Category Archives: Economics

In the shadow of the Megadrought

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An article from Slate.com caught my eye this week: “California’s Next Megadrought Has Already Begun.”

Overall, it’s a pretty grim read.

California’s cities have more than enough water to withstand the current drought and then some. They simply don’t use that much. Not true for agriculture, which uses 80 percent of California’s water—10 percent of that just on almonds. Though it’s still a national powerhouse, fed increasingly by fast-depleting groundwater supplies, the state’s agriculture industry has likely begun a long-term decline due mostly to simple math. Abnormally dry conditions have dominated in 11 of the last 15 years, and the cuts have to come from somewhere. Agriculture is the elephant in the ever-shrinking room of California water.

But isn’t agriculture also a political and economic powerhouse in California? If ag goes into a major decline as a result of continued drought, what’s going to happen to the state’s already shaky economy? Will corporate agriculture begin shifting assets to areas with more stable water supplies? There will be a real estate ripple through the central valley, and more. It’s hard to see where this ends unless it’s several years of above average rainfall, something not in the cards right now.

And other areas of the Southwest? Are cities like Phoenix living on borrowed time?

California has now imposed mandatory restrictions on watering lawns. The Sacramento Bee reports:

California regulators on Tuesday ordered every water agency in the state to restrict how often customers can water their landscaping, an unprecedented move that marks another milestone in the severe and ongoing drought.

The decision was adopted unanimously by the State Water Resources Control Board and will take effect in about 45 days. Officials at the water board said it is the first time any state in the nation has imposed an emergency water conservation requirement on every local water agency within its borders.

A Los Angeles Times editorial calls it “just a taste of what’s to come.”

A U-T San Diego editorial cites several types of available policy responses, including pricing strategies to reduce water use, desalination, purification and recycling, and controlling waste.

To what extent is Hawaii looking forward to the potential for an extended drought here? Climate change may lead to a decline in annual rainfall. As all of these California stories say, it’s way too late to address the water issues when you’re in the middle of an extended drought. The planning, and the investment, really needs to start long before the rain stops.

We lose water every day from leaks resulting from our aging infrastructure. We fail to capture what are likely large amounts of runoff that goes to the ocean instead of being saved and purified. Has Hawaii County altered its policies in light of their experience with drought over the past several years? Maybe folks from there and Maui can share their experience.

It’s all sounding like an apocalyptic science fiction yarn as modern society hits the revenge of the desert.

The economics of athletic mediocrity

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I was up on the UH Manoa campus yesterday afternoon and noticed an article on the school’s athletic budget woes as spelled out in a report released in mid-February (“Beyond wins and losses, Underfunding at the heart of continued UH athletic deficit, according to Jay“).

I had followed the coverage of the report at that time, like this KITV story (“UH Athletics report explores cutting programs to save money“), but had never read the report itself. It seems like a pretty important policy document potentially impacting lots of people, on and off campus.

So I went looking for it, thinking it should be easy to find. Where would you look?

I started with the UH Athletic Department’s website. It turns out to be a visually confusing mishmash and difficult to wade through, but there doesn’t appear to be any mention of the report.

So then I decided to check the UH Manoa website, since it’s a report on Manoa athletics and the campus has plenty of public relations staff. Right in the middle of the entry page, there was a list of news releases and, below it, a link to athletics news. I figured my search would soon be over.

First, I checked the news releases prepared by the Manoa campus administration. There were dozens of news releases in February, ranging from a group of high school students’ one-day visit to Honolulu Community College to prizes won by individual UH researchers. But none of the news releases appears to have concerned the athletics budget report. I checked a second time, because I couldn’t believe it wasn’t there. But alas, still nothing.

Still hopefully, I clicked on the link that said “Athletics News.” Ooops. It just took me back to the main athletics website, not to any specific link to “news.”

Finally I resorted to a broad Google search, and found the report, “Financial State of Hawaii Athletics–Revising the Game Plan.”

It turns out to have been buried down among documents that were part of the Board of Regents’ agenda for their February 12 meeting. I didn’t find links to the report from anywhere else on the Regents’ webpage or anywhere else in the UH system.

A conscious attempt to bury the grim news, or just another example of rather inept public relations, or is it just that the administration doesn’t take the athletic issue seriously enough? I just don’t know.

According to the report, the athletics department has some very lofty goals.

They might as well be titled, “Dream on.”

Dream on;

Strengthen the competitiveness of our overall athletics program as a nationally respected NCAA Division I FBS athletics program and build the program to become a candidate for future conference expansion to a high-resource athletics conference (i.e. Pacific-12 Conference).

Strive to be as a national Top 50 athletics program (as measured by the NACDA Directors Cup ranking). UHMAD should always strive to be a top-rated collegiate sports program that the State of Hawai‘i can take pride in. A nationally respected program will aid in keeping the best student- athlete talent in Hawai‘i home and recruiting talented student-athletes from the mainland and internationally.

Generate revenue opportunities that can sustain a budget that supports a Top 50 program.

Improve athletic competition and practice facilities to compete in the recruitment of the best student-athlete talent. Current facilities need renovation and modernization if we are to compete with other athletics programs and put our best face forward when potential recruits and their parents come for their visits.

Significantly improve game-day venue experience. This means our facilities are fully functional, clean and updated for our fans to experience a game atmosphere that is fun and enjoyable for the whole family.

The unfortunate reality followed in a simple statement.

While our department’s sport programs strive to compete for championships, we do so on a very bare- bones operating budget and budget shortfall that has led to program mediocrity. As our department struggles to fund our program aspirations, it remains difficult to achieve a sustainable and consistent level of competitiveness.

There are lots of charts and graphs that follow, but that pretty much says it all. “…a very bare-bones operating budget and budget shortfall…has led to program mediocrity.”

The athletics department predicts a total deficit over the next three years of $11.4 million, based on current estimates of revenues and expenses. But the report notes that this doesn’t include the NCAA’s expansion of allowable student aid for athletes to cover the full “cost of attendance.” Schools don’t need to pay these new costs, but failure to do so will impact the ability to recruit, so most are expected to at least attempt to compete. These costs are estimated to increase the budget deficit by $3.1 million to $3.7 million over the same three year period.

It’s a gnarly economic forecast bearing little good news.

Perhaps that’s why they’ve made the report so difficult to find.

By the way, I haven’t seen any mention of this tidbit that appears at the very tail end of the report.

A recent 2012 study published in the Social Science Quarterly assessing the effects of coaching replacements on college football team performance suggests that these moves may not lead to the happiness the fans envision. E. Scott Adler, Michael J. Berry, and David Doherty looked at coaching changes from 1997 to 2010. What they found should give pause to people who demanded a coaching change (or still hope for one).

Here is how these authors summarize their findings:

Using matching techniques to compare the performance of football programs that replaced their head coach to those where the coach was retained. The analysis has two major innovations over existing literature. First, we consider how entry conditions moderate the effects of coaching replacements. Second, we examine team performance for several years following the replacement to assess its effects.

We find that for particularly poorly performing teams, coach replacements have little effect on team performance as measured against comparable teams that did not replace their coach. However, for teams with middling records—that is, teams where entry conditions for a new coach appear to be more favorable—replacing the head coach appears to result in worse performance over subsequent years than comparable teams who retained their coach.

So the authors found that if you are a bad team, changing your coach didn’t make a difference. And if you are “not bad,” a new coach makes it worse. This result is consistent with studies of other sports.

If it costs a small fortune to fire your coach – and often it does – then a team is probably better off ?just keeping who they have on the sideline. Yes, this may not make the fans of the losers very happy ?today. But it doesn’t make sense for universities to make decisions that cost the school money and don’t ?systematically change the outcomes we see on the field.

The New Standard for Transparency: Open Checkbook

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Take a look at the official website of the Ohio State Treasurer Josh Mandel, and you’ll be invited to check out OhioCheckbook.com, the state’s searchable, online checkbook detailing all of the state’s spending.

And Mandel is now urging all local governments in the state to follow suit and open their checkbooks to public scrutiny (“Ohio Cities, Counties Urged to Put Checkbook Online“).

Ohio Treasurer Josh Mandel is drafting a letter to all 3,900 cities, counties and school districts in Ohio offering to help them follow his lead and document every penny they spend on a user-friendly website — at no charge.

If they ignore the offer, Mandel says they can expect a phone call from his office. If they still ignore him, he plans to propose ordinances or push local governments to open their books.

“If they ignore all those things, I’m going to start showing up at city council meetings and school board meetings, and I’m going to demand that these local government officials put the finances online because the people have the right to know,” Mandel said in a recent interview with the I-Team.

Then check out OpenGov.com, which seems to be landing lots of contracts to provide transparency for local governments.

Hawaii needs to catch up.

U.S. called out for our lack of maternity leave and family supports

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A segment on last night’s PBS Newshour should be required watching (“Almost every country in the world offers more generous maternity leave than the U.S.“). That link will take you to the video of the segment and a transcript.

According to the United Nations, we and Papua New Guinea are the only countries in the world that do not provide any paid time off for new mothers.

And only since 1993 have we had the Family and Medical Leave act, or FMLA, which grants up to 12 weeks of unpaid leave for full-time workers at firms with 50 or more employees. But the law fails to cover fully 40 percent of American workers, like part-timer Kimberly Lewis.

And then there are mothers who take their maternity leave, and then are fired by their employers when they try to return to work. Maternity leave is, it seems, a right that is not self-enforcing.

The program raises the issue of who would shoulder the cost of a broadly available family leave. But it fails to look at the longer term benefits to the society, and the economy, as a whole that likely more than balance the cost.

This is certainly an issue that needs to be near the top of the public agenda.

Unless we’re happy at the bottom of the international pack, the U.S. and Paua New Guinea, going it alone on our anti-family agenda.