Borrowing from business: An interview with Gov.-elect Bob McDonnell

Governor-elect looks to private sector for ideas

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Gov.-elect Bob McDonnell will take office Jan. 16. But he won’t have long to get comfortable. McDonnell will face a $3.6 billion budget shortfall and has promised not to raise taxes to close the gap. Virginia Business Special Projects Editor Jessica Sabbath spoke with McDonnell about his plans to make government more efficient, close the budget shortfall, boost economic development investments and fix Virginia’s aging transportation network.

Virginia Business: What approaches do you support in closing the budget shortfall?

McDonnell: I think the road map is looking at what are the core functions of government and making sure those are funded to the maximum degree possible, but then looking at what areas of state government we can use more innovation or privatization or consolidation. I think it’s an opportunity to think outside the box and find new ways to deliver government services and take a fresh look at whether parts of the entire administration are working well or whether certain agencies or boards are still necessary. So we’ve got a tremendous amount of work to do and many decisions to make to address the shortfall. Long term, a very top priority for me is job creation and economic development. If we’re going to start to reverse our economic slide and put more money back in the state coffers, it’s going to have to come from economic growth, so that is my top priority.

VB: Are we going to be able to put those investments in economic development even with the current budget conditions?

McDonnell: We have to. It’s essential. I don’t look at it as an option as the long-term sustainability of the commonwealth’s economy depends on making these investments now. We’ve been lagging behind other states and lagging behind foreign countries. While we have a very solid business environment overall in Virginia, we can’t keep going solely on the basis of reputation. We’ve got to make some changes in everything from the Governor’s Opportunity Fund to investments in tourism and film production and energy development. All those things are essential, and I’ve already had some preliminary discussions with members of the House and the Senate, Democrat and Republican. I believe they understand that, even in these tough budget times, you have to find some amount of money to provide for long-term economic growth or you’re going to come out of the recession much slower, and we can’t afford to do that.

VB: What about transportation? Is that something that we’re going to address this session or during a special session later in the year?

McDonnell: I’m still evaluating that, and I’m committed to transportation reform during this first year. And I laid out a detailed set of proposals during the course of the campaign [consisting of] 12 different funding mechanisms and other structural overhauls and improvements. There will be several things that I will definitely pursue during the regular session. The evaluation I’m going through now during the transition is when can I realistically focus all the attention that I need to on a significant overhaul of our transportation funding system in light of the fact that economic development and budget growth and budget management is going to be consuming an overwhelming percentage of my time during these first 60 days.

VB: In general, you’ve been very supportive of public-private partnerships. Do you think this will be difficult going forward given the ongoing issues with the Virginia Information Technologies Agency?

McDonnell: No. It’s not the public-private partnership concept. There are PPTAs [Public-Private Transportation Act] that work very well around the country so I don’t think it’s the concept. Public-private partnerships are a great way to leverage limited public resources, which is the situation we find ourselves in now. I think the challenges of VITA are from management and structural deficiencies that have to do with the original legislation and the way that the deals have been written and implemented.

I think PPTAs hold an enormous part of the solution for transportation. I believe projects like Route 460, which is among — if not the most important project in Hampton Roads — is exactly the kind of project that’s susceptible to a PPTA. The problem is we’ve been too slow and too bureaucratic and made too many excuses about why can’t get PPTA deals done.
We’ve had three offers on Route 460, we’ve had several on the [Interstate] 95/395 corridor, and yet we still can’t get any deals. So I’ve said we need to have businesspeople and people that will find ways to get these public-private partnerships written and written effectively and expeditiously at the table at VDOT in order to move the ball forward. So I am very positive about the use of PPTAs. I think we can use some amendments to that statute to make it a little easier and a little less cumbersome to use.

VB: Are there any other business initiatives you will be pushing?

McDonnell: I’m looking for ways to bring private-sector initiatives and private-sector concepts to government. I’m a strong believer in the free-enterprise system and the things that the private sector does in order to reward and compensate its employees, [and] to create quality controls and metrics for performance. [These are] all things that I want to see us do at the state level.
There are a number of things that we’re going to do from mental health to gang violence reduction to energy that I think are going to be of interest to the business community. Energy, for instance, I’ve said that my goal is in four years to make Virginia the energy capital of the East Coast and to marshal all of the resources that we have in Virginia more effectively, including expanding nuclear power, offshore drilling, incentives for alternative energy production and development. I think we’ve got more total energy capability and intellectual firepower in Virginia than virtually any state of the country. We just have to use it better.

VB: What do you think of how the federal stimulus money has been spent in Virginia?

McDonnell: I think on some of these things we were too slow to apply and too slow to get the money out into the field. I’ve been very critical of the whole stimulus bill in terms of what the federal government allowed us to use the money for. There was virtually nothing for infrastructure but mandates depending on all kinds of things that were a low priority in Virginia. I’m very disappointed with that. There was very limited use of tax credits, tax incentives. They could have both immediately helped businesspeople, particularly small-business people, to grow.
There was some help in the first year of this budget to plug holes. The problem now is in the second year of the upcoming budget without stimulus money. The tough decisions could have been made a year ago and now they’re going to have to be made on my watch. I’m convinced that the only way that we’re going to improve the economy in Virginia is not by more federal government spending … but by more work and incentives to be able to provide the tools to the private sector to grow.

I’m going to have a number of proposals to stimulate small business. We’re making it too cumbersome in many ways for small businesses to start and to grow in Virginia. The federal bailout stimulus package has been aimed almost exclusively at the larger businesses, and it’s the small businesses that create the overwhelming majority of jobs. I think there are a number of things we can do to improve the way that we incentivize and promote small business. 

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