This year Virginians will elect the first governor of the 21st century. His challenge will be symbolic--to lead the commonwealth into the new century--and formidable--to ensure opportunity for prosperity for all of our citizens.

Virginians are a proud people. We have a wonderful geographic location, and a history and tradition of conservative and prudent leadership commitment to our citizens. However, that tradition cannot allow complacency, which is, at times, the excuse for lack of vision and often the enemy of prosperity.

We cannot prosper if we live in the past; it is the future to which we must look. Change, at the pace we are experiencing it, challenges us all to decide what to keep and what to discard. We face great opportunities if we choose wisely and great hazards if we do not. No day is complete without reference in print or electronic media to economic competition on a global basis. No state or locality is isolated from that competition. Virginia must develop a vision for the future with an emphasis upon growth and prosperity. Current signs are not encouraging.

ECONOMIC GROWTH IN THE 1990S LAGS THE 1980S

Despite vigorous efforts by Governor Allen and economic development officials, net job growth in the first six years of the 1990s has been only half of net job growth in the 1980s (see Figure 1). Projections regarding the future do not suggest a return to the robust job growth of the 1980s without substantial new efforts. Indeed, if the technology sector largely based in Northern Virginia is removed from the data, job growth in Virginia thus far in the 1990s is flat.

The lack of robust job growth is particularly troubling since the population of Virginia has increased by more than one million people since 1980. The state has failed to exceed the national average in job growth and, indeed, for the past several years has been below the national average-ranking 33rd in the nation. Personal income growth has been comparable to job growth, which leaves the income of the average Virginia family only approximately equal to the national average, with personal income growth ranking only 29th in the nation.

Yet high-wage jobs go unfilled due to lack of skilled workers. EDS, a major national corporation with headquarters in Northern Virginia, reports that a lack of trained workers in Virginia has affected its employment base and immediate growth potential. The technology industry in Northern Virginia represents that 18,000 technology-based jobs are unfilled in Virginia, while employment in absolute terms is only at or below the national average.

Virginia no longer competes for jobs simply with its sister states. A recent conversation with the CEO of a global corporation suggests that Ph.D.s in Pacific Rim countries can be hired for a lifetime training cost one-tenth of that in the United States. Furthermore, competent engineers in the Far East can perform work for a U.S. company via telecommunications at one-fifth the cost of similar work done by U.S. engineers. The immediate skill needs of U.S. firms can be addressed from anywhere, anytime. For Virginia's citizens to be competitive, they must have the best education and training available.

It is abundantly clear that Virginia is barely average in the critical areas of job growth and individual income. What must we do to rebound from this mediocre performance? The answer is investment and reinvestment in essential infrastructure: education, transportation, and the commonwealth’s financial base.

VIRGINIA’S KEY ASSET IS INTELLECTUAL POWER

But when we review the commitment of Virginia to education, we find that legislative studies have identified a $6.2 billion immediate need to enhance local schools--a need without a suggested solution. Virginia ranks only 43rd in higher education funding per student. Simply to equal the southern states average per student calls for a commitment of an additional $200 million per year indefinitely for operating requirements alone.

Virginia had achieved in the 80s a slow and steady pace toward a higher level of quality and funding in its institutions of higher education. However, the depression of the early 1990s, the rejection of a tax increase, and the requirements of a balanced budget led politicians to withdraw in excess of $400 million from higher education with an invitation to the individual institutions to increase tuition. This was done, and the budget was successfully balanced from the pocketbooks of students and parents without an increase in taxes. The predictable result: Virginia public tuition is among the very highest in the nation.

As the economic crisis ended, funding for higher education in Virginia continued to be restricted. The average investment per thousand dollars of individual income dropped from $12 in 1979 to $6.76 today--a drop of 44 percent in funding (see Figure 2). This decrease means that Virginia's record for financial support for higher education is one of the worst in the nation. The results are evident in every direction. The belt tightening of the universities, despite serious restructuring efforts, has reached harmful proportions.

Despite the General Assembly's intent to fund faculty salaries at 60 percent of peer salaries, we are still far from the goal. The president of one of Virginia's leading institutions recently testified that in offering faculty appointments to sustain excellence in a core discipline, 11 of 12 offers were rejected on the basis of inadequate compensation.

Need-based student financial aid meets only one-third of unmet need. Technology is much talked about and little funded.

The community college system--a cornerstone of work-force training and retraining--has been forced to reduce worker access and to increase tuition for programs that are fundamental to preparation for skilled jobs.

In recent years, capital improvements have been paid for largely by debt. Now debt increases are frozen to sustain Virginia's bond rating and no provision made for critical capital improvements on our historical and increasingly deteriorating campuses.

In Virginia, a state with a proud heritage from the days of the Founding Fathers, support of higher education now ranks at the low end of the nation. Thomas Jefferson believed that higher education should be available within a days ride of all Virginians and founded a university of which we are all proud. Today, however, with the demand for quality education perhaps more critical to the prosperity of Virginians than ever before, political and business leadership refuses to effectively recognize the need.

As the economy of Virginia converts from mining, manufacturing, and agriculture, the principal asset of the citizens of Virginia is their intellectual power and skill. Intellectual skill must be enhanced and nurtured. As Governors Godwin, Holton, and Baliles made clear in their landmark statement of January 1995:

"Now is the time to make critical key investments in Virginia's future. We believe the place to start is by reaffirming public support for our unique system of higher education. . . . "

TRANSPORTATION NEEDS OUTPACE RESOURCES BY BILLIONS

The transportation infrastructure of Virginia continues to service more citizens and businesses with vastly more miles of travel than ever before, but without recognition of additional funding requirements. As gas mileage increases, highway revenues per mile decrease.

Principal deficiencies impact the entire state (see Figure 3). Hampton Roads has identified approximately $20 billion in necessary transportation improvements. Bridges and tunnels are very expensive, but the need cannot be denied.

Western Virginia requires an upgrade of Interstate 81, now carrying three times the truck traffic for which it was designed and without any financial plan for improvement. Roanoke and Richmond have demonstrated needs of several billion dollars each if their commerce is to continue to move freely.

Northern Virginia shares with the Washington region national recognition as the second worst gridlock area in the nation. There are clearly demonstrated multi-billion-dollar requirements. The total of state transportation requirements over the next 20 years is an absolute minimum of $35 billion and could range upward to over $50 billion by Virginia Department of Highway estimates. Despite these needs, the highway department can only identify $12 billion of likely available funds, and that number is seriously suspect as maintenance requirements erode construction funds.

FISCAL HEALTH IS FRAGILE

Finally, in reviewing the infrastructure in Virginia, we must look to the fiscal situation, and it is not optimistic. Philosophically, Virginia was, a few short years ago, a no-debt state--one of the few in the nation. How different it is today. The fastest growing item in the Virginia budget is debt service, which has grown by 633 percent in the 1990s.

Since the recession of the early 1990s, a significant gap has existed between tax revenues and expenditures (see Figure 4). Thus far, lawmakers have bridged the gap by relying on lottery profits, unspent balances from the previous year, debt financing, and such budget tricks as deferred implementation of tax breaks, the sale of assets, and, most recently, proceeds from Trigons conversion to a stock company. The continuing need to balance the budget with these stop-gap measures underscores the fragile nature of Virginia's finances.

The persistent call for increased funding for critical programs is another symptom of anemic financial health. After seven years of budget cuts and freezes, it is not surprising that gov-ernment officials and citizens have a sizable backlog of spending requests. Legislative and executive studies in the past two years have identified many short- and long-range needs for increased funding, including:

Elementary and secondary education

• $6.2 billion to replace, upgrade, and maintain deteriorating local school buildings
• $400 million each biennium to address increased costs in the basic school aid formula
• $34 million a year to fund a seven-year technology replacement cycle

Fiscal relief for localities

• $330 million a year to eliminate the local business license tax, with the states financial assumption of certain local service responsibilities

Transportation

• $34 billion at a minimum over 20 years to fund highway construction needs

Higher education

• $200 million at a minimum per year to maintain quality and increase affordability

Corrections

• $300 million to build and operate new prisons needed by 2006

At-risk youth

• $105 million a year to treat and educate 17,000 troubled, abused, or neglected children.

RECENT SURPLUS IS NO PANACEA

Much has been reported in the last few months about the commonwealths $225 million surplus in FY 1997 from a growing economy. Some political leaders are treating the surplus as excess money that should be returned to taxpayers in the form of permanent tax cuts. Regrettably, they are silent on two critical questions:

1. If tax cuts are passed and the economy falters, how will current levels of services be funded?
2. How can vital, unmet needs such as those listed previously be provided?

Predicting future economic growth is a risky business. Legislative fiscal experts present three scenarios for the next three years, based on varying levels of economic performance. At this point, any one is a possibility. In the scenarios, revenue growth above the current forecast ranges from a high of $1.1 billion to a low of $350 million--a sizable difference. In the fiscal game, the stakes are high. In this case, at stake is the commonwealths future.

ACTIONS NEEDED NOW

Where is Virginia as we look to the future, a future that should be founded upon optimism, enthusiasm, and strength? The people of Virginia are intelligent and committed and have a high level of work ethic and integrity. Mr. Jefferson, as did other Founding Fathers, believed that an informed public was fundamental to prosperity, health, and enjoyment in the demo- cratic system.

The most urgent action needed at this time is a full discussion of Virginia's future direction. A suggested approach is to inform the public clearly about the issues and engage them in responding to three fundamental questions:

1. What level and quality of state-funded services does the future require?
2. What will those services cost?
3. How will we pay for them?

Only a fully informed electorate can be expected to respond effectively and participate actively in the political process.

A second important action is improving the commonwealth’s financial forecasting process, which is too short-sighted to be of significant use to policy makers. No business would survive for long without a complete understanding of the cost of current operations and the out-year pricing structure necessary to survive, grow, and prosper. Yet Virginia state government--a $17 billion per year operation--lacks a system that forecasts future costs and revenue requirements for more than two years. A current study under the leadership of Senator Joseph Gartlan is charged with examining the forecasting process.

Virginians have indicated in overwhelming numbers at all levels an awareness that higher education is the key to individual prosperity and a desire to have a transportation system that functions. Yet we are, at the pol-itical level, unwilling to clarify what the needs are and how they will be paid for. Business has failed to demand political accountability, and politicians have failed to inform.

Without investment and reinvestment, we cannot expect to be competitive as we enter the next century. The citizens of Virginia are entitled to be informed and to decide whether we should settle for medio-crity in job growth, in education, in transportation, and in our financial base. We cannot accept a political leadership that denies Virginians the tools necessary for future prosperity.

John T. Hazel, Jr., is the chairman of the law firm Hazel & Thomas and the Virginia Business Higher Education Council, which is comprised of 43 Virginia business leaders and the presidents of 17 public institutions of higher education in Virginia. A lawyer and developer in Northern Virginia and former rector of the George Mason University Board of Visitors, he has advanced a number of statewide and community efforts to improve the quality of life in Virginia, focusing particularly on the support of higher education.