SD7 - Report on the Manufacturing Needs and the Future of Manufacturing in Virginia


    Executive Summary:
    JOINT SUBCOMMITTEE STUDYING MANUFACTURING NEEDS AND THE
    FUTURE OF MANUFACTURING IN VIRGINIA
    SJR 64 (2004)

    January 11, 2005

    The joint subcommittee was established to consider the needs of the Commonwealth's manufacturing sector by assessing its current state and to determine how its needs may be best addressed. In conducting its study, the joint subcommittee was directed to (i) assess the current state of the manufacturing sector of Virginia's economy; (ii) determine how the sector's needs may most speedily, efficiently, and cost-effectively be addressed; (iii) consider both local and state tax policies affecting the manufacturing sector and regulatory compliance and costs; and (iv) consider what role state and local governments should properly play in this endeavor.

    Senator Frank Wagner was elected chairman and Delegate Bob Purkey was elected vice chairman. Also appointed to the joint subcommittee were Senator Martin Williams, Senator John Watkins, Delegate Samuel Nixon, Delegate Daniel Marshall, Delegate Chris Saxman, and Delegate Watkins Abbitt. Information about the activities of the joint subcommittee is available at its web site: http://dls.state.va.us/SJR64.htm.

    The joint subcommittee met three times. The focus of the first meeting on August 17, 2004, was on the current state of the Commonwealth's manufacturing sector. The relative size of the manufacturing sector in Virginia's economy, measured by jobs, has been in decline for several years. Since peaking at 432,500 in 1989, Virginia's manufacturing employment has fallen to 296,600 in June 2004. Over 67,000 manufacturing jobs in the state have been lost in the past four years. Manufacturing's share of nonagricultural employment, which was 28.6 percent in 1949, is now 8.7 percent.

    At its initial meeting, the joint subcommittee decided to focus its attention on four of the 12 priority areas of concern that the Virginia Manufacturing Association (VMA) identified in its Virginia Strategy for Growth and Manufacturing Renewal: taxation, research and development, regulation, and health care costs. Other issues identified by the joint subcommittee as needing study included the ownership by Virginia's public universities of intellectual property developed at the institutions through research sponsored by private entities, energy costs, and federal and state requirements for analyses of the impact of proposed regulations on small businesses.

    The joint subcommittee's second meeting was held on November 17, 2004, at the Georgia Pacific mill in Big Island. Presentations were made by:

    • Matthew Erskine, Deputy Secretary of Commerce and Trade, on the results of the Governor's Working Summit on Advancing Manufacturing in Virginia
    • Robert Cline of Ernst & Young, on the preliminary results of the VMA-commissioned study of the comparative state and local tax burden on Virginia's manufacturing sector
    • Chris McGill of the American Gas Association, and Diane Leopold of Dominion Resources, who discussed the energy outlook for Virginia's manufacturing sector
    • Brett Vassey, President of the VMA, who outlined proposals to address the rising costs of employer-provided health insurance
    • Staff, who addressed the federal Small Business Administration's model act for small business regulatory reforms and the issue of the ownership of intellectual property resulting from privately funded research at Virginia public universities

    The third meeting of the joint subcommittee was held on January 11, 2005, to review possible legislative initiatives for the 2005 Session. The joint subcommittee endorsed the following proposals:

    • Resolution continuing the joint subcommittee for a second year.
    • Bill requiring the Virginia Liaison Office to work to ease the moratorium that currently prohibits off-shore exploration of potential natural gas reserves.
    • Resolution requesting JLARC to study the comparative burden of regulatory compliance on Virginia's manufacturing sector.
    • Bill requiring small business regulatory flexibility.
    • Bill revising the rules regarding the ownership of intellectual property developed at state universities through privately-sponsored research, though Senator Watkins voiced concerns about the scope of the proposal

    The joint subcommittee looks forward to continuing its work for a second year. It recognizes that a healthy and prosperous manufacturing sector is essential if Virginia is to have a sound, well-balanced economy. Its work in 2004 was slowed by the extension of the legislative session, which delayed its ability to start meeting. In its second year, it is anticipated that Ernst & Young will have completed additional work on its analysis that compares the burden of Virginia's state and local taxation of the manufacturing sector with other economic sectors in Virginia, as well as with the tax burdens on such sectors in five other states.

    In anticipation that the term of the joint subcommittee will be extended for a second year, the joint subcommittee does not plan to submit a formal report to the 2005 Session.