You’ve got a lot of legislators who have signed a no-tax pledge before they get to Richmond, which is a big disadvantage. Yes, there has been an extraordinary effort to get transportation funding over the last three or four years. And every year it hasn’t panned out because of the anti-tax philosophy. And there’s no sign that that’s going to change despite the intentions of Bob McDonnell. I think he’s going to face the same issue.
Shinn: Just a couple of additional thoughts. You know, George Allen didn’t inherit the same fiscal situation that Bob McDonnell is going to inherit, but he came in with a no-tax-increase pledge. And one of the big things he did … he looked to the private sector and created the Public-Private Transportation Act. I think you’re going to see a lot of activity in that area because it’s one of the few places where the money is.
I think the second thing is that, remember Bob McDonnell was very involved in the transportation negotiations on the legislation that was subsequently held to be unconstitutional. And that was a grand finesse of the tax issue by putting the burden not on the legislators, but on these local boards. But it shows, I think, some flexibility in terms of trying to get to a place where politically… you might be able to get to a coalition.
So I think there’s going to be a lot of jockeying and negotiating and just trying to find common ground. Whether they can or not, we’ll see. But even the key Senate Democrat, Senator [Dick] Saslaw, is a masterful negotiator himself. And just given all the dynamics, there are going to be a lot of efforts to find common ground on this issue.
VB: One of the centerpieces of McDonnell’s proposal is selling the ABC stores. Is that going to work?
Clement: Well if you can get it passed, and there’s a track record of not having a lot of success in that, but if you can get it passed, it’s only going to be a one-time infusion of money. And it’s not going to take you very far.
Nuckols: I believe the Obenshain bill, which is the most recent proposal [to privatize ABC stores], said that the state would have to more than double the number of liquor stores in [Virginia], almost triple. And this is not going to be the Democrats in the legislature that are going to be in opposition; it’s going to be some of the Republicans. And I think some of that will be the PR issue of increasing the number of liquor stores in the state. For some, there will be the question of if we have a source of revenue and we’re in a down economy, why would we give that up?
Now the business argument on this still makes sense, which is why is the state doing something that is unnecessary? And if you take out some of the really unnecessary angles of this argument, you can get down to whether that’s a good idea. And that probably is a debate that should take place. But you’re going to have the social conservatives with their problems with that, plus you’re going to have these unrealistic expectations about that this is somehow going to solve the transportation problem. And all of that muddies up which would be a more simple issue.
Dendy: But I think any governor coming into office who has had such a high profile, and obviously on a particular issue as he has on the privatization of ABC stores, you have to give him a chance of getting it enacted. He’s at the height of power, and [if] he chooses that to be a major initiative, he has chosen a difficult one. But I don’t think you can count him out.
VB: Is there any chance that the Governor’s Opportunity Fund might be increased to a competitive level?
Keogh: Absolutely ... The Governor’s Opportunity Fund is an important incentive, and we used to refer to it at the deal-closing fund because it is that. It’s money largely that goes to localities to improve infrastructure, to make a deal easier to happen. It’s not a huge amount of money; it’s $20 million now, and we would hope it would go to $30 million or $40 million.
But the bigger picture to me is that the state marketing apparatus, [Virginia Economic Development Partnership] doesn’t have the resources to sell Virginia. And, as I’ve said to other groups, we’re the number one state in the nation for business for four straight years. Isn’t it uniquely Virginian that we can’t tell anybody about it? And we’re not telling anybody about it because we don’t have any advertising and marketing resources. So I think you’ve got to start there really, and have confidence in your marketing arm, and put the resources behind it and go to town.
Shinn: I do think this is an area that Bob McDonnell is going to talk an awful lot about and have a number of initiatives. His number one issue running for governor was jobs. The beauty of it is that it unites [everyone] … And unlike an issue like transportation, where there are ideological divides, something like economic development and jobs can really appeal to people across the political spectrum.
So what I would look for is a lot of discussion about jobs, economic development, initiatives, particularly those that don’t cost a whole lot of money, and probably downplaying things like transportation, maybe pushing that off to a subsequent session. Anything that costs a lot of money is just going to be a very heavy lift. So where would he go for his issues to emphasize jobs? Economic development is the place he’ll focus most of his attention on.
VB: Is Virginia in a state of drift? We’ve had these accolades now four years in a row. ... Is there a danger in patting ourselves on the back and letting things just go along the way they have?
Clement: I would say that times are catching up with us. But we’ve been very fortunate … We have benefited from [our] proximity to federal government. We’re mid-Atlantic. We’ve got great seaports from the result of years of investing tax dollars. We’ve got world-class higher education institutions. But it’s, this is not a self-perpetuating phenomenon. It’s a phenomenon that has resulted from policymakers and lawmakers willing to make investments in Virginia. And I just don’t see how it can continue. I would like to think that it could, but I think times are catching up with us. I think other states are catching up with us. I know there’s a great consensus, I think, throughout the country about tax rates, income taxes, federal deficit. And maybe other states are as we are. But I don’t see how we can continue to be number one. It’s too good to be true. We’ve got to make it better.
Dendy: And the beauty of economic development is that the governor can influence that probably more than he can influence any other issue. A lot of that he can do totally on his own. You take governors like Haley Barbour in Mississippi, Lamar Alexander when he was in Tennessee, Jim Hunt [of North Carolina]. If a governor spends a lot of his own time on the phone to business leaders figuring out who the prospects are, he could make a tremendous impact.
And then the other piece of that is even the money aspect is small potatoes compared to anything else. You could really beef up new Virginia economic development for an amount of money that in the scheme of things, compared to major issues like education and transportation would be relatively minor.
Shinn: One of the areas where I think you could see a push on additional funding is in the work-force development area … Work force … is the top driver for job creation, expansions. And so I think that would be a good area for the governor-elect to invest in. So much of this is being done at the community college level now, and they are doing a phenomenal job of meeting the local needs of all the individual communities. Would you agree with that, Hugh?
Keogh: I would agree 100 percent. The shortage of technically skilled people is our chief inhibitor right now. And with the Virginia Workforce Council working in consonance with the community colleges, Virginia is inching forward. We’re better today than we were a decade ago. But it has to stay a top priority, and it needs resources, too.
It used to be that companies located based on proximity to interstates, tax rates, wage rates … the cost of land. Now companies locate on the basis of where can I get the people? And do I have access to energy, affordable energy? We’re still OK in the latter, but in the former, we ain’t OK. We’ve got to [improve our] work-force development capabilities.
VB: That was an initiative that came out of the Rolls-Royce deal [to build a jet engine plant in Prince George County] that [state officials] said they were going to focus work-force development in the community colleges, give them a leadership role. Have you seen any progress since that happened?
Keogh: I think there’s better awareness of the needs of Virginia today on that topic than at any other time … One other point on [the Rolls-Royce deal] was the combined efforts of Tech and U.Va. in an unprecedented fashion to provide higher level, technical engineering education to the Rolls-Royce people. And that really was unprecedented. Those two universities get along, but they never collaborated on a project like that.
Clement: One of the legislators [said to] a Rolls-Royce official, “We must have had to offer you all a lot of incentives to move you to Virginia from other states.” And Rolls said, “No, it wasn’t incentives. We had better incentive packages, but it was your coordinated system of higher education.”
VB: What do the Democrats take away from this election?
Nuckols: I think one thing that the Democrats are going to take away from this is they’re going to want to have candidates from Northern Virginia around. Creigh Deeds did really well up there during the primary, and then it all fell apart. And there is just a feel that there is that divide between Northern Virginia and the rest of Virginia. And the Democrats need to do really well in that region, and they need to have a candidate who is one of them or is perceived as one of them.
I think the other thing is they have to reconnect to the suburban, independent voters and find a way to re-establish a conversation with them that both Warner and Kaine were successful in doing but which got drowned out. There’s just not a strong message from the Democrats. And when you don’t have a strong message, then what has happened in Washington, D.C., is going to control the election. And that was not helpful for the Democrats this year.
Dendy: I think one lesson we learned is we do have term limits in Virginia. And they come up with every election ... You had 10 retirements from the House. Ninety members sought re-election. Ten of them of them were defeated. … One lost in the primary and then nine in the general election.
And I think the other thing is that the Republicans just simply out-recruited the Democrats … I think you have to give the speaker and the Republican leadership a lot of credit for this, considering where they were after the Obama election, to go out and recruit such a stellar group of candidates.
And on the Democrat side, the recruitment was very weak. And so then you add to that a bad election. And I think that is obviously a formula for disaster.
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