News Updates

Factory Construction Surges (USA Today)--There was zero growth in spending on factories in 2013, as American factories have been in decline since 1998, and many producers have moved offshore. However, USA Today reports that the United States has seen a 12 percent increase in spending on new or renovated factories in 2014.  According to the Department of Commerce, the higher-than-expected growth seen by the United States in the second quarter was in large part due to the rise in spending on new factories.  As of August 2014, factories were running at 77.3 percent of capacity. That figure is close to the levels seen prior to the recession and is an increase from 63.9 percent in 2009. As companies build additional factory space to accommodate increased demand, they tend to hire more workers, spurring employment. While manufacturing employment increased 88,000 during 2013, it has already increased by 105,000 in 2014. To read the full article, click here.

Huntington Ingalls Industries to create health-care centers for employees (Virginia Business)--Huntington Ingalls Industries announced in July it will create onsite health care centers for its Ingalls Shipbuilding and Newport News Shipbuilding employees and their families. The Newport News health care center, with up to 20,000 square feet, will house doctors, nurses, physical therapists, wellness coaches and nutritionists. It also will have a full-service pharmacy as well as labs and radiology. The center is scheduled to open by mid-2015. The company also has rolled out a telemedicine program called Teladoc. The program allows employees to talk to physicians by telephone or Skype 24 hours a day, seven days a week, for $10 a visit. That service is in addition to the health care centers and the regular health plan. You may read the entire article here. 

U.S. Department of Labor Awards Nearly $14 Million to Support Job Training Programs at Virginia's Colleges--Governor Terry McAuliffe announced October 1 that Virginia State University and four of Virginia's community colleges will expand their capacity to provide innovative training programs in partnership with employers, thanks to a nearly $14 million grant award from the U.S. Department of Labor's (US DOL) Trade Adjustment Assistance Community College and Career Training initiative. In Virginia, the funding will support the priorities of Governor McAuliffe's Executive Order 23, the "New Virginia Economy" Workforce Initiative, to increase STEM-H postsecondary education and workforce credentials, secure employment for veterans, align education with the needs of businesses, and diversify the economy. The funding gives: 

• Virginia State University $3,249,817 to provide training in the wireless industry for veterans, dislocated and underemployed workers.
• Lord Fairfax Community College $3,250,000 to create Knowledge to Work, a new type of educational search engine and online portal designed to help workers find free and low-cost learning resources tied to competencies and credentials, including badges, certificates, and degrees.
• Danville Community College $2.5 million to incorporate workplace experiential learning in advanced manufacturing in an educational setting.
• Southwest Virginia Community College $2.5 million to provide training in advanced manufacturing and carpentry industries through the college's PluggedIn VA.
• Thomas Nelson Community College $2,476,840 to work with regional employers and workforce organizations to develop and implement an education and training system to produce multi-skilled technicians in advanced manufacturing.

Click here to view the Governor's press release.  

Virginia SOL Committee Mulls Testing Changes (Daily Press)--The Standards of Learning Innovation Committee, created during the 2014 regular legislative session to come up with new testing strategies to help students learn, met September 30 to work through a draft of potential reforms. The draft document contains roughly twelve recommendations. Discussion concerning the potential reforms will ensue during planned October subcommittee meetings before the full committee officially backs any of them. The potential reforms in the draft document include:
 

• "Substantive changes in the organization and operation of Virginia's schools, especially high schools" to better encourage student engagement.
• "On demand" testing options so that students take high-stakes tests when they're ready, not during a fixed testing window.
• Granting "expedited re-takes" already available to high school students to elementary and middle school students as well.
• Shifting high school graduation requirements to include "authentic evidence of student competencies" instead of focusing primarily on a tally of classes completed.
• "Fewer and broader learning goals" to allow "deeper, more intensive study of key topics."
• Minimizing the "negative impacts on teaching" for tests that show student achievement but do not, in themselves, serve an "instructional purpose."
• Keeping some tests as diagnostic tools, but not using them in school-by-school accreditation ratings.

To read the full article, click here. 

Affordable Care Act litigation (Wall Street Journal) - On September 30, a federal district court judge in Oklahoma ruled that subsidies under the Patient Protection and Affordable Care Act (ACA) cannot go to consumers who obtained health coverage through a federal exchange.
As the judge in the case explains, the ACA regulates the individual health insurance market through exchanges created along state lines. A state may set up its own exchange, or a state may elect not to establish an exchange, in which case the state uses a federally-established exchange. Under a current Internal Revenue Service rule, in either instance, tax credits are extended to anyone enrolled in a health plan through an exchange, regardless of whether the exchange is operated by a state or by the federal government. In this case, the court vacated the IRS rule, finding that the ACA language regarding tax credits to consumers applies only in situations where a state has set up its own exchange. Earlier this year, a three-judge panel out of the D.C. Circuit also struck down the IRS rule. (The panel ruling is vacated because the full D.C. Circuit has agreed to review the case.) By contrast, in a case out of Virginia, the 4th Circuit Court of Appeals upheld the IRS rule. The disparity of rulings among the circuits makes the issue of whether consumers in states relying on the federal marketplace are legally entitled to subsidies potentially ripe for consideration by the U.S. Supreme Court. To read the full article, click here.

Scoring process to delay transportation projects (Richmond Times Dispatch)--Virginia legislators are carrying out a new law to set priorities for funding transportation projects. Known as House Bill 2, the General Assembly approved the bill this year to reassure the public that an estimated $4 billion in new state transportation revenues under a funding package adopted last year would be spent wisely, with projects ranked on quantifiable measures of need. Statewide, 65 projects will temporarily lose about $416 million in funding as legislators develop the legislation. The funding delay does not apply to projects funded with regional money in Northern Virginia and Hampton Roads, but Richmond region does not have a funding mechanism in place that allows for the raising of additional taxes to pay for its top priority projects. To read more, click here.

US issues final minimum wage rule for contractors (AP)-- Labor Secretary Thomas Perez issued a final rule on Wednesday raising the minimum wage for employees of federal contractors to $10.10 an hour. The action puts in force a step announced by President Barack Obama in February. The Labor Department said nearly 200,000 American workers will benefit from the new minimum, which takes effect Jan 1. To read more, click here.

Big ideas discussed for the Port of Richmond (Richmond Times Dispatch)--The head of the Virginia Port Authority, John Reinhart discussed the future of the Port of Richmond at a briefing and tour of the facility Wednesday organized by the Greater Richmond Chamber for about 80 metro region business and government leaders. At the Port of Richmond, Reinhart aims to: improve the Richmond-Hampton Roads barge service's competitiveness and capacity; add high-value services for customers, such as refrigerated warehouse space for the fast-growing food-sector market; help come up with an economic development strategy for the "Port Commerce Industrial Park" and surrounding areas in the Port of Richmond-Commerce Road corridor; and pursue having a new ocean carrier make direct calls at the Port of Richmond. To read more, click here.

Georgia may be the first state to cap income taxes (Governing.com)--Georgia appears on the verge of removing a valuable financial tool for the state, and it's leaving the ultimate decision to voters. The question on November's ballot asks voters if they want to place a cap on the state's income tax. (The state's top rate is 6 percent.) Perhaps not surprisingly, the idea has strong popular support. A poll conducted at the end of August by Georgia-based polling company Sand Mountain Communications showed 57 percent of voters support the idea. To some policy watchers, that's a problem. For one, the average voter may not be thinking about her state's ability to weather the next financial downturn, and once it's enshrined in the constitution, removing a cap will be difficult to do. However, proponents tout the measure as a way to cement Georgia's status as a low-tax state. Click here to read more. 

Supreme Court denies challenge to EPA regulation on ozone (Bloomberg)--During the first week of its October 2014 term, the U.S. Supreme Court declined to hear a case brought by the Utility Air Regulatory Group against the Environmental Protection Agency (EPA) regarding ozone production. Under the authority of the Clean Air Act, the EPA promulgated regulations regarding national ambient air quality standards for ozone. These regulations were most recently modified in 2008, when the EPA restricted the ozone threshold from its former requirement of 0.080 parts per million to 0.075 parts per million. Since that time, industry groups have challenged the EPA ozone regulations as overly stringent. The consolidated cases finally made their way to the U.S. Supreme Court this term in an appeal brought by the Utility Air Regulatory Group, but the Court denied the industry group's challenge to the regulations. As a result, the 0.075 parts per million standard for ozone remains intact. To read more, click here.

Supreme Court to decide when workday ends--On October 8, 2014, the U.S. Supreme Court heard oral arguments in the case Integrity Staffing Solutions, Inc. v. Busk, which asks whether the time employees spend in security screenings after the end of their work shift is compensable. The employees bringing the case work for a staffing company hired by Amazon.com to fill orders in its warehouses. To prevent possible theft, the staffing company employees were required to empty their pockets and go through a metal detector at the end of their shift. The employees complain that they were unlawfully denied pay for the time it took to go through the screening, which occurred after they had punched out for the day. The Court will consider whether the screenings are necessary to the employees' primary work as warehouse employees and therefore compensable under the Fair Labor Standards Act, or whether the screenings are not subject to the FLSA because they are not integral and indispensable to the employees' principal job activities. Having heard the oral arguments, the Court will deliberate and issue a decision in the coming months.

Report: China surpasses U.S. to become world's largest economy (Business Insider)--The International Monetary Fund (IMF) recently announced China has surpassed the United States as the world's largest economy. The U.S. has held the distinction since 1873, when it overtook Great Britain. The IMF now estimates the U.S. and Chinese economies are $17.4 and $17.6 trillion respectively. In just five more years, the IMF expects China's economy to be 20% larger. To read more, click here.
 

Report: U.S. natural-gas production has stabilized energy prices (WSJ Market Watch)--According to a recent International Monetary Fund study, fracking in shale deposits has made the U.S. the world's leader in natural gas production and helped lower the cost of gas and energy prices for Americans, while prices in Asia and the European Union have risen. In 2000, shale gas accounted for merely 1% of U.S. natural gas production. Today, shale gas production now accounts for about half of the total U.S. natural gas production. Further, it has already decreased U.S. imports of fossil fuels from $412 billion (2.8% of GDP) in 2008 to $225 billion (1.3% of GDP) in 2013. To read more, click here.

Germany bans all tuitions and fees (Forbes)--As of October 3, 2014, due to a decision to overturn tuition and fees in Lower Saxony, Germany, all universities will now be 100% free of charge to students, national and international. Germany, in 2006, lifted a universal ban on tuition and fees, which led to the charging of tuition in seven states. This decision fully retracted that earlier ban. According to the Organization of Economic Co-operation and Development (OECD) Germany has the second highest income tax burden of all OECD's 34 countries. Germany's tax burden figure of 49.8 percent of income is sure to increase as the country adds on more state subsidies to keep higher education free. Click here to read more. 

 JLARC: About 1/5 of college spending is on support functions--The Joint Legislative Audit and Review Commission (JLARC) released a report on October 14, 2014, that studies the cost efficiency of the state's institutions of higher education and identifies opportunities to reduce costs. The fourth in JLARC's higher education series, the report focuses on support functions, including information technology and procurement. The study found that about one-fifth of all spending by Virginia's public universities goes toward support functions, costing a typical student about $13,200 over four years. Most state institutions are spending less than comparable schools nationwide, and 57 percent of that spending goes to support academic services. Spending on support functions at the 15 four-year institutions increased 28 percent from 1991 to 2010, adjusted for enrollment and inflation. That increase accounts for 17 percent of the total growth in spending over the two decades. To view the full report, click here.  

Lending Delinquency Drops in All Sectors Except for Student Loans--Student debt has almost doubled over the last 10 years, with total student debt above $1.1 trillion today. In a report for the Dallas Federal Reserve, Ericka Davis writes that the "serious delinquency" rate for student loans has been 11.25 percent over the last two years, far higher than delinquency in other lending areas. To read more, click here.

 The United States Could See Massive Economic Gains from Trade (Wall Street Journal)--Sixty-four months into a recovery, the United States has yet to find itself on solid economic footing, as household income remains below pre-recession levels. According to the Census Bureau, median household income for 2013 was 8 percent lower than it was prior to the recession, at $51,939. What's the solution? More jobs at higher wages. How to get there? Matthew Slaughter, professor at the Tuck School of Business at Dartmouth and former member of the White House Council of Economic Advisers, says the answer lies in trade. To read more, click here.

 U.S. Supreme Court to Hear Double Taxation Case--On November 12, 2014, the United States Supreme Court will hear oral arguments in Maryland Comptroller v. Wynne. Many experts have opined this case has the greatest potential impact to the state and local tax community as a whole. The Court will address whether the Commerce Clause's protection against double taxation extends to individual residents in a state. The Court has never directly addressed whether individuals, who are owners of pass-through entities subject to income taxes in multiple states, have Commerce Clause protection that requires a resident state to either: (i) fairly apportion the tax or (2) provide a full tax credit on any income subject to tax in another state. The Maryland Court of Appeals, based on U.S. Sup. Ct's Complete Auto four-prong test, held that it was unconstitutional for the State to deny a resident a tax credit on the county portion of the State's income tax.

September 2014 General Fund Revenue Collections Up 5.3% From Previous Year--On October 14, Governor McAuliffe announced that the September General Fund revenue increased 5.3% from the previous year with all major sources contributing to the increase.  This is the first time revenues have increased for three consecutive months since April-June of 2013.  The Governor also stated that September completes the first quarter of fiscal year 2015 and is a significant month for revenue collections. To read more, click here.

 State jobless rate unchanged at 5.5 percent for September (Richmond Times Dispatch)--Virginia's unemployment rate stood at 5.5 percent in September as the state continued to see slow job growth. The September jobless rate was unchanged from the rate in August, which was revised downward from 5.6 percent. To read more, click here.