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    Document Summary
    - Report Published -

    Report Document No. 11
    PUBLICATION YEAR 2010

    Document Title
    Executive Summary of the 2009 Interim Work of the Manufacturing Development Commission

    Author
    Manufacturing Development Commission

    Enabling Authority
    30-276

    Executive Summary
    The Manufacturing Development Commission is charged with assessing manufacturing needs and formulating legislative and regulatory remedies to ensure the future of the manufacturing sector in Virginia.

    The Commission's legislative members are Senators Frank W. Wagner, W. Roscoe Reynolds, and Ralph K. Smith and Delegates Harry R. "Bob" Purkey, Watkins M. Abbitt, Jr., Kathy J. Byron, Daniel W. Marshall, III, and David E. Poisson. The citizen members are Brett A. Vassey, Joyce W. Waugh, Robert L. Williams, and Sean D. Kerlee. Secretary of Commerce and Trade Patrick O. Gottschalk serves an ex officio member. Senator Wagner chairs the Commission.

    The Manufacturing Development Commission held two meetings in 2009. On April 7, 2009, the Commission met in the General Assembly Building in Richmond. On August 25, 2009, the Commission met at AREVA NP, Inc's facility in Lynchburg.

    This executive summary of the interim activity and work of the Commission is submitted pursuant to subdivision 8 of 30-276. This summary is submitted in lieu of an annual report.

    I. ISSUES ADDRESSED

    Skills Training Needs for Employees of Manufacturers

    At the April meeting, Robin Sullenberger, Executive Director of the Shenandoah Valley Partnership, and Virginia Workforce Council member, discussed the need to retain manufacturing employees and to train them to deal with the changes in manufacturing, especially with regard to technology skills. Such training is costly and funding assistance is always needed. Mr. Sullenberger's materials suggested that the Virginia Council on Advanced Technology Skills (VCATS) should submit a proposal to the United States Department of Labor for funding the skills gap assessments and skills certification training for up to 75% of the displaced manufacturing workers. The remaining 25% could be provided the same assessment and training through funding that the Virginia Workforce Council should be encouraged to request as a special appropriation of the Governor's Discretionary funding under the Workforce Investment Act. Preferably, the training would take place in six to eight of Virginia's community colleges. Delegate Bryon suggested that a letter be sent supporting the Virginia Workforce Council proposal and Chairman Wagner agreed to do so on behalf of the Commission.

    Virginia Council on Advanced Technology Skills

    Sheryl Bryan, Director of VCATS, addressed the future of skill development. VCAT's solution to developing a skilled workforce consists of three parts: certification standards (3 levels), assessments instruments to indentify the skill gaps, and online and Action Learning Lab tools to help close those gaps. The three levels of VCATS specialization are Manufacturing Technician (Level 1), Intermediate Manufacturing Technician (Level 2), and Advanced Manufacturing Technician (Level 3). Thus far, Level 1 certification and assessment are complete with the Level 1 on-line technical skills curriculum completed. The Action Learning Lab design (short cycle) is complete and Level 2 competencies have been defined. The biggest tool for parents, students and school counselors is the Dream It, Do It Virginia Marketing Solution, a free on-line program to connect individuals to jobs in their area. VCATS continues to work on its programs that will prepare individuals for the types of technical jobs needed in manufacturing.

    Technical Diploma and Advanced Technical Diploma Update

    Michelle Vucci, Director of Policy for the Virginia Department of Education, updated the Commission members on the Technical Diploma program. She made a presentation on the same topic during the Commission's August 2008 meeting. During the Virginia Board of Education's February 2009 meeting, final changes to accreditation of public school regulations were approved. The requirements for the Standard Technical Diploma and the Advanced Technical Diploma were included. A major change to these technical diplomas is to require one standard credit in economics and personal finance. A student must earn four standard credits in career and technical education in a career concentration approved by the VA BOE for the Standard Technical Diploma (22 total credits). For the Advanced Technical Diploma (26 total credits), students must earn three standard credits in career and technical education and they have the option to take one additional credit in career and technical education or one credit in the arts. These proposed regulations must go through final stages of regulatory process and will be effective once reviewed and approved by the Governor. Final regulations for changes relative to graduation requirements will be effective for the Fall 2010 semester.

    Other Workforce Education Issues

    Brett Vassey, President of the Virginia Manufacturers Association, briefly commented at the August meeting on two education issues that he would like the Commission address at its next meeting. Currently, Virginia is falling short of its stated goal of providing general funds for 30 percent of the cost of non-credit courses taught through the Virginia Community College System (VCCS). He cautioned that it will not be possible to meet workforce training goals over the next decade locally, and that a systemic approach is needed. Mr. Vassey advised that efforts are underway to develop legislation that would provide the VCCS with greater flexibility in the use of state funds.

    The second education issue identified by Mr. Vassey pertained to industry certifications in public school systems. The Virginia Manufacturing Association supports the use of Pell funds for industry certifications. However, the existing industry certificate approval process often takes a couple of years. He noted the Commission on Youth is examining the issue, and agreed to report at a future meeting on its recommendations.

    Alice Scott of the Virginia Industry Foundation (VIF) updated the Commission on its campaign to improve the image of employment in Virginia's manufacturing sector. She reminded members that the Virginia Manufacturers Association's skilled trade gap analysis predicts that 23 percent of skilled manufacturing employees may be eligible for retirement by the end of 2010. In order to address this looming gap, the "Dream !t-Do !t Virginia" campaign promotes awareness of career opportunities in advanced technology fields. In addition to image marketing, the campaign includes a free online career resource. The VIF is attempting to expand the campaign by developing partnerships at regional and local levels.

    State Air Pollution Control Board Plans for EPA Greenhouse Gas Reporting and for Proposed EPA Regulation of Carbon Dioxide

    David K. Paylor, Director of the Virginia Department of Environmental Quality (DEQ), gave an update at the April meeting on the rapidly changing greenhouse gas issues in Washington. In March, a proposed rule was signed for greenhouse gas mandatory reporting. However, no update of state plans is required. There is an attempt to capture mobile emissions by monitoring and calculating emissions in 2010 and reporting in 2011 directly to the EPA, not to the state. The DEQ will wait to respond until after the final rule is adopted. While the Clean Air Act would apply to greenhouse gas emissions, the White House would like a separate law to deal with greenhouse gases.

    The EPA is discontinuing the National Environmental Performance Track Program. The program allows companies to develop independent audit management systems which lead to better environmental performers. The negative view by the EPA of the Program will not affect Virginia's Environmental Excellence Program which will continue to provide programs to allow companies to create ways to improve their emissions.

    American Recovery and Reinvestment Act Issues

    Dolores Esser, Commissioner of the Virginia Employment Commission, addressed the Commission at its April meeting regarding the unemployment benefits portion of the American Recovery and Reinvestment Act of 2009 (ARRA). Of the total $7 billion appropriated for the purpose of enacting specific policies that increase access to unemployment benefits, $188 million is allocated to the Commonwealth. This amount is based on Virginia's share of federal unemployment taxes. Currently, Virginia qualifies for $62.5 million (one-third of its potential distribution) due to its alternative base period. To receive the additional $125.5 million, Virginia would have had to enact at least two of four requirements. Two of the requirements were proposed by the Governor as amendments to legislation in the 2009 Reconvened Session but the General Assembly did not adopt the amendments.

    Extended benefits are available to the states if the seasonally adjusted unemployment exceeds 6.5 % for three consecutive months. The unemployment benefits would be extended by 20 weeks and are paid for totally by the federal government. Such benefits would remain in effect until 3 weeks prior to the last week for which federal money is authorized.

    ARRA provides for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). COBRA gives employees who lose their jobs and health benefits, the right to buy group health insurance provided by the employer under certain circumstances. ARRA allowed eligible individuals to pay only 35% of their COBRA premiums with the remaining 65 percent being reimbursed to the coverage provider through a tax credit. This premium reduction applies to periods of health coverage beginning on or after February 17, 2009, and lasts for up to nine months. The General Assembly agreed to amendments to Delegate Marshall's House Bill 2024 that permitted provides that employees of small employers whose group health insurance coverage does not provide for continuation of coverage under federal COBRA, and who are involuntarily terminated during the period beginning September 1, 2008, and ending December 31, 2009, or during any period for which premium assistance is specified by ARRA, as later amended, shall be offered the option to continue their existing group health insurance coverage.

    Utility Ratemaking Process and Quantifying Fiscal Impact of Rate Changes on Customers

    At the April meeting, Cody Walker, Assistant Director of the Division of Energy Regulation in the State Corporation Commission (SCC), addressed utility rate design and economic impact statements. The SCC is reactive with regard to utility rate design. The utility makes an application for a rate increase and a hearing follows. Many different things are examined when considering a rate increase. They consider revenue responsibilities, capital costs and energy costs. And there's always lots of argument about how to allocate those costs. The SCC looks at all the parties and attempts to allocate as fairly as possible. With regard to economic impact statements, the SCC looks at each bill on a stand-alone basis, not on how one might affect another.

    The issue was further discussed at the August meeting. The chairman suggested that the Commission consider providing for an extended evaluation period during which the rate impact of electric utility legislation could be analyzed. Staff provided members with an overview of the role of the Special Advisory Commission on Mandated Health Insurance Benefits in reviewing proposed legislation. In addition, members were advised of other measures directing the preparation of impact statements for proposed laws, including the authority of standing committee chairmen to request the Joint Legislative Audit and Review Commission (JLARC) to analyze fiscal impact statements; the Administrative Process Act's requirement for an economic impact analysis of proposed regulations; and requirements that introduced bills creating or expanding felonies, increasing unemployment benefits, or affecting the Virginia Retirement System, include a statement of the proposal's impact.

    Staff observed that developing a proposal to require that an entity conduct an analysis of the rate impact of bills pertaining to electric utilities would present a number of issues, including:

    • Identifying the proper entity to be tasked with conducting the analysis.

    • Ensuring that interpretations and methodologies used in preparing rate impact estimates are not binding in rate cases.

    • Acknowledging that rate impact estimates are unlikely to be accurate predictors of the rates that would be set by the SCC in rate cases.

    • Limiting the burden of conducting rate estimates for different utilities and classes of customers, and over stated periods of time.

    • Defining the types of legislation that would require the rate analysis, or giving standing committee chairmen the authority to request an analysis of specific bills.

    • Determining whether an entity to be charged with analyzing the impact of legislation will be limited to quantifying effects on rates, in which case its membership may be limited to persons with expertise in utility accounting and ratemaking procedures, or whether the entity would be charged with conducting a broader policy analysis, in which case a body modeled on the Special Advisory Commission on Mandated Health Insurance Benefits may be more appropriate.

    Senator Reynolds commented that, as an alternative to requiring the preparation of unreliable estimates of the future effects of pending legislation, the Commission should consider requiring JLARC to conduct an analysis of the impact on rates of aspects of electricity legislation, based on the SCC's application of the legislation in rate case proceedings.

    Manufacturing Growth in the Energy Sector

    AREVA NP, Inc., a U.S. subsidiary of French-based AREVA Group, designs and constructs nuclear power plants and research reactors and their components. At the August meeting, Andy Cook, Senior Vice President of Sales and Marketing, outlined the company's $50 million of investments in Central Virginia, including a fuel manufacturing facility, service equipment refurbishment facility, pump and motor service center, and technical training center. Mr. Cook noted that AREVA NP has hired more than 300 new employees in each of the past three years.

    AREVA's investments in the Commonwealth will expand sharply in the next few years with its development, through a joint venture with Northrop Grumman Shipbuilding, of a $363.4 million facility for manufacturing equipment and pressure vessels for the nuclear energy industry. The Newport News-based project is expected to create 550 new production and engineering jobs when it becomes operational in 2012.

    In addition to manufacturing for the nuclear energy industry, AREVA manufactures offshore wind turbines at a facility in Bremerhaven, Germany. Mr. Kim Stein, Director of Wind Development at AREVA, advised the Commission that the firm has an interest in manufacturing off-shore wind turbines in the Commonwealth. The turbines, each capable of generating 500 megawatts, would stand about 450 feet high. A production facility in Virginia, he reported, could generate between 8,000 and 10,000 jobs over a 20-year period.

    Offshore Wind Energy Development

    At the August meeting, Senator Wagner presented a draft of a bill creating an Offshore Wind Project Development Commission. This commission would be charged with facilitating and coordinating the development of wind power projects in waters three miles or further off Virginia's coast. The proposed entity would be charged with applying, on behalf of the Commonwealth, to the federal Minerals Management Service for leases to develop offshore wind energy projects. Guidance is being sought regarding the extent to which this commission would be authorized to assign or sublet its leases to other entities. In addition, the proposed commission would be authorized to seek up to $4 billion in federal loan guarantees in connection with the development of such projects. The entity would be responsible for ensuring that the development of offshore wind projects does not interfere with naval facilities and operations off the coast of the Commonwealth, and coordinating the connection of electric power generated offshore to the power grid. The chairman touted Virginia's natural and infrastructure advantages as a home to offshore wind projects, and observed that the development of such projects could encourage AREVA to locate a wind turbine manufacturing facility in the Commonwealth.

    II. CONCLUSIONS

    The Manufacturing Development Commission will continue to assess manufacturing needs and to formulate legislative and regulatory remedies to ensure the future of the manufacturing sector in Virginia.