New Order What will the GOP's newfound control of the General Assembly mean for the business community? It depends on whom you ask.

Randy Forbes, chairman of Virginia's Republican Party, says businesses will flourish under the new GOP-controlled legislature. Photo by Mark Rhodes

By Mark Davidson
The way Randy Forbes remembers it, the early 1990s were not the best of times for Virginia’s business community. "The state really was on a decline in terms of business," says Forbes, chairman of Virginia’s Republican Party. "There were a lot of folks in business who simply didn’t feel the government wanted them here."

Forbes, whose party in November won the House of Delegates and gained control of both chambers of the General Assembly for the first time in 140 years, cites burdensome regulations, unfair tax codes and a general indifference from the Democratic-led state government. But he believes all of that has improved in the last few years and calls Virginia one of the nation’s most business-oriented states.

Forbes contends that the state will be even more hospitable now that Republicans are running the whole show.

"Businesspeople who are looking to locate in Virginia are going to be more comfortable that we will continue to be a low-tax state. That is extremely important to them," Forbes says. "They know that under a Republican administration and legislature, the state is not going to be raising taxes. And it’s not just about taxes. I think you will see more of a commitment from the state government to make sure business flourishes in Virginia."

Other political observers, including a leading Democrat, a longtime political analyst and a nonpartisan watchdog group, think Forbes is overstating the GOP’s case. While acknowledging that the state has seen its ups and downs in terms of business, they say the political differences between the two parties in Virginia are relatively minor — despite what each party would like the public to believe.

Given that incoming House Speaker S. Vance Williams Jr., R-Amherst, says change will be moderate and gradual under his leadership, observers think the GOP’s newfound control of the General Assembly likely will mean little significant change for the business community.

"If I were a businessperson, I would not read too much into the change in party control," says Mark Rozell, a Catholic University political scientist and a longtime follower of Virginia politics. "It’s not like the high-tax, anti-business liberals are being replaced by the low-tax, pro-business conservatives. The fact is, Virginia is, and has been, a low-tax state under both parties. And there is no reason to think that won’t continue, no matter who is in control of the statehouse."

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Clayton Roberts closely monitors how each Virginia legislator stands on issues that are vital to the health of business and industry. As president and executive director of the Virginia Foundation for Research and Economic Education, a nonpartisan watchdog known as Virginia Free, he tracks their votes, listens to their campaign speeches and tries to assess the state government’s general attitude toward issues ranging from business taxes to land-use and environmental rules.

In looking at the incoming General Assembly class of 2000, Roberts doesn’t see any clear signs of impending change. After all, he points out, Republicans have gradually gained a foothold in the legislature over the past decade and, before last November, already controlled the Senate and governor’s mansion. He sees the 1999 election as another incremental step in that process.

"When you look at who is leaving and who is coming in, it would appear that very little will change in terms of support for business one way or the other," Roberts says. "We have got a lot of people on both sides of the aisle that are friendly to business, and I don’t see that changing much. There is a caveat, however: We already know the records of the (current) legislators, but we don’t have any records yet for the freshmen. We can only go by what they have said. Unfortunately, sometimes the voting records don’t match the rhetoric."

Last year, Virginia Free gave 49 of Virginia’s 100 delegates its highest rating for being strongly pro-business — up from 33 in 1991. In the Senate, which has 40 members, that number went from 14 to 23. "Our General Assembly has long been a business-friendly one, and it will continue to be," Roberts believes. He says there’s a good reason for that: "One tends not to get far in Virginia politics coming from a perspective of not being pro-business."

Although Roberts doesn’t foresee any sweeping policy changes coming down the pike, he does expect "perhaps a change in emphasis" toward issues that directly or indirectly benefit business and industry. That is in large part due to Gov. Jim Gilmore, he adds.

"Gilmore has made a name for himself as a tax cutter and a solutions-oriented person, particularly when it comes to economic issues," Roberts explains. "Certainly with the Republicans controlling both chambers now, the governor will have more friends when it comes to promoting his agenda."

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House Speaker Tom Moss, D-Norfolk, is quick to rattle off a laundry list of figures that, he says, indicate things were good long before the GOP came into power.

"This idea that Democrats are going to raise taxes and Republicans are going to cut taxes — it’s a bunch of Republican rhetoric," says Moss, who will lose his post as speaker in January. "Virginia already ranks 46th out of 50 states in state and local tax burden as a percentage of personal income. You tell me how they are going to improve upon that."

Moss produces a host of other facts that, he says, will be difficult for the Republican-led legislature to improve upon:

H Virginia has the sixth-lowest sales tax in the nation, according to the Federation of Tax Administrators.

H The state has not increased its personal income tax rate since 1972 — an accomplishment Moss attributes largely to good budget management by Democrats in the 1970s, 1980s and early 1990s.

H Virginia’s corporate tax rates are the sixth-lowest in the nation, according to the Virginia Economic Development Partnership.

H The state’s unemployment rate has consistently been below the national average since the 1980s.

H Virginia is one of only six states that enjoys a AAA rating from all three of the major bond-rating agencies, which Moss calls a major enticement for business and industry. "You can’t get any better than that," he boasts. "There’s no such thing as an AAAA."

He doesn’t fault the GOP for its part in maintaining the state’s positive business climate, but "this big technology boom you’re seeing ... started way back in the early 1980s, when Democrats were in charge," Moss maintains. "Sure, things have continued on under Gov. [George] Allen and Gov. Gilmore, but the fact is, this has been happening for a good while."

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Catholic University’s Rozell agrees with Moss that much of the economic boom that Virginia has experienced — particularly the high-technology explosion in the Northern Virginia suburbs — originated under Gov. Gerald Baliles’ administration, when Democrats controlled the governor’s mansion and both houses of the General Assembly. At the same time, he credits Republicans with continuing the state’s strong business-oriented policies.

Rozell does cite one issue on which the new crop of lawmakers might exhibit a noticeable difference: environmental regulation. Because Republicans in Virginia have tended to be less stringent on environmental matters than Democrats, real estate and development interests "may find that they get a better shake, so to speak, from a Republican legislature than they might have if the Democrats were still in control," he says.

That is because the GOP "may be less inclined to promote environmental protection legislation. I’m certainly not saying the Republicans are going to allow companies to come in and pollute. But many in the Republican party feel there has been too heavy an emphasis on environmental regulation to the detriment of business and industry."

If Gilmore and the GOP lawmakers tend to back off of those issues, even to a small degree, business and industry might feel less burdened and more likely to locate or expand in Virginia, he says.

Generally, however, Rozell asserts that the "Democratic Party in Virginia is very centrist by national standards. The majority of Democrats in the legislature have run on pro-business platforms, and they have promoted themselves as friendly to the business community."

Rozell isn’t sure any of that will make much difference. He questions how much influence a state government has on business and industry to begin with. "The state of the economy and the market forces related to that are so much more compelling to business than anything the state legislature can do," Rozell insists. "The General Assembly can influence business at the margins by creating a positive climate" and by actively recruiting industry.

Rozell says a company’s decision to locate, stay or expand in Virginia is far more likely to rest on factors such as the employment base, education opportunities, transportation access and local — not state — tax structures.

Yet GOP Chairman Forbes says state government can influence whether businesses come or go, thrive or fail, expand or contract. "It’s about creating the right environment," Forbes says. "This election sends a message that Virginia will be a low-tax, business-friendly state for years to come. I think you will see this legislature physically going out and saying to business, ‘This is what Virginia can do — and will do — for you.’"