Please ensure Javascript is enabled for purposes of website accessibility
Upcoming Event

Best Places to Work in Virginia

Hamburger Menu Hamburger Menu

byline: Mason Adams

Charging up

Virginia Del. Richard “Rip” Sullivan Jr.  is one of the General Assembly’s biggest advocates for electric vehicles. But when the Fairfax County Democrat went to buy a car in 2018, he started feeling anxious about the electric cars on offer — particularly their relatively limited range, given the lack of electric vehicle (EV) chargers in the commonwealth.

“My local travels and commutes in-district would be perfect,” Sullivan says, but he got nervous thinking about his regular drives to Richmond for legislative business. “So, I blinked, and did not get my EV.” Instead, he bought a gas-powered Hyundai Elantra.

Sullivan told that story on the Virginia Capitol floor during the 2021 session. Electric vehicles, also known as EVs, have progressed in leaps and bounds in the year and a half since then — and Sullivan’s anxiety likely will completely evaporate by the time he buys his next car.

Manufacturers have gone all in on EVs. In a Super Bowl ad this year, General Motors Co. committed to an all-electric lineup by 2035. Last fall, Ford Motor Co. announced it would build would build a manufacturing campus in Tennessee to make an electric F-150 pickup and batteries for the vehicle, plus two more vehicle battery plants in Kentucky. Rivian Automotive Inc. and Hyundai Motor Co. both announced new electric vehicle factories in Georgia. Toyota Motor Corp. will build an electric vehicle battery plant in Greensboro, North Carolina. And Mercedes-Benz U.S. International is adding an EV assembly line at its Alabama plant, while Virginia-headquartered Volkswagen Group of America began production of an electric compact SUV at its Tennessee factory in July.

The federal government is getting in on the act, too. In November 2021, President Joe Biden signed into law the $1.2 trillion Infrastructure Investment and Jobs Act, which will make available nearly $5 billion for states to build out a coast-to-coast network of 500,000 electric vehicle charging stations by 2030. Virginia’s share is $106 million over five years, beginning with a $15.7 million installment in fiscal 2022.

That investment will “enable families to make the transition to electric and get where they need to go safely and efficiently,” says U.S. Sen. Mark Warner. “Electric vehicles offer a clean and affordable alternative to traditional fuel vehicles. That’s one of the reasons I worked so hard to negotiate and pass our bipartisan infrastructure law, which included a record investment in electric vehicle charging stations.”

U.S. Sen. Tim Kaine is still calling for Congress to do more to spur the production and purchase of electric vehicles.

“Transportation is the largest source of greenhouse gas emissions in both Virginia and the United States,” Kaine says. “That means if we’re going to be serious about addressing climate change to protect Virginians from more torrential flooding and the dangers of rising sea levels, we need to do everything we can to make it easier for people to get from Point A to Point B in a more sustainable way.”

Sparking investment

The February announcement of the EV charging infrastructure funding prompted states to draw up their plans to build out their EV charging networks ahead of an August deadline — essentially the starting gun in a race to pave the way for electric vehicles.

Details around commercial electric vehicle charging are hazy so far. Many EV owners charge at home, but beyond that, the process quickly gets tricky. Some developers have added EV chargers at apartment complexes and shopping centers, but these vary. Some are universal chargers, and some are model-specific. Some stations charge much more rapidly than others. And some require payment to charge, while others are free.

Toward this end, Roanoke-based Virginia Transformer Corp. is manufacturing its E2V large-scale power modules (approximately 14,000 pounds and 8 feet by 9 feet by 14 feet) that commercial clients can use to develop custom commercial vehicle chargers. Each E2V unit includes multiple components needed to build charging stations, including transformers, switchgears, distribution circuits and breakers.

Another Virginia company that’s moving to fill the gap for EV chargers is Reston-based Electrify America. Volkswagen, which has its North American headquarters in Fairfax County, established the subsidiary company in 2016 after a highly publicized emissions scandal in which VW admitted cheating on U.S. emissions tests.

Electrify America has installed more than 800 charging stations with more than 2,500 chargers across 46 states. The company partners with Kia Corp., Hyundai and Ford to offer complimentary charges for some vehicle models. (Read more about Electrify America in our September 2022 cover story.)

The federal infrastructure bill should significantly boost the availability of chargers like those around the nation. Details of Virginia’s plan to access federal funding weren’t available as of early August, but federal officials generally seek to place EV chargers at least every 50 miles along interstates and major highways.

Virginia has a little bit of a policy head start on its Southeastern peers when it comes to electric vehicles.

During their two years in control of state government, Virginia Democrats passed landmark laws to decarbonize the state power grid by 2050 and begin the process of cutting vehicle emissions. In 2021, the General Assembly passed a law to implement a low- and zero-emissions vehicle program by adopting California’s emissions standards and electric vehicle sales targets.

The Virginia Automobile Dealers Association came out in support of the EV laws. VADA President Don Hall released a public statement during the 2021 session that was targeted as much at the organization’s members as it was lawmakers.

“As a dealer in Virginia, if you aren’t convinced EVs are your future, look at GM’s announcement of an all-EV fleet come 2035,” Hall wrote. “Look at your manufacturers and the direction they are headed. Start preparing. EVs are here to stay.”

State lawmakers also established a rebate program to lower the upfront cost of electric vehicle purchases but failed to budget any funding for it. Advocates’ hopes for new EV funding and legislation took a hit when Republicans won control of the governor’s mansion and the House of Delegates in the 2021 elections, but the ensuing General Assembly session hinted at the potential for bipartisan compromise.

Youngkin spokesperson Macaulay Porter points to a bill carried by Sen. T. Montgomery “Monty” Mason, D-Williamsburg, that encourages state government to purchase EVs if their lifetime cost is cheaper than gas vehicles.

“The governor knows that we can bring down emissions in Virginia with a common-sense approach that protects our natural resources and economic interests,” Porter says. “The administration continues to emphasize the importance of these products and this industry in our ongoing economic development strategy.”

Sullivan and Sen. Dave Marsden, D-Fairfax, co-sponsored legislation this year to establish a transportation decarbonization program to disburse up to $20 million annually in grants for private developers to install EV charging stations, covering 50% of nonutility costs in most localities and 70% in economically disadvantaged communities.

The bill didn’t survive budget negotiations, “but it spurred debate about how we implement infrastructure in rural areas,” says former state Del. Greg Habeeb, now a lobbyist and president of Richmond-based Gentry Locke Consulting.

“When people talk about electric vehicles and think about Teslas and people charging them in their garages, that’s great, but it’s really a tiny, tiny fraction of the public,” Habeeb says. That’s why the policy conversation is evolving to include consideration of multifamily rental housing and rural areas, he explains — “not highway corridors, not McLean [in Northern Virginia], but really getting into urban environments, rural environments [and] underserved environments.”

Sullivan and Marsden’s bill attracted bipartisan support. A related budget amendment by Del. Terry Kilgore, the House GOP majority leader, for rural charging infrastructure drew a handful of Republican votes in both chambers, but ultimately fell by the wayside after federal infrastructure money was announced for charging networks.

“That became a reason not to do anything at the state level,” Habeeb says.

The federal infrastructure money is intended to establish a network of chargers along interstates and major highways, easing “range anxiety” and encouraging more people to buy electric vehicles.

“The key is to get enough infrastructure so people buy vehicles, and the market can become self-sustaining, and then government doesn’t have to be involved anymore,” Habeeb says.

But, he says, that federal funding excludes many rural and urban areas not located along primary highway corridors. State incentives for “economically disadvantaged” areas in the Marsden/Sullivan bill were aimed at getting private developers to target those places, but once the federal money became available, state lawmakers put those considerations on hold.

Powerful advocate

Electric utilities like Dominion Energy Inc. also have some ideas about how the EV charger network buildout should be handled. Kate Staples is Dominion’s electrification manager. Part of her job entails helping people and businesses transition from gasoline and diesel vehicles, as well as from propane or natural gas in homes and factories.

Dominion has three priorities regarding EVs: Ease the process for customers to switch; expand access to charging infrastructure; and ensure the utility can meet growing demand with a grid increasingly powered by renewable energy sources such as wind and solar.

Dominion has been working with Virginia officials to assist in developing the state charger plan to receive federal infrastructure funding. The utility is also working with private companies to deploy chargers now.

For example, she says, Dominion “partnered with The Current, a mixed-use development in [Richmond’s] Manchester area with apartments and office space, to provide electric vehicle charging stations for tenants.” Dominion provided about half of the development’s 50 charging stations, which residents can use without additional fees.

Tension is already developing between Virginia’s monopolistic, regulated electrical utilities and its gas stations, which tend to be owned by independent franchisees. Gas stations might profit by adding chargers and selling high-margin retail goods to customers who are waiting for their cars to charge. But station owners are faced with the uncertain prospect of investing in chargers before the market has clearly taken shape.

“Our gas station clients are not aggressively proposing a shift toward EVs,” Habeeb says. “They want to find a way to preserve businesses for their families. I’m cynical about the role of utilities. Tomorrow, if you took every gas-powered vehicle off the road and replaced it with an EV, that would drive huge demand, deployment and distribution. All of that is investment for utilities to get a [guaranteed] return on.”

Staples, of course, sees it differently.

“I am an electric vehicle driver,” says the Dominion executive. “I charge at my house, so every morning I wake up with a full … tank. A gas driver can’t do that, so they have to go to gas stations. There needs to be significantly more gas stations than charging stations, because everyone can fuel up on electricity at home or a business.”

While Dominion Energy and Gentry Locke’s gas station-owning clients differ on the best ways to build charging infrastructure, they’re more aligned when it comes to electrifying school buses.

In 2019, Dominion launched an initiative to help Virginia school districts replace diesel buses with electric models. In its first phase, 15 localities received 50 electric buses that have clocked more than 300,000 miles so far. The U.S. Environmental Protection Agency also is assisting with the transition. It named more than 80 Virginia school districts as “priority” recipients for its $500 million Clean School Bus Program.

The program funds about $375,000 toward each bus, and another $20,000 for charging, although it can vary by school district. In April, the program awarded $1.5 million to five Virginia school districts to replace 32 old diesel buses.

Replacing diesel buses makes a big difference in air quality. One diesel bus emits more than 54,000 pounds of greenhouse gases each year, according to Dominion — and air quality inside a diesel bus is five times worse than outside. Additionally, electric buses build grid stability because they can be used as batteries when not in use. EV makers are making this part of their pitch: Ford, for example, says the batteries in its electric F-150s can be used to power homes for days in the event of a grid outage.

Meanwhile, Campbell County bus dealer Sonny Merryman Inc. has started selling electric school buses, including to its home county, with the aid of an Appalachian Power grant.

“While this technology is still in its infancy, I think we can all agree it is the future of human mobility and global sustainability,” Sonny Merryman Executive Chairman Floyd Merryman III said during the ribbon-cutting event.

Dominion Energy’s electrification manager, Kate Staples, charges her own electric vehicle every morning at home, an advantage electric vehicles have over gas-powered vehicles. Photo by Caroline Martin

Energetic outlook

Other companies also are investing in electric vehicles with massive economic development announcements entailing enormous incentives and thousands of jobs. Virginia’s Southeastern U.S. peers have snatched a disproportionate share of these factories, including the neighboring states of Kentucky, North Carolina and Tennessee. Georgia pledged $1.5 billion in incentives to land a $5 billion Rivian EV assembly plant, and $1.8 billion in incentives for a $5 billion Hyundai EV plant — the latter of which nearly landed at the Southern Virginia Megasite at Berry Hill in Pittsylvania County, according to Danville Economic Development Director Corrie Bobe, adding that “making it to the final stage shows how well prepared the Southern Virginia Megasite is for large-scale manufacturing.”

The General Assembly approved $150 million in its budget this year to shore up utility infrastructure at sites such as the Southern Virginia Megasite. That may not sound like much, compared with the incentives Georgia is paying, but infrastructure improvements can help attract smaller companies in the EV supply chain — or in the supply chains for Virginia’s rapidly growing solar and wind energy industries. Or, for that matter, to entice companies like Amazon.com Inc. or Google LLC, which may not be directly involved in energy but want EV chargers and renewables to attract a talented, savvy workforce.

“That’s where we’ve been behind,” Marsden says. “These other states are ready to go. We haven’t been.”

That doesn’t mean Virginia hasn’t had EV-related wins.

Volkswagen announced in 2020 it had signed a lease to move its North American headquarters from Herndon to a 196,000-square-foot space at Reston Town Center. The German auto manufacturer is moving into the electric vehicle space in a big way, announcing a $7 billion investment in North America to boost its digital and electric technology over the next five years. That includes a battery lab in Chattanooga, Tennessee, where it also began producing its electric flagship ID.4 SUV in June.

Volvo Trucks, which manufactures all its North American tractor-trailer trucks in Pulaski County, set a global target to have electric vehicles account for half its truck sales by 2030. The Pulaski plant is contributing toward that target by making electric trucks, although Electromobility Product Marketing Manager Andy Brown says Volvo’s trucking customers also want vehicles that can run on hydrogen and cleaner diesel fuels.

Volvo Trucks manufactures all its North American tractor-trailer trucks in Pulaski County, where it’s expanding production of electric trucks. Photo courtesy Volvo Trucks

Volvo announced in 2019 it would invest nearly $400 million to upgrade the Pulaski County plant, with a portion of that going to prepare for more electric production, says Mary Beth Halprin of Volvo Group North America. By 2022, the company had sold 62 models of its electric VNR truck.

“We prepared and adjusted our production processes, so that we are assembling all powertrain variants of the Volvo VNR (battery-electric, compressed natural gas, diesel) on the same assembly line,” Halprin says. “There was specific training developed so that the battery-electric trucks could be — and are — assembled by the same skilled, trained employees who assemble all VNR models.”

In addition to the huge investments being made by global automakers like Volvo and Volkswagen, perhaps the greatest predictor of EVs’ success is the fact that their economic development potential has brought Democrats and Republicans together in other Southeastern states. Lawmakers who usually are at odds are finding bipartisan consensus around deals that carry billions in investments and create thousands of well-paid manufacturing jobs.

While electric vehicles might still feel futuristic, their ability to bring political parties together seems like the most obvious indicator of their coming ubiquity on American highways.

Midterm murkiness

Republicans look to extend their 2021 wins in state elections as they closely eye congressional targets in November’s midterm elections.

Democrats hold seven of the state’s 11 congressional seats, with three of those having changed hands during the last midterms in 2018. U.S. Reps. Elaine Luria of Norfolk, Abigail Spanberger of Glen Allen and Jennifer Wexton of Leesburg were elected as part of a blue wave that saw Republicans lose seats across the country during President Donald Trump’s term.

Now, it’s Democrats’ turn to brace for widespread losses as President Joe Biden’s approval rating has dropped below 40% amid skyrocketing inflation, stocks flirting with bear market territory, and recent survey results from the Associated Press-NORC Center for Public Affairs Research showing that only two in 10 adults say the U.S. is heading in the right direction or the economy is good.

It’s still unclear how that will play out in Virginia, where polling remains sparse.

“We just don’t know,” says Amanda Wintersieck, assistant professor of political science at Virginia Commonwealth University. “We have very little data. There is exactly one poll from more than a month ago now, and it’s specifically focused on [Luria’s race in] House District 2.”

Luria and Spanberger appear to be the GOP’s top targets.

Luria, a retired Navy commander, defeated incumbent Scott Taylor, a former Navy SEAL, in 2018 by 51.1% to 48.8%, then again in a 2020 rematch that also included an independent candidate. Her Republican challenger for this year’s race was not yet determined by press time for this issue. Republicans were slated to choose their candidate for the seat in a June 21 primary between state Sen. Jen Kiggans, Tommy Altman, Andy Baan and Jarome Bell.

Spanberger, a former CIA operations officer, has prevailed in even closer races than Luria. The Richmond-area congressional representative defeated incumbent Dave Brat in 2018 by a 50.3% to 48.4% margin, then defeated state Del. Nick Freitas by a similar margin in 2020. The GOP candidates running in the June 21 primary to face her included state Sen. Bryce Reeves of Spotsylvania; Derrick Anderson; Gina Ciarcia; David Ross; Crystal Vanuch; and Yesli Vega.

The 10th congressional district was held by Republicans from 1980 until 2018 but trended left until then-state Sen. Jennifer Wexton defeated incumbent Barbara Comstock 56.1% to 43.7%. Wexton was reelected by a slightly larger margin in
2020. In a May convention battle between 11 candidates, Republicans nominated retired U.S. Navy Capt. Hung Cao to run against Wexton.

Larry Sabato’s Crystal Ball, a political newsletter published by the University of Virginia’s Center for Politics, rates the 10th — as well as the 3rd, 4th, 8th and 11th districts — as “Safe Democratic.” The 1st, 5th, 6th and 9th districts are rated as “Safe Republican.” In early June, Sabato’s Crystal Ball rated Spanberger’s 7th District as “Leans Democratic,” indicating a more competitive race, and Luria’s 2nd District race as a “Toss-up.”

The midterms take place across 11 new congressional districts drawn by the Virginia Supreme Court after a bipartisan commission failed to come to any agreement on state and congressional redistricting. The court appointed two special masters who proposed new maps, which were opened to public comments and then tweaked.

The court also approved new maps drawn by the specialists for the 40 districts of the Virginia Senate and the 100 districts for the House of Delegates.

Democratic lawyer Paul Goldman argued the 2021 House of Delegates elections had taken place in outdated districts and sued the state to force new elections this year, instead of waiting until 2023. However, in June, a panel of three federal judges dismissed Goldman’s lawsuit, ruling that he lacked standing to bring the legal challenge. State elections will take place as scheduled in 2023.

VCU’s Wintersieck says many Republicans expect to retake the U.S. House of Representatives during this year’s midterms, and perhaps the U.S. Senate too. That’s largely because they’re currently locked out of power, which lends greater urgency among their base while swing voters tend to focus their frustrations on whoever’s in the White House.

“Negativity bias is really taking hold,” Wintersieck says. “People in the ‘out’ group are much more incentivized to vote. In this regard, we should expect turnout more from Republicans than Democrats. Dems [are] not as driven by burning desire, and we’re seeing disillusionment among youth voters or progressive voters, which could result in lower turnout.”

Democrats could be fired up, however, by a leaked draft opinion that came out in May suggesting that the U.S. Supreme Court will overturn Roe v. Wade — the landmark 1973 ruling that established a woman’s right to have an abortion without excessive government restrictions. That could rally Democrats who need something to vote against, instead of something to vote for.

“It’s a small boost of negativity for Democrats who do not want to see women’s health care in the form of abortion abolished,” Wintersieck says. “It makes them more competitive, but if you look through history, the reigning political party typically loses at least some seats in elections. So, it may mitigate some losses, but I don’t expect it to completely alleviate them.”

Political scientist Stephen Farnsworth at the University of Mary Washington agrees but warns that a Roe reversal still could trigger backlash.

“Normally, midterms are very painful for the president’s party,” Farnsworth says. “On average, the president’s party can expect to lose 20 seats in the House and three seats in the Senate. There are sometimes exceptions. If the abortion decision reverses Roe v. Wade, as seems likely, this may be another one of those exceptional elections where the president’s party doesn’t suffer as much as it might otherwise.”

Election Day is Nov. 8. 

Read more about the political balancing act in Richmond.

Balancing act

The Virginia General Assembly returned to a familiar configuration in 2022, legislating with a Republican-majority House of Delegates and Democratic-controlled Virginia Senate for the seventh time since 2000.

But while the partisan split was old hat, much else about the session was new, taking place two years into the global COVID-19 pandemic and occurring after two years of Democratic control that brought progressive priorities to the Old Dominion.

The session also featured a new player: first-year Gov. Glenn Youngkin, a Republican businessman who had never served in elected office until his January inauguration.

From a business perspective, the partisan split’s not necessarily a bad thing, politicos say.

“As many lobbyists tell me, divided government tends to be a better construct for them as they try to help their associations and clients,” says Chris Saxman, a former Republican delegate and executive director of Virginia FREE. “There’s more competition from the parties, [and] competition is good. It draws out what are important issues, policies and sometimes demeanor when it comes to being successful.”

With CNBC naming Virginia its top state for business for the past two years, neither party was incentivized to make major changes that could negatively affect that unprecedented ranking.

Yet the legislative session’s relatively staid results belie the partisan acrimony that simmered in Richmond. Youngkin and House Republicans tried to reverse course after two years of Democratic control, but were stopped by Senate Democrats. At times, the partisan divide took a personal turn, as the parties clashed over the budget and confirmations at the Capitol, and in blunter terms on social media.

“We approached the session with an understanding that Democrats still controlled the Senate,” says House Speaker Todd Gilbert, a Republican from Shenandoah County. “We knew amending or reversing policies passed under complete Democratic control wouldn’t be likely.”

After the session, “I think the bottom line is, we’re roughly in the same place,” says Sen. John Bell, a Democrat from Loudoun County. “I think people from both sides want to keep that label as being business friendly. If we allow the extremes of either party to go through, we wouldn’t be. And that would be a major problem.”

While Virginia is familiar with a divided legislature, the gulf between parties appears deeper than at any time in modern history. Partisan politics have become even more polarized, while Donald Trump’s presidency and ongoing influence in the GOP have disrupted party alignments and priorities in ways still playing out now.

Youngkin swept into office last year on a wave of momentum from suburban voters motivated by battles over public school policies and curricula, as well as weariness with pandemic-driven mask mandates and other regulations. The former Carlyle Group co-CEO was sworn in on Jan. 15 and immediately signed 11 executive actions, including allowing parents to decide whether their children should wear masks in schools, attempting to withdraw the state from a regional carbon trading market and declaring Virginia “open for business.”

Six days later, Youngkin announced his package of legislative and budget priorities, including measures to eliminate the grocery tax and to create 20 charter schools across the state. On Feb. 7, his press office issued a news release, “Governor Youngkin Delivers on Promises, Day One Game Plan Bill Passes House of Delegates.”

That momentum proved to be a mirage, though, as the Virginia Senate soon became an insurmountable hurdle for much of Youngkin’s agenda.

Virginia Gov. Glenn Youngkin signed a bill banning mask mandates in public schools in Virginia during a Feb. 16 signing ceremony on the steps of the State Capitol. Photo by AP Images/Steve Helber
Virginia Gov. Glenn Youngkin signed a bill banning mask mandates in public schools in Virginia during a Feb. 16 signing ceremony on the steps of the State Capitol. Photo by AP Images/Steve Helber

Some victories, some defeats

That’s not to say the governor didn’t have wins. The Senate backed a proposal by Sen. Siobhan Dunnavant, R-Henrico, to keep schools open five days a week for in-person instruction and to ensure a parental opt-out from school mask mandates.

“I promised that … Virginia would move forward with an agenda that empowers parents on the upbringing, education and care of their own children,” Youngkin said after the vote. “I am proud to continue to deliver on that promise.”

And, in budget negotiations, Youngkin’s platform to repeal grocery taxes was partially successful, with the 1.5% state portion eliminated but retaining the 1% tax for localities. Also, $100 million will go toward the College Partnership Laboratory Schools Fund to establish K-12 “lab schools,” public, nonsectarian institutions housed in colleges and universities.

But the Senate blocked many Republican initiatives, including a gas tax holiday, reversing an increase in the minimum wage and banning teaching of “inherently divisive concepts.” Meanwhile, the GOP took aim at “critical race theory,” an academic lens for examining how race is built into societal institutions that superintendents deny is taught in public schools, but typically used by partisans to encompass classroom instruction on racial issues and history.

The Democratic-controlled Senate also rejected former Trump administration Environmental Protection Agency head Andrew Wheeler to serve in Youngkin’s Cabinet as secretary of natural and historic resources, although Wheeler is serving as an adviser to the governor now. That set off an escalating feud as the Republican-led House then blocked 11 of outgoing Gov. Ralph Northam’s appointees to different boards and commissions, and the Senate then rejected all but one of Youngkin’s nominees to the parole board.

Amid the tension, Senate President Pro Tempore Louise Lucas, an eight-term Democratic senator from Portsmouth, became the face of Youngkin’s opposition on social media as she accrued more than 64,000 followers for her biting commentary on Twitter. In one memorable moment, she tweeted about a text message Youngkin sent her complimenting her for a speech that was instead made by another Black female senator, Mamie Locke, D-Hampton. The governor apologized, and Lucas and Locke later wore replicas of Youngkin’s signature red vest on the Senate floor.

All humor aside, “I want to give voice to what’s happening to us as voters,” Lucas says. “A lot of people got hoodwinked by him [Youngkin]. They didn’t know he had all these Trumpian policies.”

Youngkin made his own move to communicate more directly to voters, purchasing an ad during March Madness basketball games to pressure Democratic lawmakers to approve his budget priorities. Sen. Adam Ebbin, D-Alexandria, dismissed it as “a gimmick.” Youngkin later vetoed nine of Ebbin’s 10 bills that passed the legislature, apparently in retaliation for Ebbin’s role in blocking his nominees.

The governor won some legislative victories, including the passage of a bill to let parents opt their children out of reading assigned material with sexual content. But more often his accomplishments came from nonpartisan economic development announcements such as the recent decisions by Raytheon Technologies Corp. and The Boeing Co., the world’s second- and third-largest defense contractors, to relocate their global headquarters to Arlington.

“I’m pleased with what we got done in the House, but I do wish we had been able to get more through the Senate,” Gilbert says. “We had lots of good bills come out of the House just to die in Senate committees.”

Holding firm

Democrats view the session differently, noting that many of their signature accomplishments from the last two sessions remain intact.

“The firewall held,” Bell says. “One thing that was wise was that many of the partisan pieces of legislation from the House didn’t make it out of the House, and partisan legislation from the Senate didn’t make it out of the Senate. It’s a good thing that far reaches from right or left aren’t going to pass.”

Take the Virginia Clean Economy Act, a 2020 law that commits to decarbonize the state’s electric grid by 2050, ending the use of coal to generate power and incentivizing more solar and wind. Every House Republican voted in favor of a bill to roll back the law, but the repeal attempt was swiftly killed in a Senate subcommittee.

“A wise thing I’ve learned, often stated by people of both parties, is that when new legislation is passed, give it a couple of years until you make any changes,” Bell says. “Most of this legislation, the ink is pretty wet.”

The General Assembly, however, “nibbled around the edges” on energy policy, says House Majority Leader Del. Terry Kilgore of Scott County. That included passage of a bill to remove power from citizen air and water control boards, after the former blocked permitting for a compressor station on a Mountain Valley Pipeline extension.

Youngkin also vowed to withdraw Virginia from the Regional Greenhouse Gas Initiative, an 11-state carbon market to cap and reduce greenhouse emissions in the power sector. He wasn’t able to do so immediately by executive order because Virginia’s membership was enacted by the seven-member citizen state air pollution control board. However, he has appointed two new members — former electric cooperative executives — to the board, which can then fulfill his edict.

The General Assembly failed to pass a two-year budget until June, when lawmakers finally approved a compromise that increased the standard tax deduction for individuals and joint filers without doubling it, as Republicans had called for. The budget also included $1.25 billion for school construction and modernization, and $159 million for the Virginia Economic Development Partnership to develop more “megasites” of the type that have been targeted by auto manufacturers who’ve recently announced new factories in Georgia, Kentucky, North Carolina and Tennessee — but not Virginia. 

Democrats also used the extended session to elect a new House minority leader, Del. Don Scott Jr. of Portsmouth, after ousting Del. Eileen Filler-Corn in April. Filler-Corn served as Virginia’s first female and Jewish speaker when Democrats held the chamber in 2020 and 2021.

Virginia lawmakers frequently have needed extra time to resolve budget impasses beyond the end of the regular session, a problem for businesses as well as localities waiting to set their own budgets.

“It’s become something of a tradition that needs to be broken, because it sends a signal to everyone in Virginia that deadlines don’t matter, when in fact they do,” Saxman says. “The business community grows increasingly uncomfortable with both parties when they can’t resolve what are frankly in the business world easily resolvable issues.”

Football fumbles

As of early June, there was still no resolution on a bill to award a state subsidy to attract the NFL’s Washington Commanders to build a stadium in Virginia. Early in the session, subsidy estimates ran as high as $1 billion, but through the spring fell to $350 million as headlines about an allegedly hostile work culture continued to plague owner Daniel Snyder. Key Democrats and Republicans supported the proposal, but it ultimately failed to come up for a vote — largely from concern about going into business with a troubled organization.

The Ashburn-based football team and its ownership have been under investigation for allegations of sexual harassment and workplace misconduct, and Virginia Attorney General Jason Miyares announced in April that his office was investigating allegations the franchise engaged in financial improprieties.

“There are many, many studies that show that jurisdictions that are very generous to football teams do not recoup an effective return on their investment,” says Stephen Farnsworth, a political scientist at the University of Mary Washington. “This seems doubly true in the case of a legally-challenged and performance-challenged football franchise.”

In late May, the Commanders acquired the right to purchase 200 acres in Prince William County that drove speculation about its plans. The team also was considering other sites in Prince William County and Loudoun County, as well as its current site in Landover, Maryland.

The state legislature also got involved in what had been a municipal matter: Richmond’s casino referendum. After city voters rejected the proposed $565 million casino developed by media company Urban One Inc. in November 2021, Richmond Mayor Levar Stoney, several City Council members and Urban One quickly regrouped and launched a plan for a second referendum vote in November, approved in March by council and a circuit judge.

Meanwhile, state Sen. Joe Morrissey, a Democrat who represents parts of Richmond and Petersburg, had already started efforts to move the project to Petersburg. His bill to get a referendum on Petersburg’s ballot this year failed, but he prevented Richmond from placing a second referendum on ballots until November 2023 via a budget amendment.

As of early June, Richmond and Urban One officials say they are examining their legal options.

Also in the air is regulating the retail market for marijuana, which Democrats legalized in 2021 without establishing a commercial structure. The Senate passed a bill to complete that work in 2022, but the House rejected it. However, retail sales of synthetic THC products like Delta-8 — which some Democrats and Republicans attempted to outlaw — were approved, and lawmakers also approved misdemeanor penalties for people caught in public with more than four ounces of marijuana.

“Democrats let the genie of legalization out of the bottle, and I don’t think there’s any going back from that,” says Gilbert, a former prosecutor. “But I’m concerned about the idea of having marijuana stores popping up in Virginia without regard to what’s being offered to consumers. We have a hard enough time keeping kids away from alcohol and tobacco, and some of these edible products that have come to market in Virginia look very enticing for kids.”

Lucas, who maintains an ownership stake in The Cannabis Outlet, a cannabis products store with branches in Norfolk and Portsmouth, says the legislature must deliver on its promise of a commercial cannabis market that includes social equity provisions for communities adversely affected by decades of marijuana criminalization.

“Polls show the majority of Virginians want to see marijuana legalized,” Lucas says. “African American and brown people have suffered the hardships of prohibition. How dare we have an industry this large leave out the folks who have suffered the most? We need to legalize recreational sales — I’m hoping by 2023, not 2024. Why are we penalizing people for things that would make them feel better and healthier?”

Saxman says it’s best that lawmakers take their time with a complex issue that affects not just retailers but other stakeholders, including insurers and the criminal justice system.

Others agree that complicated bills take time to find consensus — especially in a divided General Assembly.

“That shouldn’t surprise anyone,” Farnsworth says. “It’s a radical departure from the past. These are complicated issues and big changes. These are things that should take time.” 

Read more about midterm congressional races.

The great divide

Virginia’s business community faces a strangely familiar and yet uncertain state government headed into the 2022 General Assembly session, which begins Jan. 12.

Republicans rolled to victories across the board in the November 2021 election as Gov.-elect Glenn Youngkin led a GOP sweep of all three statewide offices, and Republicans also won a narrow 52-48 majority in the House of Delegates. That leaves Democrats with just a 21-19 majority in the Virginia Senate — and newly elected Republican Lt. Gov. Winsome Sears holds the ability to break any potential tie votes.

A divided state government is nothing new for Virginia. Since 2000, Republicans held unilateral control of state government only twice, from 2000 to 2002 and from 2012 to 2014. Democrats won unilateral control in 2019, ushering in sweeping policy changes over the past two years that transformed the regulatory atmosphere around everything from energy generation and legal marijuana to gambling and the balance between labor and business owners.

Youngkin, Gilbert and other Republicans already have identified laws passed over the last two years they’ll seek to roll back. That includes a 2020 act to transition Virginia entirely to clean energy by 2050; Youngkin has said he’ll use executive action to withdraw the state from a regional carbon market. Walking back actions by the 2020-21 Democratic majority will require flipping a senator, however.

Speculation on likely Democratic swing votes has centered largely around state
Sen. Joe Morrissey, D-Richmond, and his push to bring a casino to economically challenged Petersburg in light of Richmond passing up the opportunity in a failed November 2021 referendum. Due to the chamber’s ideological diversity, however, the GOP will likely target multiple Democrats for support depending on the issue.

Youngkin arrives as a largely unknown quantity. He has held no prior elected office, and while he’s discussed numerous issues with ramifications for business, he has offered few policy specifics. Political observers have gleaned clues from his early appointments to Cabinet and agency positions. By contrast, however, his governing partners in the House of Delegates have well-established records. Aside from the last two years, Republicans have controlled the House since 2000. The top two leaders there, Speaker Todd Gilbert of Woodstock and Majority Leader Terry Kilgore of Gate City, respectively have 16 and 28 years of legislative experience.

“We still have the problem of a Democrat-controlled Senate, and are there enough folks … willing to work with us on issues like taxation and regulation and workforce and things that are all going to contribute to keeping our business climate competitive and positive?” Gilbert says. “Much of this comes down to how many folks in the state Senate are willing to work with us to achieve these goals.”

Adds Kilgore: “We’re going to be playing a lot of defense as usual with Senate bills we do not support, but we’re also going to be helping Gov.-elect Youngkin with his agenda. We also want to roll some of the legislation back that has been passed over the past couple of years. I’m not saying we’ll have the votes for all those, but hopefully we can come together with reasonable minds in the Senate and work toward some positive outcomes.”

Meanwhile, Senate Democrats say they’re focusing on issues that directly affect families.

“In the upcoming 2022 legislative session, Virginia Senate Democrats are focusing on one thing: What happens at Virginians’ kitchen tables?” says Jacqueline Hixson Woodbridge, communications director for the Virginia Senate Democratic Caucus. “The heart of our homes is the center of so much of our daily lives: paying bills, completing homework, taking care of our health and so much more. Every day,
Virginians have been facing difficult realities throughout the COVID pandemic — which has further exposed many existing problems families face and exacerbated others. Senate Democrats will continue to build on the economic growth, social equity and fairness achieved in the last several years to make sure everyone in the commonwealth has the best opportunity at success possible.”

Some Democratic groups already are fundraising off their constituents’ fears that Republicans will push through a Texas-style abortion law. In an email, Whole Woman’s Health Alliance referenced oral arguments before the Supreme Court about the Texas law, warning that the Virginia GOP’s November wins make the commonwealth “a target for similar attacks that could overturn years of progress made to expand abortion rights and access.”

In remarks made to reporters after the election, Gilbert deemphasized abortion.

“You didn’t hear our caucus running on those things,” Gilbert says, referring to abortion and voting rights. “We’re focused on things we think were important. We realize we’re in a divided government right now and a lot of the issues people want to talk about, especially in the media, are important to selling papers and selling ad space, but you’re not hearing that from us.”

Instead, Gilbert says, “we’re working in earnest to make sure that we have a robust agenda to make our schools better, to make our streets safer, to make life more affordable for Virginians. That’s what we ran on.”

Subdued Assembly?

Those comments seem to suggest the state GOP is following the tenor of Youngkin’s campaign, says Larry Sabato, founder and director of the University of Virginia Center for Politics.

“I can already tell from the comments that Todd Gilbert and others have made that [Republicans] clearly want to keep a lid on the crazier ideas,” Sabato says. “Youngkin got elected by corralling the crazy. My sense is they’ll adopt the most palatable agenda possible.”

Ongoing redistricting issues and Virginia’s constitutional limit on governors to a single consecutive term mean Youngkin may have only a limited time frame to make an imprint on state government, says Mark Rozell, political scientist and dean of policy and government at George Mason University.

Some analysts speculate that the redistricting process, which is in the hands of the Supreme Court of Virginia, could trigger new House of Delegates elections this November. A federal three-judge panel will decide whether delegates must run in 2022 based on the redrawn districts. And if that impacts the balance of power in the General Assembly, it could result in Youngkin facing a Democratic majority legislature after only a year in office.

“Democrats are not going to want to give him any major legislative victories early on, and they will try to do all that they can to hold their caucus together,” Rozell says. “Given the reality of divided government and possibly an even more divided government after next year, he needs to start working in a bipartisan fashion from the beginning.”

That could include championing politically popular measures such as eliminating the sales tax on groceries or suspending the state excise tax on gasoline sales, Rozell says.

“The key is that he begins his administration with some significant legislative victories that enable him to build over time,” Rozell says.

Lobbyists also foresee a largely static General Assembly 2022 session after the whirlwind, marathon sessions of the last two years.

“Most folks I talk to have this cautious optimism that there won’t be a whole lot of stuff done this year,” says Greg Habeeb, president of Richmond-based lobbying and marketing firm Gentry Locke Consulting, and a former Republican delegate. “Nobody thinks you can do anything except at the margins.”

However, former Virginia Attorney General Jerry Kilgore, a member at the Cozen O’Connor law firm, foresees potential for bipartisan support of legislation to improve Virginia’s business climate.

“Any time you’re talking about making Virginia more friendly for business, or you have a business that wants to come here and needs legislation passed for a variety of reasons, the Senate is likely to come along,” says Kilgore, twin brother of Del. Terry Kilgore, the new House majority leader. “The Senate has overall been more business-friendly even under Democrats than the House has been under Democrats.”

The day after the November 2021 gubernatorial election, panelists at Virginia Business’ 15th annual political roundtable event expressed similar views.

“To me, if you really start thinking about the message aspects of this [gubernatorial] campaign, education and workforce was an important part of [Youngkin’s] campaign,” observed Barry DuVal, president and CEO of the Virginia Chamber of Commerce. “I think we should see an agenda from [Youngkin] that focuses on workforce and education at a high level. I also think you’re going to see some initiatives around tax reform.”

“How do we grow our economy?” asked James W. “Jim” Dyke Jr., senior state government relations adviser with McGuireWoods Consulting. “How do we make sure that everyone in Virginia has the opportunity to get a quality education, whether it’s a four-year education or two-year or [a] certification? … Once you are elected, you have a responsibility to represent every Virginian and do what’s in the best interest of the commonwealth of Virginia to move us forward.”

Nevertheless, lawmakers in the newly divided General Assembly must also take action to follow up on legislation passed in 2021, noted Amanda Wintersieck, assistant professor of political science at Virginia Commonwealth University.

“Marijuana legislation needs to be re-passed in order to take effect,” Wintersieck explained during the political roundtable. “The negotiations on licensing and possession haven’t happened yet. … At the same time, there was some pushback against the high-speed rail expansion to D.C. among the Republican coalition. We could see a reversal of what we thought were fairly set and done legislative pieces during this last session.”

No lockdowns

One topic Youngkin likely will address soon in his administration will be the coronavirus-related restrictions implemented by his predecessor, Gov. Ralph Northam. “We will not have shutdowns, we will not have lockdowns — we will be open,” Youngkin said during his Nov. 15, 2021, speech at the Virginia Tourism Summit.

During the campaign, Youngkin said he would end school mask mandates, avoid adding the COVID-19 vaccine to the list of required vaccines for K-12 students and would roll back vaccine mandates for state employees.

Terry Kilgore says he expects GOP-led legislation around vaccine mandates and pandemic shutdowns. “I think you’ll see some bills on keeping us from shutting down again and bills that don’t allow you to fire someone because they haven’t had a vaccine,” Kilgore says. “If the vaccine mandate goes through in Southwest Virginia, our hospital system is going to be decimated, our [manufacturing] plants will be decimated.”

Southwest Virginia’s coalfields already have been disrupted by market and regulatory shifts. The Democrat-led General Assembly accelerated those shifts with the Virginia Clean Economy Act of 2020, which aims to phase out coal to generate electrical power by 2045, as well as incentivizing vast swaths of solar and wind power. The legislation received bipartisan support, so it’s unlikely to be rolled back outright.

But Republicans see room for movement around the edges, particularly when it comes to consumer costs.

“Everyone says, ‘Hey, we want clean energy,’ and they say that up until they get their [electric] bill,” Kilgore says.

Habeeb anticipates more conversation about ratepayer impacts and whether to give the State Corporation Commission more oversight. But Rozell warns that Republicans should be careful not to tamper too much.

“Going after clean energy initiatives and trying to repeal some of the actions of the Democratic-led previous administration will put [Youngkin] in the crosshairs of a number of big partisan battles,” Rozell says.

Joint efforts

Republicans have little choice but to address open questions about marijuana. Democrats legalized adult possession and cultivation of recreational marijuana in 2021 but left a gaping policy void around the development of taxation and a commercial marijuana market. Incoming House Speaker Gilbert has referred to the issue as a “live grenade rolling around.”

Adds Gilbert: “The Democrat-led General Assembly legalized marijuana possession and even personal growing of marijuana, and they did absolutely nothing to lock in any regulatory environments, tax structure, oversight, you name it.”

In an interview with Virginia Business (see Q&A, Page 24), Youngkin says he wouldn’t attempt to roll back legalization of personal possession of marijuana, but he feels that the effort to create a legal retail market for marijuana needs further work.

Echoing Youngkin’s sentiments, House Majority Leader Kilgore says, “Do I think we have the votes to turn it back and make it illegal? No. But we do need to fix it if there’s going to be a retail market. We’ve got to make sure that retail market works, and it doesn’t set up a black market where the commonwealth is missing the taxes on it.”

Gentry Locke Consulting has worked with companies in the cannabis space, and Habeeb thinks a GOP-led repeal of marijuana legislation is very unlikely.

“No one in the General Assembly wants to unwind that stuff,” Habeeb says, but “all of the regulatory, all the businesses, all the licensure, all the tax revenue is totally [incomplete]. Probably a lot of Republicans don’t like legalization in the first place. The only thing worse is legalization with a black market. Many don’t want to deal with it, but they have to do something.”

The issue with the largest short-term implications for the General Assembly is one over which it may have little control: redistricting.

In 2020, Virginia voters approved a constitutional amendment to take redistricting from lawmakers and turn it over to a bipartisan commission. The commission gridlocked on plans, however, sending the question of congressional districts and state House and Senate districts to the Virginia Supreme Court. In late October, a federal judge responding to a lawsuit filed by former Democratic Party Chairman Paul Goldman appointed a three-judge panel to determine whether delegate seats will be up for election again in November, under newly drawn districts.

Jerry Kilgore says the open questions about redistricting and its potential impact on the Assembly’s balance of power will affect the session’s tone.

“The business community needs stability and probably doesn’t want to see the General Assembly have to run again in ’22,” Kilgore says. “We saw how much money [state candidates] spent this year. They’d be spending all that money in ’22 and in ’23 and have no stability in leadership. People would be constantly questioning whether the Democrats are going to take the majority back.”

Virginia Business Deputy Editor Kate Andrews contributed to this story.

The outsider

A former CEO who has never held political office, Glenn Youngkin will take the reins as Virginia’s next governor, having harnessed political tailwinds to a Republican sweep of statewide offices and GOP control of the House of Delegates.

The electoral success ended eight years of Democratic victories, but Virginia’s 74th governor will have to contend with Senate Democrats who maintain a narrow 21-19 majority.

Youngkin, 55, defeated former Democratic Gov. Terry McAuliffe 50.6% to 48.6%, exceeding even former President Donald Trump’s margins in rural Virginia while also improving on Trump’s performance in suburban counties, flipping several from previous elections.

A Richmond native who was a high school basketball star in Norfolk, the 6-foot-7-inch teen Youngkin scored a basketball scholarship to Houston’s Rice University. He went on to work for Credit Suisse Group AG and McKinsey & Co., specializing in mergers and acquisitions, before joining Washington, D.C.-based private equity firm The Carlyle Group in 1995, rising to co-CEO in 2018. Bloomberg News described his brief shared leadership with co-CEO Kewsong Lee as an acrimonious and awkward arrangement, with Lee running revenue-growing initiatives while Youngkin was saddled with stagnating divisions. Youngkin left Carlyle in September 2020, expressing a desire to pursue public service. He announced his gubernatorial candidacy in January 2021.

In the campaign for the GOP nomination, Youngkin went on to defeat better-known candidates such as longtime state Del. Kirk Cox, Sen. Amanda Chase and Pete Snyder at a drive-through Republican convention of 30,000 delegates who cast ranked-choice ballots at 39 sites across the state.

Youngkin balanced a careful line between appealing to Republicans fired up by Trump’s presidency and moderates and independents who want stability and centrism. He accomplished this by focusing on basic issues: education, cost of living and public safety. Assisted by a backlash against President Joe Biden and two years of unilateral Democratic control of Virginia, Youngkin’s victory has been embraced by national Republicans as a path forward after their losses during Trump’s term.

As a new governor with no previous political record, Youngkin begins with a blank slate, but observers already are making comparisons to past governors.

“[Youngkin] seems like a throwback to old business governors like John Dalton, or a modern version is Bob McDonnell,” says political analyst Larry Sabato, director of the University of Virginia’s Center for Politics.

In this exclusive interview with Virginia Business, Youngkin demonstrates his methodical approach to issues, listing his points and often pausing to summarize his message.

Virginia Business: You come into office with a one-term limit and a pretty narrow margin to move an agenda. What are your top priorities in Year One?

Virginia Gov.-elect Glenn Youngkin: First and foremost, my top priority is to make sure that we press forward with our Day One Game Plan … [which] is very clearly focused on making sure that we address some of the big challenges in Virginia.

To make Virginia more competitive, we’ve got to get our taxes down, to bring down our cost of living. One of the big issues we see in Virginia today is we’ve watched the cost of living really escalate in a runaway fashion. We’re now above the national average,1 and Virginians are moving away, faster than they’re moving here from the other 49 states. [Editor’s note: Youngkin’s assertion is based on IRS data that showed a net loss of Virginia taxpayers who moved to other states between 2013 and 2018. However, according to U.S. Census Bureau data, Virginia’s population grew by more than 530,000 during the 2010s, even though 71,103 people left Virginia for other states.]

We’ve got to get to work on eliminating the grocery tax and doubling our standard deduction and making sure that we do what we can to keep our veterans by excluding up to $40,000 of our veterans’ retirement [income from taxes]. Going into this year, we’re watching just massive overtaxation of Virginians. We’ve got to be more competitive with the states around us.

Second is our schools. We’ve got to reestablish expectations of excellence in our schools. That’s going to start with reestablishing high standards in our schools and then funding … the largest education budget in the history of Virginia, our top priority, [including] raising teacher salaries, [putting] funding into facilities and also funding our special education programs. Virginia’s kids with disabilities have suffered mightily over the last two years.

We absolutely are going to press forward aggressively with a new charter school program. School choice in our public schools has to be a giant element of K-12 education going forward. It is a big part of our Day One agenda.

Of course, finally, we’re going to have a curriculum that focuses on allowing our children to soar. It’s not a watered-down curriculum. It’s actually a curriculum that stretches our children. We’re going to have the support in place to make sure that children who need extra help can get it, but this will not be an education philosophy that is based on watering things down. It will actually be based on allowing our kids to run as fast as they can.

Then thirdly, we have to press forward with making our communities much safer than they are today. We’re going to comprehensively fund law enforcement with higher salaries — funding equipment, funding training budgets. We’re going to make the very difficult job of law enforcement one where we can begin to attract more people.

We’ve seen our mental health system … [has] been an area of crisis for the last eight years. We’ve got to fund additional resources to expand capacity, and to make sure that we can take care of those Virginians that are really suffering when it comes to mental behavioral health issues.

Finally, our parole board needs to be restructured. I will replace the parole board on Day One.

With those three initiatives, we are going to make our schools the envy again of the nation. We’re going to make sure that our communities are so much safer and we’re gonna get our cost of living down — those are building blocks to getting Virginia moving.

VB: You’ve previously discussed how, despite the fact that Virginia is the top-ranked state for business, we can’t compete with other states for the largest projects. So how can the state better approach economic development?

Youngkin: Yes, Virginia is not in the discussion on many, many, many of these important economic development opportunities. Even with some of the brand-name wins, we are trailing miserably versus our peer states. Virginia today is ranked 43rd in the nation in job recovery coming out of the pandemic.2 There [are] 235,000 jobs that have not recovered — jobs that were there in February 2020 that are not there now.3 That’s a real challenge for us. We are not competing. Tennessee, North Carolina, South Carolina, Georgia, Florida, Texas [and] even Maryland are competing substantially better than we are. We have got to compete.

When we’re going to be able to win is when we have a cost of living and a cost of doing business that’s competitive. We’ve got to get our tax structure down. We have to cut back the regulatory framework that is really challenging to businesses today.

Second thing we have to do is recognize that our workforce is well behind where it needs to be to staff into a growing economy. When you have an economy over eight years that grows at 0.9% compounded, you may identify workforce problems. But when you get this economy really cranked up and growing at 2.5%, which is our objective, we actually see those workforce challenges being a major inhibitor to growth. We have to do a much better job of getting Virginians back to work. Our labor participation rate is the lowest it’s been since these statistics have been kept.4

We’ve got to have a K-12-plus-higher-ed education system that develops and trains the workforce of the future. We’re not going to be able to attract businesses here if we do not have a workforce to convince them that they can grow here.

Finally, there are a number of industries where we should be absolutely outperforming our peer states. Those are industries where Virginia has a clear advantage. It starts with some of the easy ones, like government contracting and supporting the military. We should continue to attract a disproportionate amount of that opportunity into Virginia.

When it comes to agriculture, our largest independent industry in Virginia, we should be growing faster than we are [by] using our port as major leverage to bring processing into Virginia. These sectors where we have a major competitive advantage — the maritime industry, pharma and bio, data centers, cyber, logistics, energy broadly defined but specifically wind and, I believe, nuclear power — should be a big competitive advantage of ours.

Manufacturing has to be an industry of growth for us. We are not being considered for a lot of manufacturing footprint in aerospace and in automotive. We absolutely have to retool with site development to make sure that we have physical sites for these businesses to come build on and invest in.

Finally, the tourism and hospitality industry is one that has been mightily impacted by COVID and some of the unnecessary constraints that the current administration placed on it. I look forward to making sure that Virginia is open for business. We can retake some of the lost ground that we have seen in tourism and hospitality.

There are some real opportunities for us. All aspects of Virginia have regional competitive advantages, and we can go to work and open it up.

I firmly believe that a 2.5% normalized growth rate in Virginia is absolutely doable. It generates 400,000 new jobs. It also gives us an opportunity to climb up out of the basement when it comes to best places to start a business, where we can become an innovation economy, as opposed to a stalled one. The last place I want to be is 49th as the nation’s best place to start a business.5 We should have an absolute booming economy here in Virginia.

And oh, by the way, all of this can be done in four years.

VB: The pandemic’s reshaped life for everyone. Mask mandates and vaccine mandates have been hot button issues. What specifically do you want to change?

Youngkin: First and foremost, I will declare Virginia open for business, and make it very clear that we’re not going to have lockdowns and shutdowns. That’s incredibly important, because no business is going to invest in new facilities and new manufacturing and hiring new employees if they think it’s going to get closed down next week.

Second thing is that our schools are going to be open, because having dependable K-12 education, where folks know that their child is going to go to school and learn the things they need to learn, is critically important as well.

There [are] three big principles that I strongly believe in: No. 1, that the vaccine is the best way to keep yourself safe. I’ve gotten the vaccine, my family has gotten the vaccine, but I do not believe that government should mandate that everyone should get the vaccine. Second, I do not believe people should get fired for not getting the vaccine. We can absolutely use other procedures and protocols to keep people safe besides mandating the vaccine. Finally, I believe that parents should be making decisions on behalf of their children.

Therefore, executive orders that mandate that state employees have to get a vaccine and wear a mask, or an executive order that makes children [in] K-12 have to wear a mask — we’ll work with [the new commissioner of health and new Board of Health] to rescind that. Finally, [Attorney General-elect] Jason Miyares … has already confirmed that he will, with my support, push back hard against the Biden administration’s mandates that businesses with more than 100 employees have their employees vaccinated.

We continue to provide all of the information resources that we possibly can and continue to be strong advocates to get the vaccine. We have seen other states that have done a very good job of bringing up their vaccination rates without mandates. Those are the policies that I plan on pursuing.

VB: Virginia has the widest income disparity in the country — from a $142,000 median family income in Loudoun County to a $30,000 median family income in Dickenson County. How will you work to narrow that gap?

Youngkin: The economic development opportunity across the commonwealth is extraordinarily good, but we have to get
moving. Some of the more rural areas suffer from particular issues like the lack of high-speed internet access. Universal broadband access is part of our Day One plan to make sure that we can connect with high-speed, low-cost internet access across Virginia. This enables education, business development and oh, by the way, human flourishing, which is really important. That’s big step No. 1.

Step No. 2 is that each part of Virginia does have real competitive advantage. As we look at site development, opportunities to bring manufacturing [and] logistics opportunities that don’t have to necessarily be at the port, but with a continued investment in our highway infrastructure, can provide significant opportunities for growth.

Finally, the workplace has changed. For so many industries, their employees can live remotely. This is a great opportunity for us to leverage and market the great quality of life that exists in Virginia, as people want to move out of Northern Virginia and yet stay employed by their Northern Virginia-based employer, to see folks move out of central Richmond, move out of densely populated areas in Hampton Roads and to spread across this great commonwealth.

One of my big initiatives is personally to be engaged with those areas in Virginia that could benefit the most from a focused economic development effort. That is a promise that I have made on the campaign trail and I will fulfill … to make sure that many of these more rural areas in Virginia are going to get attention from me as governor.

VB: During the campaign, you said you wouldn’t push to repeal the Democrats’ legislation legalizing recreational marijuana possession and paving the way for commercial marijuana sales. Is that still the case? And what do you want to see in commercial marijuana legislation when it comes to your desk to be signed?

Youngkin: I will not seek to overturn the law on personal possession. When it comes to commercialization, I think there is a lot of work to be done. I’m not against it, but there’s a lot of work to be done. There are some nonstarters, including the forced unionization that’s in the current bill. There have been concerns expressed by law enforcement in how the gap in the laws can actually be enforced. Finally, there’s a real need to make sure that we aren’t promoting an anti-competitive industry. I do understand that there are preferences to make sure that all participants in the industry are qualified to do the industry well.

I am all for opportunities for minority-owned businesses, women-owned businesses [and] military-owned businesses. We also have to make sure that they have the capabilities to compete and thrive in the industry. So, I think there’s work to be done. All of that will be on the table. Again, I don’t look to overturn the bill, but I think we need to make sure that it works.

VB: There’s a lot of focus on the Democrats’ narrow edge in the Senate. Republicans need to flip just one Democratic senator on any given issue. How’s your relationship with the Senate coming along?

Youngkin: Coming along very well. I … started literally on Nov. 3 reaching out to leaders in the House and the Senate from the Democratic Party. I do believe that there is so much in our Day One plan that is universally shared values, like safe neighborhoods and better schools and low taxes and a job market that creates opportunities for all Virginians. I’ve been really encouraged by the feedback. There’s a lot of issues where we’re going to garner bipartisan support.

But I also recognize that relationships matter. I will continue to reach out across the aisle and make sure there’s not just a message on the other end of a telephone call, but there’s actually an understanding of who’s behind the message. To me … a really important part of being an effective governor is making sure that I have relationships across both houses, the House of Delegates and the Senate, but also both parties.

VB: Is there anything else you want to add?

Youngkin: I am extremely encouraged by the momentum that we feel going into inauguration. Our transition teams are working incredibly hard. The caliber and quantity of the people that have expressed a strong interest in being part of Virginia’s government going forward has been incredibly encouraging. We’re going to be able to attract people to serve Virginians that will do a spectacular job. I am so excited about the next four years. I have to say that being an outsider and oftentimes bringing a different perspective, a fresh perspective, to this opportunity has actually brought along a lot of folks who maybe had the thought there weren’t ways to do particular things. I’m encouraged by [the] bipartisan support and the really, really impressive talent that we’re going to be able to bring along with us into government.

 

 

1Virginia’s cost of living index in 2020 was 1.5 percentage points higher than the national average, according to the Missouri Economic Research and Information Center.

2 As of early September 2021, Virginia ranked 49th in percentage of jobs recovered, having regained 55% of jobs lost since the pandemic began, according to U.S. Bureau of Labor Statistics data. However, Virginia’s unemployment rate in August was 3.6%, a full percentage point below the 4.6% national rate.

3 In February 2020, 4,337,089 workers were employed in Virginia, compared with 4,102,508 workers in October 2021, a decrease of 5.41%, according to U.S. Bureau of Labor Statistics data. This places Virginia 43rd among all states for jobs lost during this time frame.

4 Virginia’s labor force participation rate of 62.7% from April 2021 through June 2021 was the lowest the state has seen since data collection began in 1976, according to the U.S. Bureau of Labor Statistics. The state’s highest labor participation rate was 70.9% in 1992, and the previous low of 64.9% was recorded in 2015 and 2016.

5 According to a January 2021 study of best states to start a small business conducted by The Blueprint, a Motley Fool service. State rankings were based on tax climate; consumer spending within the state; rate of new entrepreneurs; five-year business survival rate; labor costs; and climate change impact.

The color of money

A dusty floor, lumber piles and strewn tools mark the signs of active construction in the future showroom of Pure Shenandoah LLC.

CEO Tanner Johnson stands in the front room of the historic, renovated Casey Jones building in Elkton and describes the experience of a future customer.

“You’ll come in right here to a cool circle welcome desk,” Johnson says. “There’ll be a big bar there with some of the smokables and [age] 21-plus products. A divider here — maybe even hemp bales — separates a workshop area where we do a lot of education. There’ll be a spot here where we highlight farmers, from CBD to the fiber side. Right here, we’ll have all the in-home grow technology. And then cool visual stuff.”

Pure Shenandoah plans to offer tours of its facility to the public, including guests from the nearby Massanutten Resort.

“Everyone’s been on a brewery tour, but there aren’t really cannabis tours anywhere,” Johnson says. “Most people in the cannabis market like to guard what they’re doing. We’re the opposite. Everyone’s going to be interested in it, just because it’s been in the shadows for so long.”

Suffolk couple Ron and Sarah Morton started Lockgreen, a business selling lockboxes for marijuana users to comply with state law when transporting cannabis. Photo by Mark Rhodes
Suffolk couple Ron and Sarah Morton started Lockgreen, a business selling lockboxes for marijuana users to comply with state law when transporting cannabis. Photo by Mark Rhodes

Those shadows began to be lifted when the federal government removed hemp from its controlled substances list in 2018, opening the door for cultivating industrial hemp and the production of cannabinoid products such as CBD oils, which don’t intoxicate users. In 2020, Virginia lawmakers legalized medical cannabis through five licenses awarded to companies across the commonwealth.

Then, earlier this year, Virginia became the 16th state in the U.S. — and the first in the South — to legalize recreational marijuana. Lawmakers made it legal for people older than 21 to cultivate and possess limited amounts of marijuana, and they also started the process of writing regulations for a commercial market to open in 2024.

Legalization in Virginia has opened a vast, uncertain new industry that still faces many unknowns. Entrepreneurs, including the four brothers behind Pure Shenandoah, are scrambling to engage the market. Johnson says marijuana was “always in the back of our minds” when they founded Pure Shenandoah.

“Some of that’s out of our control,” he notes, “but the way the laws came down, it couldn’t have been any better.”

Marijuana represents only one of three new, potentially giant industries for the commonwealth.

“I genuinely thought that being at the forefront of solar and renewable [energy] was a once-in-a-lifetime opportunity to be on the front end of a multibillion-dollar industry,” says Greg Habeeb, president of Richmond-based Gentry Locke Consulting, a lobbying, communications and marketing business started by the Roanoke law firm. “Then a year later, it’s the same thing with casinos and online gaming, and the next year, it’s the same with cannabis.”

Widespread impact

Economic opportunities created by marijuana legalization reach far beyond retail operations, says Jenn Michelle Pedini, executive director of Virginia NORML. Photo by Caroline Martin
Economic opportunities created by marijuana legalization reach far beyond retail operations, says Jenn Michelle Pedini, executive director of Virginia NORML. Photo by Caroline Martin

A 2020 study by Virginia’s Joint Legislative Audit and Review Commission (JLARC) found that marijuana legalization could generate between $31 million and $62 million in tax revenue during its first full year of sales, and between $154 million and $308 million by the fifth year of commercial sales. By comparison, Colorado, an early legalizer, collected $387.4 million in state taxes and fees in 2020 on an industry that recorded $2.2 billion in annual sales last year, according to The Denver Post.

Virginia’s new law will create up to 400 retail licenses, 450 cultivation licenses, 60 processing or manufacturing licenses and 25 wholesale licenses. (The state ruled out an ABC store model for marijuana retail sales because it would have required state employees to do something federally illegal, experts say, and also because the Northam administration and legislators wanted to make social equity a priority in awarding retail licenses.)

But state-level legalization of marijuana has broader implications for businesses stretching far beyond license holders.

“You have a hard time finding a business that can’t be directly or indirectly affected,” Habeeb says. “We were having a hard time coming up with one that couldn’t find a way to be involved with cannabis. Transportation, technology, security, everything — there was always a way, if they wanted to, to be involved in this industry.”

That can also include marketing, human resources and HVAC services.

“Often with legalization, the focus is directed toward cannabis business licensing opportunities, but the economic opportunity afforded by legalization is so much greater than that,” says Jenn Michelle Pedini, development director for the National Organization for the Reform of Marijuana Laws and executive director of Virginia NORML. “Cannabis businesses need all of the same services that any business needs. Not only do businesses need these ancillary services, so do consumers.”

Farmers harvested hemp for baling at a field leased by Pure Shenandoah in Page County in October. Photo by Scott Elmquist
Farmers harvested hemp for baling at a field leased by Pure Shenandoah in Page County in October. Photo by Scott Elmquist

Take Lockgreen, a Suffolk-based family business that sells lockboxes for marijuana users to safely transport cannabis in compliance with state law, which requires marijuana to be in a sealed container while transporting it in a vehicle and not to be consumed by the driver or passengers. Husband and wife Ron and Sarah Kiah Morton see their endeavor both as a way to enter the burgeoning industry but also to educate communities that have traditionally been punished under earlier drug statutes.

“We always have our face in the book of the law with regard to cannabis, and our ear to the street,” says Sarah Morton. “We are painfully aware of the disproportionate arrests and marijuana convictions in the Black community. Blacks are 3.4 times more likely to be arrested for marijuana.” According to a JLARC report, Black people in Virginia were nearly four times as likely to be convicted as white people charged with marijuana possession from 2010 to 2019.

Even with legalization of adult possession and use, the Mortons saw how legal provisions mirroring bans on driving with an open container of alcohol could still be a source of continued arrests. The answer? Lockable stash boxes that meet Virginia’s requirements and bear a commemorative design celebrating state legalization.

“We wanted something that people could be proud of that also protects them,” Sarah Morton says.

The lockboxes also represent a step toward participation in the future commercial market. Ron Morton has worked for the past decade in marijuana enterprises across Colorado, Maryland and now Virginia, while Sarah has been engaged with the Hampton Roads business community since 2007, while also serving on Virginia NORML’s board.

Lockgreen gives the University of Virginia alums a chance to educate and engage with the emerging marijuana industry. With a business that directly addresses still-existing gray areas about recreational use, they’re also positioning themselves as participants in the still-to-be-developed commercial market.

“We intend to enter into the commercial cannabis market, or at least to apply,” says Ron Morton. “The aspect we’re coming from — educational and spreading the information, being a proponent of the community — that’s the right way to approach it. If you’re filling that gap, everything else will fit around it.”

Sarah Morton adds, “We want to shape the culture in Virginia.”

Habeeb
Habeeb

Details up in the air

Virginia’s legalization of adult recreational use and home cultivation of marijuana this year marked just the first step in a process that still requires years of additional legislation and regulatory work.

Next year’s General Assembly must reenact the law passed this year. Then the Cannabis Control Authority, a state board advised by a health advisory council, will develop regulations including a social equity program intended to restore communities adversely affected by decades of marijuana prohibitions — primarily people of color. The authority will also license participants in the commercial market, with specific policies that are still being developed.

The commercial market is scheduled to launch in 2024, although lawmakers can decide to move the date earlier.

Regardless, there’s a lot of uncertainty about what legal marijuana will look like in Virginia.

“Cannabis regulation looks different in every single state and territory in the U.S. that has adopted such a measure,” NORML’s Pedini says.

Virginia has the advantage of following other states that have tried legalization. These include Washington and Colorado, which both legalized marijuana in 2012, as well as Illinois, which considered social equity as a priority but has largely failed to attain its goals.

“Virginia is one of the single most prepared states when it comes to undertaking a legalization effort,” Pedini says, adding, however, that “it was a heavy lift in 2021 and will be a heavy lift in 2022.”

However, they note, “I don’t think legislation in and of itself can ensure a good outcome. What Virginia has done thus far is outline in legislation some initial criteria for social equity licensing and funding, and [it] has established a cannabis equity reinvestment board.”

JLARC already has issued recommendations for 2022. It recommends tightening the path for currently registered hemp processors to obtain licenses to produce marijuana, eliminating special treatment. The watchdog group also recommends reducing the number of retail locations for medical marijuana licensees from five to three, which would somewhat curtail their advantages in a recreational market.

The General Assembly implemented 80% of the commission’s recommendations from its 2020 report, but there’s no guarantee lawmakers will follow all of these suggestions. Adding greater uncertainty are this month’s elections for governor and party control of the House of Delegates.

“Marijuana legalization really is on the ballot in Virginia,” says Pedini, “not with a referendum, but for whom you cast your votes.”

Democratic former Gov. Terry McAuliffe, running for a second, nonconsecutive term as governor, openly supports marijuana legalization, while Republican Glenn Youngkin told Virginia Business that he would not push to reverse the law if elected.

But there’s no question that the creation of a commercial market and other aspects of the law’s implementation would look different under Democratic and Republican administrations. Just how different? That depends on who holds a majority in the House of Delegates in January, but for starters, Republicans are less likely to focus as much on social equity as Democrats. It’s also unclear whether a Republican-controlled House would approve a commercial marijuana market, complete with a new slate of regulations.

Federal hurdles

Even beyond partisan control in Richmond, plenty of uncertainty remains over commercializing marijuana in Virginia, in part because marijuana is still considered a controlled substance under federal law.

Farmers who are already growing hemp are now considering growing marijuana, but Ben Rowe, national affairs coordinator of the Virginia Farm Bureau, says this has inherent risks.

Currently, federal law requires farmers growing the Cannabis sativa L. plant as industrial hemp to keep it below the 0.3% threshold for THC, the compound found in cannabis plants that gives marijuana its psychoactive properties.

“If a farmer is out of compliance with federal law, they risk losing access to federal programs like crop insurance, guaranteed loans and conservation programs, regardless of what the law is at the state level,” Rowe says.

The Farm Bureau also is concerned that smaller-scale farmers will be pushed out of the industry by “out-of-state, large-scale producers” unless state policymakers ensure that agricultural interests are represented in their discussions, Rowe adds.

Additionally, employers are grappling with whether they can — or should — screen employees for marijuana use. For many companies, drug screens are a standard part of onboarding new employees. Virginia’s legalization of recreational marijuana doesn’t prohibit workplace drug testing, but employers may lose out on hires amid a tight labor market in which many workers are more willing to leave jobs.

“Just because there’s legalization doesn’t mean you have to let your people consume marijuana,” says Habeeb of Gentry Locke. “But the concern is that [could conflict with] one of the strangest labor markets we’ve ever seen in our lives, where people are choosing not to work or choosing not to return to their job. Today, it’s a killer when employees walk out the door.”

Some companies — including Henrico County-based Altria Group Inc. and Amazon.com Inc., which is building its HQ2 East Coast headquarters in Arlington — didn’t screen for marijuana use even before legalization. As with raising minimum wage, the market is ahead of the law in some cases.

Of course, drug testing remains important for jobs that involve public safety or require high alertness or federal government clearances, and researchers still are trying to develop more targeted tests to measure impairment.

Another challenge related to federal marijuana prohibition is taxing cannabis businesses. The IRS prohibits tax deductions for any business that “consists of trafficking in controlled substances” like marijuana.

Habeeb calls federal taxes “really screwy on this. If you’ve got $30,000 a month in overhead and $60,000 a month in revenue, in most businesses, that means you made $30,000, and you pay taxes on $30,000. In cannabis, you pay taxes on $60,000. You can pretty quickly get squeezed on the revenue side.”

Federal law also restricts banks’ ability to engage with marijuana businesses, even those that are complying with state law. 

Herndon
Herndon

The emerging industry’s “access to the banking network is very limited,” says Bobby Herndon, senior vice president and director of treasury management at Charlottesville-based Blue Ridge Bank, which began working with Virginia cannabis businesses when hemp was legalized federally. “Most federally regulated banks do not want to jump into that space because of the gray area. Even though [marijuana] is legal at the state level, we still have audits and regulation at the national level.”

As a result, legal marijuana companies unable to use banks accumulate large amounts of cash while otherwise operating normally. Herndon says Blue Ridge Bank supports passage of the federal Secure and Fair Enforcement (SAFE) Banking Act, which would allow state-licensed marijuana businesses to work with banks and other financial institutions. The House of Representatives passed the act in September as a rider on its annual defense spending bill, but it appears stalled in the Senate.

Moving into position

On the ground, businesses are working to position themselves for the commercial marijuana market. A lot of this comes down to paperwork.

Pure Shenandoah is seeking to acquire a medical marijuana license approved by the Virginia Board of Pharmacy, covering the northwest region of the state. The matter is tied up in court with multistate cannabis dispensary operator MedMen Enterprises Inc., which is fighting to keep its license.

Meanwhile, Pure Shenandoah is taking other steps toward meeting medical requirements, including maintaining batch manufacturing records, traceability and test results. Even if it doesn’t receive the state license, company officials see these as steps to prepare for the commercial market.

Other hemp processors are taking a more cautious approach. Golden Piedmont Labs in South Boston intends to pursue a processing license to continue its mission of working with Southern Virginia’s agricultural community as farmers transition from hemp to marijuana.

Rick Gregory, principal at Golden Piedmont Labs, and friend Sterling Edmunds co-founded the company to assist farmers who were adversely affected by tobacco’s decline as a crop.

“We decided we would get more benefit for our contributions if we set up a company that would help turn around or assist the agricultural community in Southern Virginia,” Gregory says. “We decided to found Golden Piedmont Labs because the [hemp] industry was just starting to grow, but there weren’t any extraction industries for Virginia and North Carolina farmers on the boundary.”

As more farmers think about moving to marijuana when retail sales will become legal, Gregory says Golden Piedmont will adapt to meet their needs. In the meantime, it is waiting as lawmakers and regulators continue to build the framework for commercial marijuana sales. Even with prospects for a vast new industry, Gregory doesn’t think marijuana will ever come close to tobacco’s former dominance as an economic and cultural power.

“Remember, we were growing tobacco for the world,” Gregory says. “Here, you’re talking about marijuana for Virginia. That’s not to say it won’t have some impact, but the hemp crop will have more because it’s going to be much more difficult and regulated to grow anything in fields more than 1% THC. Marijuana will not change the world here.”


Pure Shenandoah processes hemp into consumer products such as CBD oil, edibles and massage oil. Hemp fiber can be used to make goods like animal bedding, packaging, clothing and paper. Photo by Scott Elmquist
Pure Shenandoah processes hemp into consumer products such as CBD oil, edibles and massage oil. Hemp fiber can be used to make goods like animal bedding, packaging, clothing and paper. Photo by Scott Elmquist

Grassroots vs. ‘Big Marijuana’

Perhaps the largest uncertainty for Virginia’s marijuana industry is what will happen when federal prohibition ends. It’s likely to cause an earthquake in the industry.

“While you will hear from activists and even legislators shaking their fist about ‘Big Marijuana,’ they haven’t seen ‘big’ yet,” says Pedini of NORML. “‘Big’ is brands like Constellation [Brands] and Altria. It will be the end of federal prohibition that opens the floodgates for these truly ‘big’ companies.

“What we’re doing in Virginia right now is ensuring that we have our own regulatory structure in place prior to the end of federal prohibition. So, Virginia is deciding how Virginia regulates cannabis, rather than Virginia being beholden to … behemoths like Altria that will undeniably have a hand in the end of federal prohibition.”

Altria Group — which owns the nation’s largest cigarette manufacturer, Philip Morris USA — has been making headway in the industry during the past few years, viewing it as a natural progression from tobacco products. In 2018, Altria spent $1.8 billion for a 45% equity stake in Canadian multi-national cannabis corporation Cronos Group Inc. It also has filed patents and purchased marijuana vaporizer technology.

“Altria supports an appropriate federal regulatory framework for cannabis,” Altria spokesman George Parman says. “States are shaping policy frameworks for regulation and legalization, and it will be important that federal policy is, whenever possible, complementary to those efforts. In both cases, we want to ensure this process is done in a way that establishes a transparent, responsible and equitable operating environment for stakeholders in the commonwealth.”

Meanwhile, Constellation Brands Inc., which owns Corona beer and Svedka Vodka, among other alcohol brands, also has invested in Canopy Growth Corp., another marijuana company based in Canada, where federal legalization was enacted in 2018.

The entrance of huge corporations into the nascent industry has grassroots organizers and legislators concerned, after decades of pushing for federal prohibition to end.

Many worry that big corporations and out-of-state products from states like Oregon and California could overwhelm smaller and minority-owned businesses, not to mention social equity programs that aim to empower communities previously damaged by marijuana prohibition.

In Elkton, Pure Shenandoah continues to look to the future, hoping to secure a foothold in Virginia’s rapidly evolving landscape. Johnson, the company’s CEO, says he is looking particularly closely at processing, which emerged as a bottleneck during the first years of hemp production in Virginia.

Meanwhile, Pure Shenandoah raced to finish up work on its retail front for a ribbon-cutting in early October. “We’ve been so internal,” Johnson says. “Now, we’re saying, ‘Look at what we’re doing.’”

In mid-September, Pure Shenandoah’s showroom was empty, but not for long. Like the void in Virginia’s still to-be-determined commercial marijuana market, it will soon be filled.

Tale of the tape

As Virginians decide whether to go with the known — Democratic former Gov. Terry McAuliffe — or the unknown — first-time candidate Glenn Youngkin, a Republican — Virginia Business checks in with the two major contenders to be the commonwealth’s 74th governor. In exclusive interviews, the candidates lay out their plans to create more jobs, encourage entrepreneurs and expand broadband access to all parts of the state. We also see where they differ philosophically on how to build an environment for flourishing business growth and economic development.

McAuliffe: Economic development, broadband are keys to success

Virginia Business: What would be your top priority as governor?

Gov. Terry McAuliffe: Clearly, the most important issue for me is building a great economy. We’ve made great progress. We got to build a really stronger post-COVID economy.

Last time I [was] in office, with the Great Recession and sequestration, Virginia was too dependent on the federal government outlays and defense spending. We needed to diversify. That’s what I did.   

I was the architect of the new Virginia economy. We retooled workforce development, became a leader in the country on that. We redid all of our schools to better align the workforce gaps to make sure we’re teaching our students the skills they need to meet those jobs of the 21st century.

I leaned in before on this: 200,000 new jobs, 1,100 economic development projects, a record $20 billion of new capital, personal income went up 14%. It worked.

As governor, I’ll continue to travel. We’ll have a great ally with Joe Biden as president now to assist us. The resources, the federal government will be very helpful to us to build this new Virginia economy again and continue to diversify and continue to bring in all those great-paying jobs. I led the nation on our public-private partnerships. We’ll do it again.

I want to make us a leader in clean energy. I was the governor to sign the first offshore wind turbine lease [with the U.S. Bureau of Ocean Energy Management]. We now have two turbines out there.

I want to see us lead the country in building a trained workforce and creating more streamlined pathways from our public schools into our workforce, working with our career and technical [schools], working with our community colleges. 

Working with my wife, [we had] 13 million more school meals served. We led on getting pre-K [education] to tens of thousands of our Virginia students.

There’s over 550,000 Virginians today that actually have health coverage now [through Medicaid] — including 13,000 [cancer patients] today [who] get radiation [treatment] … who would not have had it. That’s a big deal for me. 

I [also] wrote the bid for Amazon [HQ2], submitted it before I left the office.

Terry McAuliffe photo by Will Schermerhorn;
Terry McAuliffe photo by Will Schermerhorn

VB: If the federal infrastructure package passes, what should be the priorities for Virginia?

McAuliffe: Transportation — huge for Virginians. I did $10 billion worth of infrastructure, unlocked Hampton Roads, which had been a mess. [I] canceled [the U.S.] Route 460 [toll road], on which the prior administration had wasted $200 million of our great taxpayer money. I saved the Port of Virginia, [which] lost $120 million [during] the five years before I took office. [It’s] now one of the most successful ports on the East Coast. I did the Atlantic Gateway rail project, added 18 miles to I-95. I did the I-66 Project —
$3.7 billion project, no state money involved — and it will be a game-changer for the folks up here in Northern Virginia.

I think with the infrastructure money, obviously, we have thousands of bridges and roads that are in disrepair. [One priority is] fixing that infrastructure to get us where we need to be to have a world-class transportation system. We need to continue to lean in on the rail capacity here, and [Gov.] Ralph [Northam] has done a great job on that.

We need increased passenger rail, trying to get people out of cars and getting them into [the] Metro, building more bus lanes and issues like that. As I say, we did the Atlantic Gateway, which opens up [the port’s Norfolk International Terminal]. Now they can get their goods out of the port quickly into the breadbasket of America and all over. Our [agriculture] and forestry businesses can thrive here. I’m all about transportation. I did it before. We did some of the most complex deals, and we are a different state today.

I’ve been friends with Joe Biden for 40 years. When he was vice president, he helped me get the largest transportation loan, called TIFIA [Transportation Infrastructure Finance and Innovation Act]. He helped me with the [Port of Virginia]. [Editor’s note: Virginia secured a $1.2 billion TIFIA loan in 2017 for the construction of toll lanes on Interstate 66.]

We [also] unveiled a $25 million cyber-security initiative at our HBCUs [historically black colleges and universities].

I’m very excited to have the president. I love the other 49 states, but I’m going to do everything I can as governor to leverage that relationship to make sure that we are getting a majority of that money right here to Virginia.

VB: How can rural Virginia’s lagging economies — areas previously dependent on coal, tobacco and textiles —catch up with the more prosperous parts of the commonwealth?

McAuliffe: If you read [my] plan, and this is important, I have 18 policy plans — 153 pages as of now — of very serious policy proposals. I have a whole section on raising rural Virginia. When I was governor, I reduced unemployment … from 5.7% [to 2.6%]. We were practically full employment when I left office, and we’ve reduced unemployment in every city and county in Virginia. Nearly every rural county saw a reduction of nearly 50%.

I leaned in. I traveled the globe. I think I was the most-traveled governor in U.S. history in four years: 35 trade missions, five continents, dozens of countries, and [we] brought companies back from all over the globe and many of those [invested in] our rural communities. [Another priority is] continuing to be a great ambassador for Virginia to sell our agriculture and forestry abroad, and to leverage relationships and bring companies here to Virginia. I did it before, I’ll do it again.

In addition, a huge priority for me is broadband. I promise you that within two years, we will get broadband access to everywhere. We have over 300,000 homes today that do not have any broadband access — 14% of our

Former Gov. Terry McAuliffe visited Granules Pharmaceuticals during a campaign stop in Chantilly on Aug. 26. L to R: Granules Pharmaceuticals CEO Priyanka Chigurupati; McAuliffe; and David-Imad Ramadan, a former Republican member of the Virginia House of Delegates.
Former Gov. Terry McAuliffe visited Granules Pharmaceuticals during a campaign stop in Chantilly on Aug. 26. L to R: Granules Pharmaceuticals CEO Priyanka Chigurupati; McAuliffe; and David-Imad Ramadan, a former Republican member of the Virginia House of Delegates. Photo by Will Schermerhorn

children did not have broadband access last year.

Think of that during COVID — how really damaging that is for children who are online learning and yet they couldn’t online-learn because they didn’t have any internet capacity. They go to McDonald’s to a Wi-Fi hotspot. That is unfair. The first thing we need to do is get the broadband access all over rural [Virginia], but in addition, of the 14% [who did not have access], 40% were urban. [We need to make] sure that everybody has that broadband access.

I called for raising the teacher pay above the national average for the first time in Virginia history, because today we rank 50th out of 50 states. [Editor’s note: This comes from a 2020 business.org report on average teacher salaries compiled by the National Center for Education Statistics.]

When you compare [teachers’] average pay to the average pay of our citizens, we’re last in the country. It’s really disgraceful for the 10th-wealthiest state in America.

It’s not fair that rural parts of our state have substitute teachers [instead of permanent teachers]. Let’s pay our teachers. Let’s keep the best quality teachers in Virginia, who today are leaving to go to Maryland, Pennsylvania, Delaware because they can … [make] $10,000 to $24,000 more.

In addition, we need to build the infrastructure of our schools. Fifty percent of our schools are 50 years or older. I was just down in Bristol the other day, at Highland View, an [83]-year-old [elementary] school. They have rats, they have bats. They had a fire recently because of the old wiring that they had down there. That’s not fair. They have one bathroom for the entire … school — one stall for teachers, one stall for students. [Editor’s Note: Highland View actually has two bathrooms but McAuliffe is essentially correct, says Bristol Superintendent of Schools Keith Perrigan, noting that the school also has asbestos and air quality problems and isn’t accessible for people with disabilities.]

Education is the main reason I’m running — to rebuild our education system so I can build the greatest workforce in the United States of America. It’s not talk for me. I did it. I brought a record amount of jobs to rural parts of our state, and we can take it to the next level.

VB: CNBC just ranked Virginia as its Top State for Business again.

McAuliffe: We’re No. 1 again, the only state to get it two times in a row. Very, very important for us to continue that pro-business climate that we have here. I was a very pro-business, pro-jobs, socially progressive Democrat, making sure our state’s open and welcoming.

VB: Virginia just legalized marijuana. Do you support that?

McAuliffe: I support it. It’s very important for us. Once we get it up and running, we’re going to see about $330 million added to our economy [annually]. It’ll create tremendous new business opportunities all across the commonwealth. By 2023, businesses are going to be able to apply for licenses, and the retail market should be fully functional by 2024.

This is a whole new avenue, as is casino gaming, which I’m a proponent of. We’re doing great in Virginia. We have five approved [casino] projects. They’re all working their way through their respective approval process. That’s going to generate another $360 million for the commonwealth of Virginia. I’m excited. I’m very bullish. [Editor’s note: Voters passed local referendums allowing casinos in Bristol, Danville, Norfolk and Portsmouth, while Richmond residents are voting on their casino referendum this fall.]

[Northam] just announced a big budget surplus, much different [from] when I went into office. … I do want to thank President Biden [for] the American Rescue Plan, because that has been so helpful to the commonwealth of Virginia. We got $70 million off of that, just for vaccinations. Think of that. We have a million-and-a-half children who have been able to benefit. Seven million Virginians have seen relief checks [totaling] $9 billion.

I was up in Winchester and met with small business leaders. Most of the people in that room told me that, had they not been able to get the rescue fund money, [Paycheck Protection Program loans] and other [support], they would not be in business today. I’m a huge advocate of all of this.

If you thought the last eight years were great in Virginia, which they were, I remind you when I took office, our economy was in a crisis. People were laughing at Virginia because of the anti-women bills that had been passed. We are a different state today. We are poised now with Joe Biden in the White House. This state is going to take off like a booster rocket.


VB: Youngkin has said you’ll repeal Virginia’s right-to-work law if given the opportunity. Is that the case?

McAuliffe: In my four years as governor, I learned that the best way to make progress for Virginians is to focus on where we can get things done and deliver real results, like creating good jobs, expanding access to health care and investing in education. As I say on issue after issue, I support things that can get passed and I am focused on creating good-paying jobs, raising our minimum wage to $15 by 2024, and getting every Virginian access to paid sick days and paid family medical leave. This is the type of progress we need to be focused on, and they will be my priorities as governor.

——————————————————————————————————————————————————————————

 

Photo courtesy Youngkin for Governor
Photo courtesy Youngkin for Governor

Youngkin: Va. needs more jobs, higher wages, site readiness

Virginia Business: What will be your top priority if you’re elected governor?

Youngkin: This is about growth and jobs. This is what it boils down to: growth and jobs. That’s going to require us to fundamentally rethink how we’re growing, how we’re creating jobs, how we’re preparing people to take those jobs.

Career preparation and talent pipeline is critical. In order to facilitate that, we’re going to fundamentally need to make changes in our business environment. That’s going to enable what we need to get done.

Over the course of the last eight years under [Govs.] Terry McAuliffe and Ralph Northam, Virginia’s economy has just stalled out. Real GDP in the commonwealth of Virginia has been outpaced over the last eight years by Maryland, Tennessee, North Carolina, South Carolina and Georgia — states we compete against head-on. Just those states we compete directly with for companies and for families, Virginia’s GDP has grown 70% slower.

Over that same eight-year period, we’ve had net-zero job growth. We’re 33rd in the country on job growth. As we’ve come out of this pandemic, we’re 45th in job recovery. [Editor’s note: As of August, Virginia ranked 34th in job growth for the previous 12 months, according to Bureau of Labor Statistics data. And Virginia ranked 49th in percentage of jobs recovered, having regained 55% of jobs lost since the pandemic began. However, the state’s unemployment rate in August was 4%, significantly below the national rate of 5.2%.]

All of that actually points to opportunity. Opportunity is voted on every day by Virginians. What’s happened again, over the same eight-year time period, is we’ve watched people vote with their feet; 600,000 Virginians have moved [to] these competitor states. The sad thing is, the biggest group are people between the ages of 26 and 35, people who are really starting life. [Editor’s note: Demographers with the Weldon Cooper Center for Public Service at the University of Virginia cite affordable housing and job opportunities as top factors for out-migration.]

The net of this is that we’ve got to get moving. We’ve got to find growth, we’ve got to create jobs, and we have to create opportunity, so that people stay here as opposed to moving away. That’s the framing of where we stand right now. It’s not a pleasant thing to actually identify, but [I] spent my whole career actually studying things like this. This is the performance of Virginia, the scorecard of Virginia.

The highest priority that we have when it comes to economic topics has to be reenergizing growth, reinvigorating the job machine, and restoring opportunity for folks by getting trained and prepared to take these jobs.

I want Virginia to win. Virginia hasn’t been winning over the last eight years, and it’s time for Virginia to win again.

VB: CNBC just named Virginia its Top State for Business again. What would you change?

Youngkin: Let me just comment on the CNBC ranking. I am thrilled to death that Virginia gets accolades. I am a proud, proud Virginian, and I want Virginia to get accolades. Unfortunately, Virginia isn’t performing like the No. 1 state to do business in. It’s not. In fact, some of the underpinnings to that ranking actually shine a bright light on the challenge as why we’re not performing. The cost of living in Virginia — gosh, we’re ranked 32nd, and the cost of doing business, where we’re ranked 26th, and the quality of our infrastructure, where we’re ranked 24th. [Editor’s note: These rankings come from CNBC’s 2021 Top States for Business report.]

We get ranked really highly on the quality of our higher education. That’s great, because we have great colleges, but unfortunately, they’re not accessible and affordable [for] Virginians.

We absolutely have to get our business environment and our business-friendly quotient moving in a completely different direction. Right-to-work is critical to Virginia’s future. Critical. In fact, in business-friendly rankings, it is the No. 1 [criterion] in business-friendly rankings.

The first thing we have to do is preserve [Virginia’s] right-to-work [law]. The second thing we have to do is, we have to get the cost of business down. The way we’re going to get cost of business down is we got to carve back the amount of red tape that’s been piled on businesses.

I was just speaking with the owner of a small business. She told me she spends between two and three hours a day filling out paperwork for Virginia. A day. This is just almost debilitating for small businesses right now. We’ve got to carve back the regulatory burden that’s been placed on so many businesses. It doesn’t mean we’re going to let them do anything they want. It’s just become so cumbersome, that they can’t even do their business.

The second thing we have to do is increase the cycle time for [permitting]. The cycle time to get a permit is so long today in order to build something. We actually have to have set timeframes, and we absolutely have to give people clear criteria, because we know that when there’s an extended permitting process, we’re not going to get things done. 

Third, we have to create sites across Virginia that are ready for businesses to develop, and we do not have any Tier 4,
Tier 5 sites that are shovel-ready for businesses to get going. [Editor’s note: While Virginia has a few dozen shovel-ready, Tier 4 or Tier 5 industrial sites, only a few are large enough for 500-acre or larger mega-projects, and those sites would require additional infrastructure to accommodate such projects, according to the Virginia Economic Development Partnership.] 

I recommended that we include up to $200 million out of the American Rescue Plan money to be put forth to site readiness across Virginia so that companies can move here.

Finally, we have to change Virginia’s culture into an innovation state. New business formation, new business starts in Virginia have basically been zero, and Virginia was ranked 49th in the country [for] best place to start a business. [Editor’s note: This ranking comes from The Blueprint’s January 2021 ranking of best places to start a new small business.]

We don’t have any innovation going on, and we know that in order to have robust job growth and economic development, you have to have new business starts, and you have to be viewed as a good place to innovate and start a company.

That’s a very succinct list of things we’ve got to go get done, and that’s what I’m going to be really focused on in order to fundamentally change our business environment. There [are] some short-term things we have to do. I called for a 12-month tax holiday for small businesses that have less than $250,000 in net income. Those businesses deserve a chance to get back on their feet as we come out of this pandemic, because they need to get going.

VB: Does Virginia strike the right balance between workers and businesses? Do you support the recent changes to minimum wage and overtime laws?

GOP gubernatorial candidate Glenn Youngkin addresses his supporters during an Aug. 26 rally at CommUNITY Church in Salem. Photo by Natalee Waters
GOP gubernatorial candidate Glenn Youngkin addresses his supporters during an Aug. 26 rally at CommUNITY Church in Salem. Photo by Natalee Waters

Youngkin: They’ve been passed, they’re in place, and we’re going to grow an economy to support it. Sometimes I’m a little more practical than philosophical. One of my goals, in fact, is to get Virginia’s economy growing at a pace that will support job growth and wages that in fact will lift up all Virginians.

Quick side note: I don’t believe that minimum wage is lifetime maximum wage. I think it’s a place to start. Therefore, we want to build an economy that in fact has economic growth … [that’s] 2.5% to 3% [growth] vs. the 1.2% that we’ve seen under Terry McAuliffe and Ralph Northam. That’s real GDP growth, and we’ve got to get moving at least twice the pace we’ve had.

When I’m governor and we get this economy moving at 2.5% to 3%, we’re going to create 400,000 jobs during that period, not 175,000. By the way, we have a stretch target to create 500,000 jobs. We’re going to have 10,000 new businesses that get started. We’re going to reinvigorate Virginia as a great place to start a business and to innovate. That will create opportunities across Virginia and lift up all Virginians, not for minimum wage jobs only, but for all jobs.

VB: If the federal infrastructure package passes, what would be your priorities for Virginia?

Youngkin: Our infrastructure, again by CNBC’s poll, was ranked 24th in the country, and we must be at least [in the] top 15. Given the natural infrastructure that gives us such an advantage with the Port [of Virginia] in Hampton Roads, with our highway infrastructure, our location, we should absolutely be a top player with infrastructure offerings to business and to Virginians.

First place that we need to invest in is high-speed internet access for rural Virginia. I agree with the Northam administration: $700 million is a good number to invest in order to get that done, but I think their pace is way too slow. Terry McAuliffe was talking about broadband internet access when he was running for governor in 2009, and then when he was actually elected governor in 2013, he didn’t get it done.

We actually have to finish all the work around our port. In fact, there’s some final dredging that needs to get done in order to get it to the right depths.

I think one of the great opportunities is to invest in our highway system. Yes, we are finishing up the [Hampton Roads Bridge-Tunnel] expansion … and there’s a widening on [Interstate] 64. We need to finish that widening all the way up into Richmond, but there is a tremendous opportunity for us to invest in [U.S. Route] 58. We can create along Highway 58 an industrial and logistics center because it connects right into the port. It connects to all of our major interstates, and it actually runs through incredibly available space for economic development.

Finally, I do think we need to invest in our airports. We need to expand cargo capacity in Dulles, and we need to invest in flights and connectivity in our other airports around Virginia.

VB: Do you think Donald Trump won the 2020 election, and how does this affect your ability to work with the White House?

Youngkin: I have absolutely been clear that Joe Biden was legitimately elected our president.

VB: How can lagging economies in rural Virginia catch up to our more prosperous metro areas?

Youngkin: Through focus [and] a governor who understands how to get things done and keeps his promises.

With Southwest Virginia, there [are] some incredible opportunities. The enabler is high-speed broadband internet. We have to get that done. We’ve got to get it done fast, but then you begin to look across industries that should — and will in fact — have a great footprint in these areas vs. logistics. We should absolutely have logistics hubs that are connected via road and rail.

Second is manufacturing. When we invest in site development and have 500-acre Tier 4 sites available, then big manufacturing will come. We [also] have to maintain our right- to-work status. We have to get our cost of doing business down.

Finally, there’s no reason why we shouldn’t be drawing into Virginia agricultural processing opportunities. In the meat processing business, in the dairy milk processing business, in lumber.

There are real opportunities for us to press forward in Southwest Virginia and Southside Virginia around sectors that we can attract and build. We must prepare our workforce for these opportunities as well. Today, we’ve seen the sad reality that across Virginia we’ve lost our focus on career and technical education.   

I think it’s important to point out the discrepancy in our education system right now. All but one Virginia university offers sociology degrees, and only two offer systems engineering degrees. We’ve got to rethink how we’re preparing people to take these jobs of the future that are going to present themselves. This is an opportunity for us to rethink our K-12 education and also higher education.  

Related: The 2021 Virginia gubernatorial race is on!

Enter the candidates

Illustration by Ed Harrington

With early voting starting the next day, Virginia gubernatorial candidates Terry McAuliffe and Glenn Youngkin came out swinging in their Sept. 16 first debate, sniping over issues ranging from coronavirus vaccine mandates to abortion in what The Washington Post described as a “bare-knuckled” sparring match at the Appalachian School of Law.

Democratic former Gov. McAuliffe dismissed his rival as a “Trump wannabe,” while GOP candidate Youngkin, 54, offered mock concern for his 64-year-old opponent’s health.

Virginia voters have until Nov. 2 to decide between McAuliffe, a champion fundraiser seeking a second (nonconsecutive) term, and Youngkin, a political outsider and retired equity fund CEO with a hefty personal bankroll and a blank public record. Both men say they’ll be the best governor for business and both are willing to shell out record sums to land the job.

Read our exclusive interviews with McAuliffe and Youngkin.

That race, along with all 100 House of Delegates seats also on the ballot, will determine whether Democrats retain the power over state government they gained in 2020, when the party assumed majority control of the legislature for the first time since the 1990s.

An early September poll by The Washington Post and George Mason University’s Schar School of Policy and Government showed the gubernatorial race in a virtual dead heat, with McAuliffe leading Youngkin by three percentage points, within the margin of error. Political analysis site FiveThirtyEight also noted in mid-September that the contest was shaping up to be much tighter than anticipated. McAuliffe’s previously assured lead stands to be harmed by President Joe Biden’s flagging approval ratings, the site noted, as well as Youngkin’s willingness to pour millions of his own money into the race. Additionally, an internal Youngkin campaign poll found that third-party, progressive Liberation Party candidate Princess Blanding could pull enough support away from McAuliffe to cement a Youngkin victory.

Virginia is the only U.S. state that doesn’t allow governors to serve consecutive terms, and McAuliffe, if elected, would be the state’s first two-term governor since Mills Godwin in the 1970s.

  Youngkin, a first-time political candidate and former co-CEO of Washington, D.C.-based private equity firm The Carlyle Group, triumphed over better-known candidates to win the Republican Party of Virginia’s unassembled convention of 30,000 delegates who cast ranked-choice ballots at 39 sites across the state on May 8.

From Jan. 1 through Aug. 31, Youngkin raised $35.26 million, including $16.5 million of his own money, and had $6.03 million in cash on hand. During the same time period, McAuliffe raised $26.06 million and had $12.6 million in the bank. As of Aug. 31, Youngkin had spent $29.24 million to McAuliffe’s $18.99 million — a difference made even starker considering that more than half of McAuliffe’s expenditures went towards campaigning for the June 8 Democratic primary. Spending a combined $48.23 million by Aug. 31, Youngkin and McAuliffe seem on track to match or exceed the record-setting $65 million spent in the 2017 Virginia gubernatorial race.

“Youngkin obviously has immense personal resources to bring to bear here,” says Kyle Kondik, managing editor of the University of Virginia Center for Politics’ political newsletter and website, Sabato’s Crystal Ball. “One thing that’s interesting is that McAuliffe is the one who is trying to nationalize this race, because he wants people to think of Youngkin as Trump so that Democratic voters will be motivated to come out. Youngkin wants this to be more of a localized race. He’s muddying his ideology and political background, representing himself as a nonpartisan business type — almost like Mark Warner in reverse, 20 years later.”

The 2021 Virginia governor’s race headlines a ballot that includes state house races and two other statewide races. Democratic state Del. Hala Ayala and Republican former Del. Winsome Sears are vying for lieutenant governor. And two-term Democratic incumbent Mark Herring and Republican Del. Jason Miyares are running for attorney general.

Democrats currently hold a 55-45 seat advantage in the House of Delegates, and Republicans are laser-focused on winning the six seats they need to overturn the Dems’ new, still-vulnerable majority. All but eight seats are being contested by both major parties in 2021.

Bellwether status

The governor’s race so far looks like an uphill fight in both directions.

McAuliffe benefits from his quasi-incumbent status but is running against historic trends, given that only one Virginia candidate since the ’70s has won the governorship after their party won the White House. That lone exception? McAuliffe himself.

“We are the ultimate bellwether,” says former state Del. Chris Saxman, executive director of Virginia FREE, a nonpartisan business advocacy group. “We come before and after every major national election. People forget how quickly things can change. One, the losing party is highly motivated to win the next round. Two, the winning team from the previous November doesn’t have nearly the juice it had a year ago.”

Youngkin, however, must contend against antipathy toward Trump and CNBC’s recent ranking of Virginia as America’s “Top State for Business” for an unprecedented second time in a row.

“The Youngkin campaign had a strategy of talking about Virginia’s economy being in a ditch,” says Stephen Farnsworth, a political science professor at the University of Mary Washington. “That strategy disappeared when Virginia was named the No. 1 state for business. That ranking has forced Republicans to retool. When a state’s No. 1, you can’t argue the incumbent has driven it into the ditch.”

Instead, Youngkin pivoted to campaigning on hot-button GOP issues such as critical race theory, as well as claiming that McAuliffe is “too dangerous for Virginia,” citing the state’s 40% increase in murders during McAuliffe’s tenure, while not acknowledging that Virginia was also then the fourth-safest state in the nation for violent crime. Meanwhile, McAuliffe, who supports vaccine mandates for people ages 12 and above, has tried to paint Youngkin, who opposes mandates, as an “anti-vax” extremist, echoing Youngkin’s “dangerous for Virginia” rhetoric.

Second bite of the apple

A close friend of former President Bill Clinton and former Secretary of State Hillary Clinton, McAuliffe spent decades in politics as a fundraiser and chair of the Democratic National Committee before his first run for governor in 2009, when he lost in the Democratic primary. He ran successfully four years later, beating Republican Attorney General Ken Cuccinelli. McAuliffe began his term in 2014 as the state continued emerging from the Great Recession, with seasonally adjusted unemployment rates steadily decreasing from 5% in January 2014 to 2.6% in December 2018. He dubbed himself “the jobs governor” and took glee in traveling around the commonwealth for economic development announcements.

Yet McAuliffe was constrained by a Republican-held General Assembly, which hampered his budget initiatives and frustrated his attempts to adopt Medicaid expansion. His successor, Democratic
Gov. Ralph Northam, has seen more success, especially after Democrats won control of the General Assembly in the 2019 elections.

Virginia has radically changed since then, widely viewed as the most progressive Southern state. Its newly empowered Democratic legislature passed a flood of consequential laws ranging from abolishing the death penalty and legalizing marijuana and casino gaming to mandating that Virginia’s utilities generate electricity from carbon-free sources as soon as 2045. Notably, the Assembly also has mandated increases in the minimum wage, putting Virginia on a course for a $15 minimum wage by 2026.

Virginia’s Democratic Party has shifted leftward, too, but McAuliffe used his fundraising prowess and endorsements to win the 2021 primary over four more progressive and diverse challengers, including two contenders who could have been the party’s first Black woman gubernatorial nominee.

“McAuliffe has a number of advantages as a candidate,” Farnsworth says. “The two biggest ones are, he knows how to win statewide — he’s done it. And he knows how to be governor — he’s done it.”

High-wire act

The contest could also prove to be a preview for a potential 2024 Biden-Trump rematch in a state where Biden defeated Trump 54% to 44% in 2020. Trump retains a firm grip on the Republican base, but it’s less clear how much he still drives people to vote against his political party. That variable animates both the McAuliffe and Youngkin campaigns. Youngkin emerged in May as victor of the six-candidate Republican field. A Virginia Beach native who attended Rice University on a basketball scholarship, Youngkin drew attention for his charisma, business background and organizational savvy, building a team that outmaneuvered a slate of more experienced candidates in the GOP’s pandemic-era convention.

His nomination was greeted with near-universal acclaim by Republicans. He achieved it by walking a careful line between the party’s various wings. That balance appears more tenuous during the general election as McAuliffe has sought to pounce on any feint toward social conservatives or Trump on Youngkin’s part. That included a leaked video of Youngkin saying he must limit his comments about abortion for fear of alienating moderate voters, but that he’d go “on offense” if Republicans win. (Abortion moved to the forefront of the gubernatorial race in September, after Texas’ GOP-led legislature passed one of the strictest anti-abortion laws in the nation.)

“Glenn has been an incredible success and will truly Make Virginia Great again,” Trump said in a July statement endorsing Youngkin. “Terry McAuliffe was a failed and unpopular governor whose only claim to fame was his relationship with crooked Hillary Clinton — how did that work out? If Virginia wants to open up and take advantage of its great and virtually unprecedented opportunity, Glenn Youngkin is the very successful businessman that will get them there!”

Youngkin, however, has rarely spoken about the former president, and Trump has made no campaign appearances for Youngkin or other Virginia candidates.

But even if the 45th president remains relatively mute about Virginia, Democrats won’t let him be forgotten.

“Nearly every McAuliffe ad is likely to mention Trump,” Farnsworth says. “It’s a winning hand for the Democrats, and they’re going to use it.”

Swinging suburbs

The races for statewide office and a majority in the House of Delegates will likely come down to a handful of competitive regions, largely around the suburbs of Northern Virginia, Hampton Roads and Richmond.

Over the past two decades, Virginia’s changing demographics steadily inched the state toward Democrats before Trump’s 2016 election dramatically accelerated the trend, especially in the suburbs. Chesterfield and Loudoun counties, for example, swung 7 and 10 points, respectively, toward Democrats between 2012 and 2020.

“People in the suburbs were absolutely repulsed by Donald Trump in Virginia,” Saxman says.

Winning those voters back is a crucial part of the Republican strategy.

“There are a lot of people who either are new to Virginia or maybe voted for Republicans in the past but now are functionally Democrats,” Kondik says. “That’s an important group for Youngkin. He’s not going to win places like Loudoun and Prince William counties, but he can’t get blown out in them as Republicans have in recent years.”

Virginia Beach is another important swing area. If Youngkin can get close to McAuliffe there, Kondik says, he might boost enough down-ballot candidates to flip some of those seats to the GOP. “Even if McAuliffe wins the governor’s race but Republicans flip the House of Delegates, that’s a pretty successful election for them.”  

The Powell Memo

The Powell Memorandum has been praised and vilified, denounced as a blueprint for business to seize control of American life, and embraced as a way to protect liberty and free enterprise.

Whether because of its lasting influence or alarming prescience, the Powell Memorandum has become one of the most important single documents in understanding the embrace
between American politics and business over the last half century.

Yet, 50 years since it was written in 1971 by a highly respected Virginia lawyer and future U.S. Supreme Court associate justice, the memo remains shrouded in mystery. Political analysts and historians sharply disagree on its actual level of influence. The debate itself testifies to the enduring power of the concise yet comprehensive 34-page document that outlined why and how corporate America could — and should — assert influence over American politics, society and culture.

“Rarely has any memorandum or position paper been more successful, more influential than the Powell Memorandum,” says A.E. Dick Howard, the University of Virginia’s Warner-Booker distinguished professor of international law.

“It was one of the first statements of the culture war,” says political analyst Bob Holsworth. 

Memo mythology

The Powell Memorandum was written for the U.S. Chamber of Commerce by Lewis F. Powell Jr. A Richmond-area corporate lawyer and partner in the law firm that is now Hunton Andrews Kurth, he served as president of the American Bar Association from 1964 to 1965.

A spokesman for Powell told The New York Times in 1972 that he wrote the memo at the request of Eugene B. Sydnor Jr., a Richmond businessman and chamber official who was also Powell’s neighbor and close friend.

“Of all the people I have met, he was the most conscientious and hardest working,” says Hunton Andrews Kurth Special Counsel Allen Goolsby, who worked with Lewis Powell Jr. at the firm in the late 1960s. Photo by Matthew R.O. Brown
“Of all the people I have met, he was the most conscientious and hardest working,” says Hunton Andrews Kurth Special Counsel Allen Goolsby, who worked with Lewis Powell Jr. at the firm in the late 1960s. Photo by Matthew R.O. Brown

Titled “Attack on American Free Enterprise System,” the resulting document counsels a multifaceted strategy encompassing media, government, courts, higher education and corporate structures to counteract rampant anti-business sentiment.

“We are not dealing with sporadic or isolated attacks from a relatively few extremists or even from the minority socialist cadre,” Powell writes. “Rather, the assault on the enterprise system is broadly based and consistently pursued. It is gaining momentum and converts.”

Initially, the memorandum received little attention. That changed a year later in 1972 when syndicated newspaper columnist Jack Anderson published excerpts from the memo in his political column, “Washington Merry-Go-Round,” after Powell had been nominated to the U.S. Supreme Court in 1971 by President Richard Nixon.

The publicity brought the memorandum to the attention of businessmen who enacted a wide-ranging program along the lines of what Powell had recommended. The Powell Memorandum was eventually credited for playing a role in the emergence of conservative institutions that reshaped the political landscape. In turn, the document became a rallying point for the political left to fundraise against and build its own institutions.

Today, the Powell Memorandum is wrapped in a blanket of mythology complicated by 50 years of political rhetoric, blame-casting and hindsight.

Consensus builder

By the time he wrote the memorandum bearing his name, Powell already had devoted three decades to public service, including three years as a military intelligence officer with the U.S. Army Air Forces during World War II and 25 years as a partner at Hunton, Williams, Gay, Powell & Gibson, the forerunner of Hunton Andrews Kurth.

In addition to being an active member and leader of the American Bar Association, Powell chaired the Richmond School Board and tried to dissuade U.S. Sen. Harry Byrd from his Massive Resistance strategy opposing racial desegregation of Virginia public schools. Powell also served most of a decade on the Virginia Board of Education.

Allen Goolsby began working with Powell when he started at Hunton Andrews in 1968.

“Of all the people I have met, he was the most conscientious and hardest working,” Goolsby says. “He basically worked seven days a week. I remember being told that he would go to church on Sunday, but he would only go for the sermon — and then he’d go back to work.”

Howard worked with Powell on the commission that drafted a rewrite of the Virginia Constitution, approved by voters in 1971. The redraft was largely undertaken to eliminate racially discriminatory policies such as school segregation.

U.Va. law professor and Powell biographer John Jeffries disagrees with the notion that the Powell Memo was a blueprint for conservative institutions: “I think people love conspiracy theories.” Photo courtesy University of Virginia
U.Va. law professor and Powell biographer John Jeffries disagrees with the notion that the Powell Memo was a blueprint for conservative institutions: “I think people love conspiracy theories.” Photo courtesy University of Virginia

“At every meeting, Lewis Powell was invariably the best briefed and best prepared, no matter the topic,” Howard says. “It might be something he knew about like education, or corporations and finance. If it was an area he wasn’t familiar with, he was well briefed all the same. He was the voice of — not compromise, but reconciliation, bringing views around the table together.”

“He was very lawyerly in the way he thought about things,” says John Jeffries, a U.Va. law professor and Powell’s biographer. “The typical Lewis Powell participation would be to let everyone else speak and then at the end to sum up.”

President Nixon nominated Powell to the U.S. Supreme Court in 1971 to succeed Associate Justice Hugo Black. Powell’s ensuing 15-year term included the 7-2 Roe v. Wade decision that legalized abortion. (Powell voted with the majority, affirming a pregnant woman’s right to choose an abortion.)

Probably his most famous opinion came in Regents of the University of California v. Bakke, which upheld affirmative action and allowed colleges to incorporate race as a factor in admissions. The case had split the court, but true to form, Powell won consensus with a Solomonic opinion that found that the Constitution allowed affirmative action while striking down the specific program in question.

“Powell was in the majority more than any other justice while he was in the court,” Jeffries says. “It wasn’t because he moved to the majority; it was because the court was balanced so that it swung whichever way he voted. He was a fulcrum, not a swing.”

During his Supreme Court term, Powell drew deeply on his knowledge of corporate law in ways that echoed the Powell Memorandum. In the majority opinion on First National Bank of Boston v. Bellotti, Powell wrote for the majority that corporate influence of elections through campaign contributions represents free speech covered by the First Amendment. The case has had long implications on federal law and court rulings ever since, notably influencing the Supreme Court’s landmark 2010 Citizens United decision.

Battling commies and leftists

Compared with Powell’s reputation as a consensus builder, his Powell Memorandum reads like a polemic. The first part lays out the case that free enterprise was under assault by “communists, New Leftists and other revolutionaries who would destroy the entire system, both political and economic.”

“He was kind of a conservative corporate lawyer and someone shocked by the hippies,” says Mark Schmitt, former editor of the liberal and progressive public policy magazine The American Prospect and a self-identified “Powell memo debunker.” “He was like a lot of older established men of that era, who were comfortable with the liberal consensus of the post-war era but saw something a lot freakier coming along.”

The memo called for a more aggressive response from corporate America, with strategies across business, government, politics and the legal system.

“Its genius is a recognition that you have to build institutions,” Schmitt says. “Corporate America didn’t think of itself as building institutions to engage in political fights [and] legal fights. He [Powell] spotted all the areas where … arguments about the direction of the country were going to happen.”

The memo’s comprehensive nature, relatively short length and concise language make it stand out even today. However, immediate response to it was muted.

“I don’t think anything of great consequence within the chamber ever came of it,” says Goolsby. “He listed a bunch of items they could undertake. I don’t think they did any of them. It wouldn’t have been effective.”

Jeffries says, “There is not a long trail” of paperwork about the memorandum in Powell’s personal papers. “If I had seen in the papers any evidence of impact at the time he wrote it, that would have been very prominent in my mind and in the biography.”

Others have found traces of the memorandum’s influence on key right-wing figures.

In her 2016 book “Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right,” writer Jane Mayer quotes businessman and political activist Charles Koch from a 1974 speech: “As the Powell Memorandum points out, business and the enterprise system are in trouble, and the hour is late.”

Mayer writes that other wealthy conservatives were likewise inspired by the Powell Memorandum. Joseph Coors reportedly was prompted by the memo in 1973 to establish the conservative think tank The Heritage Foundation, but Schmitt discounts the memo’s role more as a “minor contribution” that “pushed him [Coors] in a direction he was already going.”

“I’ve found a few more traces of real actual influence at the time, but it’s still a fiction to treat it as a blueprint for the conservative movement,” Schmitt says.

Whose memo is it anyway?

While Schmitt is skeptical about the idea that the Powell Memorandum served as a blueprint for the growth of the conservative movement that found full flower during Ronald Reagan’s presidency in the 1980s, he agrees that the memo did play a major role in building up institutions — but ironically on the political left in the 21st century.

“There were a group of progressive fundraisers brought together after the 2004 elections,” Schmitt says. “They went to rich people with a PowerPoint and made the case, ‘Here’s what the right built; we have to build something similar.’”

Ironically, the Powell Memo has served as a galvanizing force for organizing the political left, says Mark Schmitt, former editor of The American Prospect. Photo courtesy New America
Ironically, the Powell Memo has served as a galvanizing force for organizing the political left, says Mark Schmitt, former editor of The American Prospect. Photo courtesy New America

This reaction to the Powell Memorandum is exemplified in a 2012 issue of The American Prospect, published when Schmitt was not part of the magazine. The cover depicts a black-and-white photo of Powell with hand-scrawled devil horns and a forked tail.

In the cover story, the magazine’s editors argued, “The Powell Memo must be reckoned as one of the most successful political directives in history.” The issue featured 19 essays that laid out how to match the “revitalized conservative movement” with action on the left.

The American Prospect issue stands out for its stark vilification of Powell, but its umbrella assumption that his memorandum sat at the core of conservative institution-building has been echoed in numerous left-leaning books and publications.

“I find it appalling,” says Jeffries. “To be completely and perhaps unwisely candid, I think people love conspiracy theories.”

What is undeniable is that more than two decades after his 1998 death, Powell and his ideas are as relevant as ever. A new Supreme Court is taking up cases on issues with which Powell wrestled, including affirmative action and abortion.

Moreover, the vision for action he outlined in the Powell Memorandum has come to fruition. The political right and left both have built robust institutions that produce research and talking points, cover news through an ideological lens, put forward judges, conduct political operations and educate the next generation.

Powell also foresaw how corporations would be challenged by societal, cultural and political movements such as diversity and climate change. Indeed, some of the movements that Powell identified as threats have been thoroughly absorbed into the culture of business.

“Environmental and safety regulations have made cars much safer, and we have cleaner air,” Holsworth says. “It turns out that all of that is consistent with the capitalist system.”

Powell would welcome other developments, such as the emergence of activist public interest law firms and the expansion of laws protecting the rights of corporations. Those changes sprang largely from Powell’s writing in 1971, says Howard — a fact that would have gratified the Richmond lawyer.

 

Click here for Virginia Business’s interactive, annotated version of The Powell Memo

Back to the future

The candidates running for governor in November face the convergence of two Virginia political trends.

The first is the commonwealth’s tendency to vote for governors of the opposing party from the present White House occupant. Beginning in 1977, Virginia has voted against the party holding the White House in every election except for 2013, when Democrat Terry McAuliffe was elected governor the year after President Barack Obama won re-election to the White House.

The second is Democrats’ recent statewide streak: No Republican has won statewide office since 2009, when the GOP swept all three statewide offices.

This year, with Democratic President Joe Biden in the White House, one of those trends must yield to the other.

In the gubernatorial race, McAuliffe will run against Republican businessman Glenn Youngkin.

Del. Hala Ayala, D-Prince William County, will face Republican former state Del. Winsome Sears in a race to become both Virginia’s first woman lieutenant governor and the first woman of color to hold statewide office in Virginia. Democratic incumbent Attorney Gen. Mark Herring will run for a third term against Republican
Del. Jason Miyares. Voters will also vote for all 100 seats in the Virginia House of Delegates, where Democrats hold a 55-45 majority. 

McAuliffe appears set to become the first governor since Mills Godwin to win election twice, pundits say. The Virginia Constitution prohibits governors from holding consecutive terms.

McAuliffe’s gubernatorial tenure was marked by economic growth as Virginia fully recovered from the Great Recession, but this year many of his opponents in the Democratic primary argued that a white man no longer represents the state’s diverse demographics. His fundraising and endorsements from establishment figures, including outgoing Gov. Ralph Northam, prevented any of his opponents from collecting enough support to successfully challenge him.

He’ll face Republican Youngkin, a first-time political candidate and the former CEO of Washington, D.C.-based private equity firm The Carlyle Group. Despite Youngkin’s inexperience, he defeated a field of primary candidates that included state Sen. Amanda Chase, former House Speaker Kirk Cox and venture capitalist Pete Snyder.

Former Gov. Terry McAuliffe touts his economic development successes and support for abortion rights and gun control. Photos by AP Photo/Steve Helber
Former Gov. Terry McAuliffe touts his economic development successes and support for abortion rights and gun control. Photos by Steve Helber

Not only did Youngkin prevail over more experienced candidates, but he did so at an unprecedented, “unassembled” drive-thru Republican convention of 30,000 delegates who cast ranked-choice ballots at 39 sites across the state.

Youngkin appeals to both grassroots and establishment Republicans.

“He seems acceptable to them all — but I always add the words ‘so far,’” says Larry Sabato, founder and director of the University of Virginia Center for Politics. “One of his main problems is that Donald Trump is never going to yield center stage until he’s six feet under. That’s going to be tough for Youngkin. The only way he wins is by doing what he’s obviously going to do: Spend an unbelievable amount of his personal money, combined with Biden becoming unpopular — if he does.”

That dynamic also would need to be enough to drive down turnout among Democrats — not an unexpected possibility given Trump’s departure from elected office and social media platforms. The 2009 race that Republicans swept featured only 40% turnout. Even in the Democratic victory of 2017 — in which the two gubernatorial candidates received the highest and second highest number of votes in state history — turnout was still less than 50%.

A drop in turnout generally favors Republicans.

“Republicans will vote in every single election from the White House to the courthouse, and every time you have to convince Democrats to show up,” Sabato says.

But McAuliffe is a veteran campaigner, not just from his 2013 win and a failed 2009 primary run, but from decades of fundraising for Democrats.

“He knows how to energize the Democratic vote,” Sabato says. “He’s doing it already.”

The campaign and election will play out in a very different Virginia than that of even a few years ago. Democrats may be on a decade-plus-long streak of winning statewide elections, but control of the General Assembly eluded them until just two years ago.

Demographic and ideological shifts enabled the Democratic takeover after a generation of Republican control, or at least a party split between the governor’s office and the legislature’s two chambers. Sabato says that despite this particular race, the statewide tickets of both parties indicate a trend toward more diverse candidates who reflect a changing Virginia.

The pandemic, racial unrest and political disruption engendered by the one-two presidential punch of Obama and Trump led to a pivotal moment in Virginia.

“Everything hasn’t changed, but a lot of pieces that we thought of as ‘Old Virginia’ have been tossed into the garbage pile,” Sabato says.

Nevertheless, Democrats shouldn’t automatically assume victory, he says.

“Do you seriously think this string of Democratic victories will go on forever?” Sabato says. “Of course, it won’t. Accumulated scandals, unpopular programs — it will change at some point. I don’t think we’re necessarily there yet. I can see this going on for three terms. If you look at Virginia’s history, three terms is about it.”

Voters will decide in November whether Democrats get that third term in the Executive Mansion.