Coal Tax Credits

Give Me the Warm Power of the Sun

August 19, 2016 by David Toscano

Solar Energy and Change in Virginia

There is a quiet, but significant, revolution occurring in our energy sector, driven by dramatic declines in the cost of solar energy and exponential improvements in the technology that undergirds this section of the economy. For Virginians, the question is whether we have the policies in place to allow this sector to grow, creating economic opportunity and jobs for our citizens, producing revenue for our communities and the Commonwealth, and generating energy savings for businesses and consumers, all the while helping reduce the amount of CO2 entering the atmosphere.

Solar Economy

There are now more than 208,000 solar energy employees in the United States, in jobs ranging from design to sales to installation. In fact, the solar industry has added 115,000 new jobs since 2010, with 35,000 of those in the last year alone. By contrast, oil and gas firms slashed nearly 17,000 extraction jobs in 2015. Today the solar industry workforce is larger than that of the entire coal extraction industry. Wages in the solar industry are higher than the U.S. median wage, ranging from $18 per hour to nearly $30 per hour. And the cost of solar is dropping fast. From 2009 to 2014, the average cost of solar panels dropped by 73 percent. In the first half of 2015, consumers could build rooftop solar at a cost of $3.79 per watt and were not projected to receive a return on their investment for over ten years. In Charlottesville today, residential systems can be built for $2.70 per watt and the expected time for a return on the investment has been lowered to about 7.5 years. In other places, costs are now close to $2.50 per watt. It took forty years for the United States to hit the 1 millionth solar installation mark. The next million installations will occur in the next two years; we call that exponential growth. And while we typically think of these as rooftop residential systems, perhaps even more significant growth has occurred in the so-called “utility scale” systems installed by the Walmarts, Ikeas, and Amazons of the world, where costs are falling even faster; there were none of these as recently as 2007.

While solar is expanding in Virginia, it has been barely noticeable compared to other states. As of the end of 2015, we had about 22 megawatts of solar generation (1 megawatt can power between 150-180 homes) in our portfolio; by contrast, North Carolina already had over 2,000 megawatts of solar in its portfolio, and many independent studies place Virginia low in ranking of states for solar market penetration. There are a number of reasons for this, but one lies in the policy arena, where Virginia has lagged far behind its competitors.

Some Change in Virginia

The pace of Virginia change has been slow, but it is occurring nonetheless, and could be accelerated with some minor changes in policy. In 2015, we were able to pass a law stating that 500 megawatts of solar energy was “in the public interest,” a signal to a sometimes reluctant State Corporation Commission (SCC) that it should approve some solar projects, even if they might cause a very small increase in utility rates for consumers (the building of all new power plants, regardless of energy source, causes an increase in rates to enable a utility to recover its capital costs). Dominion Power, as part of its pledge to build 400 megawatts of solar by 2020, won SCC approval for three solar farms, one of which will be built in partnership with a company headquartered in Charlottesville, Coronal Development. These three projects will produce 56 megawatts of power and support 800 construction jobs. In August 2016, Dominion was granted approval for a $35 million project in Buckingham County that will generate 19.8 megawatts, enough to provide electricity to 3,500 homes, and the state recently announced an agreement whereby Dominion Power would build and own a 21 megawatt facility – enough to power 4,400 homes – at Naval Air Station Oceana in exchange for the Commonwealth purchasing the generated power. The Governor has pledged that state buildings will derive 8 percent of their electricity from solar by 2019. Electric cooperatives are also getting into the act; the Central Virginia Electric Cooperative is working with Coronal on two 5 megawatt facilities expected to service 1,200 homes, and Old Dominion and A&N Electric Cooperatives just announced a partnership with Hecate Energy, LLC, to build a 20 megawatt solar farm in Northhampton County designed to provide power to 3,000 homes. Locally, Secure Futures, a Harrisonburg firm, is building a 1 megawatt capacity system at Albemarle High School, a system designed to meet 14 percent of the school’s electricity needs. These recent developments, while productive, are just scratching the surface of solar possibilities.

Policy Initiatives for Virginia

In Virginia, we lag behind for a number of reasons. We have no mandatory Renewable Energy Portfolio Standard (RPS), a requirement that has spurred investment in renewables in other states. While we provide huge tax credits to coal companies who are failing to increase jobs, we have no solar tax credit – none. We impose artificially low limits on “net metering” arrangements by which residential consumers can sell their excess energy to the utilities. We even have prohibitions about how much energy individual solar power generators can put onto the grid at any one time.

To accelerate change in this market, we should consider the following changes in Virginia policy:

Increase the size of the caps on net metering systems.
Protect the rights of individuals and groups generating solar energy to be fairly compensated and allow them the flexibility to enter into Power Purchase Agreements with third party operators and consumers of solar power.
Pass a state solar credit.
Modify the 2015 bill to quadruple the amount of solar that the SCC considers to be “in the public interest.”
Allow for more distributive power and community net metering, including incentives for utilities to invest in these innovative approaches.
Change the coal tax credit into grants designed to “solarize” portions of Southwest Virginia, creating jobs and saving energy in the process.

A Coming “Disruption” for Utilities?

Many argue that the utilities will oppose these changes because they threaten their bottom line. There is some truth to this, as witnessed by the efforts nationally by these companies to roll back “net metering” policies that require them to purchase excess power from residential solar generators at retail price. But there is little doubt that change is coming, and regulators in several states have studies underway to determine how to grapple with this major transformation. Some analysts, including Silicon Valley entrepreneur Tony Seba in his book, Clean Disruption, go so far as to argue that the dramatic decline in solar energy prices threatens to throw utilities into a “death spiral” unless they embrace an entirely new business model. At present, this is difficult to see because the energy from the sun is now only usable during daylight hours. That could all change when technological advances permit large scale energy storage at reasonable cost. But for now, getting to a renewable energy future with the utilities is easier than without them; there is simply too much infrastructure and business acumen embedded in these companies upon which we must rely. Electrons, whether green or brown, must be transmitted and distributed. And, at present, our utilities are the only ones who can do this.

In the short run, then, policymakers face a choice. Will we take advantage of improving market conditions and accelerate changes to help our constituents and the environment? Or we will remain on the sideline, losing benefits that are now available while ignoring changes in the industry that may disrupt our utility companies and affect energy distribution in unpredictable ways? The solar market is changing and the revolution is coming; Virginians would benefit by us becoming more proactively engaged in the process.

Democrats Sustain the Governor’s Vetoes

April 22, 2016 by David Toscano

General Assembly Retains Focus on Building New Virginia Economy

In Governor McAuliffe’s State of the Commonwealth address in January, 2016, he made clear his priorities for the upcoming General Assembly session. He argued that our focus should be on building a new Virginia economy that is diversified and robust, and investing in education at all levels to encourage creativity and innovation. He also stated that if Republicans in the House or Senate sent him legislation that was socially divisive or that threatened workers’ rights, women’s ability to control their reproductive health choices, discriminatory measures, or bills that transfer public investments from public schools to private entities, he would veto the bills.

The Governor kept his promises. He proposed a budget that included major new investments in ports, airports, and economic incentives. He proposed almost a billion dollars in additional funding for K-12 education, and substantial new investments in higher education. He supported the initiative of private business leaders called “Go Virginia.” During the General Assembly session, both the House and the Senate adopted most of the Governor’s proposals, and even increased funding for others. That was a wonderful example of finding common ground for the benefit of the Commonwealth.

Along the way, however, Republicans passed, as they have done in recent years, a series of measures that would undermine the rights of Virginia citizens. In response, Gov. McAuliffe vetoed 32 pieces of legislation coming out of this session.

During our Reconvene session of Wednesday, April 20, 2016, Democrats sustained every one of the Governor’s vetoes. Among the vetoes that were sustained (this means that the bills will not become law), are measures that would:

Defund Planned Parenthood.
Undermine efforts of the Commonwealth to produce a clean power plan.
Extend inefficient and costly tax credits to coal producers.
Deny localities the ability to contract with private companies to pay a living wage.
Allow discrimination under the guise of religious freedom.
Reverse the Governor’s executive orders to keep guns out of state administrative buildings.
Remove the discretion of sheriffs and local law enforcement in handling immigration detention requests from the federal government.
Place additional barriers on citizen’s ability to register and vote.
Limit the ability of localities to determine the status of monuments in their cities and counties.

In addition, we passed a number of the proposals made by the Governor to change legislation and include new items in the budget. These included new additional monies for bioscience support and initiatives in cybersecurity.

Our efforts to enact a Solar Tax Credit targeted to investment in Southwest Virginia failed in a party line vote, as did the proposal to build a smaller and less punitive juvenile detention center.

Finally, the Governor’s proposal to make it easier to get drugs for lethal injection was passed by the General Assembly. This proposal arose in response to a bill that would make the electric chair the default execution method in Virginia in the event that the lethal injection drugs were not available. The Governor’s proposal proved very controversial because it would keep secret the identities of companies manufacturing the lethal cocktail as well as the components of the mixture. Civil libertarians argued against the measure and this was one area where I departed from the Governor by voting against it. In my career, I have voted against any measure that would expand the death penalty or make it easier to administer. While lethal injection is perceived as less cruel than the electric chair, it is nonetheless replete with all kinds of problems, and there have been many botched attempts using these drugs for execution. Accepting the Governor’s recommendation means that the death penalty will continue to be carried out in Virginia.

Town Hall Meetings

In the next month, I will be convening several town hall meetings to discuss the General Assembly session. I am also available to speak to groups about what we did and did not do in the 2016 session. We will provide more information about times and locations.

The Last Week of the Session

March 8, 2016 by David Toscano

The 2016 Session of the Virginia General Assembly is scheduled to end on Saturday, March 12, and there is significant work remaining. Most efforts are now focused on reconciling the House and Senate budgets. The good news is that there is a lot of common ground; both bodies supported much of the Governor’s introduced budget, and have provided substantial increases for K-12 education, higher education and job creation. Some specifics on how to implement certain investments in higher education and job creation remain to be resolved. In my view, the House budget has erected an overly cumbersome screening process for some research and economic development projects that may make it difficult to respond quickly and nimbly to opportunities. Universities, for example, may need to move quickly to attract talent from other states with funding packages that will ensure they will relocate to Virginia; too many bureaucratic hoops may make recruitment more problematic. The same is true for efforts to recruit and retain businesses in the Commonwealth. These issues are likely to be resolved, and I expect the House and Senate conferees will reach agreement on a budget in the next several days.

Challenges remain with the so-called reform of the Certificate of Public Need (COPN) process. The COPN system is designed to protect hospitals from being undercut by medical providers who seek to establish stand-alone clinics offering only the more profitable areas of medical care. This would create greater fiscal uncertainty for hospitals, which might need to charge more for other services in order to continue to provide costly indigent care. A compromise that would have allowed some reforms in exchange for contributions to a fund designed to assist uninsured Virginians fell apart Monday afternoon, but it is worth a careful look in the future. COPN reform represents a significant change in how we provide medical services in the Commonwealth, and deserves thoughtful scrutiny before adoption.

Funding for Planned Parenthood continues to serve as a lightning rod for Republicans who seek to undo Roe v. Wade and undermine reproductive rights. HB1090 would prevent any non-Medicaid money from being provided to Planned Parenthood; this would take away much of its resources for family planning counseling and birth control, the major services it offers. Defunding this organization is a symbol to House Republicans, but I will continue to defend against those efforts.

I recently gave a floor speech about the Coal Tax Credit, which you can watch immediately below.

I also gave a statement on the Republicans’ refusal to reappoint Justice Jane Roush to the Supreme Court of Virginia.

Several of my measures are making steady progress. My bill to allow our own Jefferson Area Board for Aging (JABA) to compete for neighborhood assistance tax credits was passed by both bodies and is being sent to the Governor for signature. The bill that I introduced to make it easier to hold drivers accountable when they pass a stopped school bus (HB915) has been rolled into another measure, and is now in a conference committee on which I serve. I trust we will vote to approve this measure in the next several days. Finally, my bill to give greater flexibility to school divisions addressing challenges for English Language Learners (ELL) was passed by the House. In the Senate, however, the committee simply decided to send a letter to the Board of Education requesting that they study the issues and determine whether the problems which generated my bill should be addressed at the state level or by local school authorities.

Throughout this session, I have greatly appreciated all of the emails and phone calls from constituents providing very useful advice about how I should vote on bills. In most cases, our views have been similar, but even in those cases where we have differed, the input has been critical and makes a difference in how I think about these issues. Please do not hesitate to continue contacting me about the issues before the General Assembly.

Crossover has Passed: the Budget Awaits

February 19, 2016 by David Toscano

With crossover behind us, the next major event will be the release of the House and Senate budgets on Sunday, with the debate to occur next Thursday. In the last several days, the House considered two controversial measures: the so-called Government Nondiscrimination Act and a bill to extend the coal tax credit for another four years.

WHEN NONDISCRIMINATION BECOMES DISCRIMINATION

Under the misnamed Government Nondiscrimination Act, the Commonwealth of Virginia would be prohibited from taking any action against any person who discriminates against another person so long as the discriminator believes that the other person is gay, transgendered, or has engaged in sex outside of marriage. Although it was presented as a cure for recent celebrated news stories, such as the two Oregon bakery owners who declined to bake a wedding cake for a gay couple, the bill is far reaching and probably unconstitutional. It nonetheless passed the House 56-41. Interestingly, a number of younger Republicans crossed the aisle to vote with every Democrat against the bill. We are seeing a generational shift in the House of Delegates, and the younger Republican members are showing more tolerance on social issues than their elders. Nonetheless, the fact that this bill passed by such a large majority, should give us all pause. It now heads to the Senate, where it faces an unpredictable future. The Governor will likely veto the bill, and given the strong “no” vote by the House, that veto would likely be sustained.

The Coal Tax Credit has been on the books since 1988, and it has cost Virginia taxpayers more than $630 million. The monies go primarily to coal mine operators and electricity generators. Since the credits were enacted, coal production has dropped precipitously and industry employment has gone from 11,000 workers to about 2,800 today. A JLARC report published five years ago indicated that the coal tax credit had outlived its initial purpose, which was to provide jobs and maintain coal production. Since then, the market has changed dramatically, and natural gas has largely replaced coal as an energy source. Some coal is still exported overseas, but prices for other fossil fuels have dropped so low that it is hard for coal, especially Virginia coal, to compete. Those of us who argued against extending the Coal Tax Credit suggested that it is inefficient to use taxpayer monies to prop up an industry that is in steep decline. When there are critical needs for public safety, education and job creation in Virginia, millions of dollars that we send to a few large companies could be better spent elsewhere. Southwest Virginia is in serious economic decline, but it would be better off if we invest monies in the region to grow educational credentials and support new businesses. The extension of the credit was passed on a 75 to 23 vote; I voted no. The Governor may veto the bill; if that happens, there will be another vote as to whether to sustain his veto.

UPDATE ON BILLS

Among the bills that failed in the first half of the session were:

An effort to end the requirement that a woman undergo a fetal ultrasound before an abortion. You may remember the controversy when that law was enacted several years ago. We tried to repeal it, which the Republicans blocked.
A measure that would prohibit abortions after twenty weeks went to Committee, but was removed from consideration for this year by Republicans who were concerned about the optics of passing such a bill.
All efforts to redesign the redistricting process.
Efforts to increase the minimum wage to the Federally-mandated level of $7.25 per hour.
My effort to prohibit discrimination in public employment on the basis of sexual orientation or gender identity.
An effort to require public school restrooms and locker rooms to be restricted to males or females on the basis of their anatomical features at birth.
A bill to allow those over the age of 65 to vote absentee or early.
An effort to reduce the required gross receipts ratio for mixed-beverage restaurant licensees, calculated from the sale of food and non-alcoholic beverages consumed on premises, from 45 percent to 25 percent of total receipts.
Creation of a Casino Gambling Commission.

Items that passed the House included

The requirement that the Department of Environmental Quality seek approval from the General Assembly before creating our state’s Clean Power Plan. This will likely be vetoed by the Governor.
The gun compromise trio of bills that give greater protection to victims of domestic violence, provide for voluntary background checks at gun shows, and remove the reciprocity prohibitions that would prevent Virginians from carrying concealed across state lines.
My resolution on religious freedom and tolerance.
A repeal of the Certificate of Public Need (COPN) regulations. This bill will likely be changed substantially as it goes through the Senate.
An expansion of the definition of stalking to include circumstances after a victim notifies the stalker that the victim does not want to be contacted or followed.
My bill that will allow localities to fine motorists who have passed a stopped school bus by sending them a summons in the mail.
A bill to prohibit the tolling of highways, bridges or tunnels without approval of the General Assembly with certain exceptions in Northern Virginia and Hampton Roads.

Please remember that for all of the above passed bills, it is necessary for it to clear the other house and be signed by the Governor before they become law.

THE BUDGET AWAITS

On Sunday, both chambers will release their respective budgets and I will write to let you know what is in them.

Virginia Budget Prelude

December 2, 2015 by David Toscano

State of Play:
A Preliminary Look at the Virginia Budget

With the 2015 election over, legislators and commentators are now turning their attention to the upcoming General Assembly session and Governor McAuliffe’s first two-year budget. Even though the Governor has been in office almost two years, this is his first budget: it is not widely understood that a governor does not have a chance to propose a budget that is totally his own until well into his second year in office. In Virginia, we have two-year budgets and this is Gov. McAuliffe’s chance to establish a legacy of budgetary priorities. His budget will be unveiled to the money committees in the House and Senate on Thursday, December 17, 2015. Between now and then, you’ll begin to read about possible initiatives in the proposed budget and will undoubtedly hear criticisms from the Governor’s detractors of his various proposals.

Budget Priorities, Assumptions & Projections

Before your eyes begin to glaze over as you read and hear about budgetary lingo like “re-benchmarking for the standards of quality,” “budget drivers,” “our budget is structurally sound,” and “claw backs,” please take a moment and think about the significance of the budget.

State budgets reflect the priorities and intentions about where we want to go as a Commonwealth. Every decision in the budget process, no matter how small, reflects a priority and can affect thousands of Virginians. We spend money on state police to keep us safe, on clean water to protect our health, and on education to ensure our children have opportunities to learn. We invest in job creation for future growth, and provide funds to the disabled, elderly, and infirmed so they can have a better life.

Budgets are also based on assumptions and projections. We are not precisely sure how much money we have to appropriate until tax dollars are actually collected. So we project figures. We usually expend close to our projected revenues, leaving us some cushion for the possibility that the economy will not be as robust as we think it will be. That is prudent budgeting, but it is also where politics and economic philosophy intrude. If your projections are too conservative, you might not fund a critical program; if too liberal, you could create a shortfall, requiring cuts in future years.

Traditionally, the House and Senate have used different assumptions in building their budgets, with the House generally more conservative in projecting revenues. The House Appropriations Committee and staff are generally less bullish on the economy, projecting the growth in revenues at 3.2% in fiscal 2017, and 3.3% in fiscal 2018. In contrast, the Senate Finance Committee and staff are projecting 3.6% and 3.8% in the same years, respectively. This difference will mean millions of dollars over the next two years.

The Governor will also make projections when he releases his budget, and it will be interesting to see what they are. If he builds Medicaid expansion into the budget, the revenue growth is likely to be much higher than either the House or the Senate money committees have assumed, and his budget is likely to be more robust. This will set up a direct conflict between the spending the Governor wants and the constraints that the Senate and House Republicans will put on the budget because of their refusal to accept federal monies to expand Medicaid.

Our budgetary challenges in recent years have occurred because of two factors. First, the Virginia economy has not recovered from the 2008 recession as well as it has historically done. Second, federal sequestration has decreased employment and brought less growth, especially in Northern Virginia. Virginia ranked 49th among the 50 states in growth for 2014 and we have been lagging behind places like Alabama and Maryland since 2010. Unemployment rates have declined somewhat, but wages have largely been flat since 2009. Part of this has to do with the effect of decreases in federal procurement, especially in Northern Virginia. There are some signs that Northern Virginia is slowly recovering, but we have a long way to go and we are not likely to return to the expansive growth rates of ten years ago without some structural changes in our economy.

Considerations To Be Made

The largest portion of state revenues is spent on education. The last two-year budget totaled $36.8 billion, almost half of which involved transfers to local governments. The largest section of those transfers to local governments is for public education, the number one priority of many of us in the General Assembly. This is where the Commonwealth’s spending comes to life – in the quality of our classrooms, the talents of our teachers, and the magic that occurs when students are being taught and learning at their full potential. And this is where much of the debate will occur in this budget cycle. We are under an obligation required by state law to “re-benchmark for the standards of quality” every two years. In everyday parlance, this means that we have to total up the costs of providing basic education services in the Commonwealth and then put enough money in our budget to fund it. In actuality, we do not totally fund all of the demands of public education; the state pays only a portion, and local governments need to find the rest. Consequently, every dollar not allocated by the Commonwealth for education creates more pressure on the localities and their taxpayers. In Charlottesville and Albemarle, we are very generous in spending local dollars on education; our community believes that educational investments are necessary to maintain our local school divisions. Other localities find this more difficult because their tax base is not as strong. Virginia’s per pupil spending state-wide is not much higher than it was in 2007, and many Democrats and some Republicans believe more investment is needed. Re-benchmarking is expected to cost the state an additional $450 million in the next two years, but I would expect the Governor’s budget will include more money for education than just for re-benchmarking.

With this background, here are some budget questions and issues we will debate in the upcoming next session:

After we re-benchmark for the Standards of Quality, how much additional money will be allocated for other educational initiatives? We know the Governor is very supportive of pre-K education and observers predict that there will be more money in his budget for that. But historically, House Republicans have been skeptical about claims in support of pre-K and are likely to resist expanding the program. And what about higher education? Democrats have been focused on reducing the impact of tuition increases on rising student debt. In-state undergraduates pay 47% of the cost of education, up from 23% in 2001-02 and much more than the state targeted rate of 33%. Many on both sides of the aisle believe that we need to invest more in our research universities, such as U.Va., and provide greater incentives to commercialize research breakthroughs out of our universities to create new businesses and spur economic opportunity. We will likely see some new initiatives to spur university-business collaborations in bioscience, manufacturing, and cyber security, all designed to help build the new Virginia economy.
What additional initiatives will we adopt to encourage the Governor’s New Virginia Economy Workforce Initiative? Agreement exists that we need more effective workforce development. We know two-thirds of all new jobs do not require college degrees, but a recent JLARC report indicated that our investment in workforce has not been as productive as it needs to be. Some change can occur without money, but other initiatives, especially in our community colleges, will require state investment to be effective.
Will the legislature seriously attack the proliferation of tax preferences for industries – most notably coal – that no longer work for their intended purpose of creating jobs or economic opportunity? Eliminating credits for coal, for example, would create between $50 to $100 million in revenue, enough to fund a 2% statewide teacher raise.
Will the legislature finally decide that it makes good economic sense to expand Medicaid and therefore provide healthcare coverage to over 300,000 Virginians while shoring up our budget, our rural hospitals, and creating jobs? Right now, we’re sending in excess of $4 million a day in our taxes to Washington, D.C., which could be brought back to Virginia if we expanded Medicaid. The Governor is likely to put a provision in this budget that will bring those dollars back to Virginia, but Republicans remain steadfast in their opposition. There is no doubt that state Medicaid spending is a huge driver of the additional demands on the budget. Virginia has adopted a number of reforms, which has had the effect of limiting the increases in Medicaid spending, but because so much of the additional costs are driven by increasing numbers of older people with special nursing home and other expensive needs, the program continues to expand. The good news is that the percentage increase in Medicaid spending is likely to decline.
Will the budget include pay increases for faculty, teachers, and other state employees? A 2% faculty COLA increase would cost $33 million to the state in the next two years. A 2% teacher increase amounts to $83.2 million per year.

In the next several months, you’ll read more about so-called “wedge” issues – guns, Syrian refugees, abortion – and I hope you engage in these conversations. But the major action always involves the budget, and I will continue to keep you informed as we go through the process.

We have a long way to go before we get to a biennial budget and I will continue to try to provide insights about the Governor’s proposals and the legislative responses to them.