Gov. Bevin lays out bevy of policy initiatives in inaugural address
12/08/2015 10:40 PM
FRANKFORT — Echoing Kentucky’s motto in his inaugural address, Gov. Matt Bevin asked Kentuckians to come together to address challenges that face the commonwealth, but what Bevin will likely face when trying to address those challenges is a major philosophical divide on how the legislature will move forward on two key areas of education and healthcare.
In the speech, Bevin promised to stand by his Blueprint for a Better Kentucky policy platform delivered during the campaign.
The incoming governor spoke briefly on the subject of policy during Tuesday’s address to Kentucky with several specific promises including an audit of “every single pension plan” in the state.
On those retirement plans, Bevin said he intends to change pension plans “to ensure that we save them.” It will take hard decisions to solve the pension crisis in the state, and Bevin said he is willing to make those decisions.
Last week, the Kentucky Employee Retirement System non-hazardous’s pension funded ratio dropped from 19 percent to 17.7 percent, making it one of the worst-funded pension plans in the nation.
The Kentucky Teachers’ Retirement System faces $14 billion in unfunded pension liabilities, and is seeking $1 billion in payments in the upcoming biennium budget.
Republicans and Democrats who spoke to Pure Politics afterward agree that pensions will be a paramount issue in next year’s legislative session, but the approach to those funding issues, particularly in KTRS, appear to revolve around a question that stymied the General Assembly this year: to bond, or not to bond?
House Speaker Greg Stumbo said he stood and applauded Bevin’s call to audit the pension agencies and said all, including the Judicial Form Retirement System for judges and lawmakers, should have their books reviewed.
The Prestonsburg Democrat said reforms enacted in 2013 for KRS should be given time, and he again defended his call for the sale of pension obligation bonds to shore up KTRS. Stumbo sponsored a bill that would have offered $3.3 billion in bonds for the teachers’ pension, saying such a move would afford the state eight years to come up with a long-term funding plan.
“(KTRS) needs an influx of money, and I still think that pension obligation bonds are something that we ought to consider because the market’s still viable,” Stumbo said.
“Now, should it be done at the level that my bill proposed? If you want to make the fund 100 percent viable and you don’t want to raise taxes and you don’t want to rob the budget in areas like education, human services, probably so. Can you get by and adequately fund it and safeguard it with an amount less than that? Probably so as well.”
Pensions will play a major factor in the upcoming budget-writing session, as will other increased costs like expanded Medicaid eligibility, said Sen. Chris McDaniel, a Taylor Mill Republican who chairs the Senate budget committee.
“The biggest thing is that there’s been an expectation created that we have excess revenue in the commonwealth, and the fact is that if we honor our existing obligations to the pension systems, we simply don’t have that revenue,” he said.
McDaniel suggested that some cuts could be on the horizon alongside phasing in increased contributions and changing benefits for future hires to KTRS to help that system’s bottom line.
A 25-member work group tasked with coming up with a funding proposal for KTRS couldn’t decide on a concrete plan during its final meeting Dec. 1, but gradually increasing contributions was among its list of options to lawmakers.
“That simply is not a tenable solution,” McDaniel said when asked about bond sales for KTRS. “You’re talking about borrowing money at four and a half (percent) so that you can hopefully invest it at seven and a half.
“It all ultimately comes out of the general fund of the commonwealth, and it’s just not a wise financial decision to borrow money. It’s much like taking out a credit card to pay off your home loan.”
Bevin said the work has already begun to thin state government, and he told those in attendance at the inaugural address to “stay tuned.”
“We are going to do it within each cabinet,” Bevin said. “I am blessed by the caliber of men and women who have stepped forward. Is is unbelievable the depth of talent we have in our cabinet.”
Reforming the tax code
In looking at the structure of Kentucky’s tax code Bevin will join a multitude of other governors who have sought to revamp a system which nearly all in government agree is outdated.
“Time will tell exactly the specifics of that, and we’ll be rolling out a budget here in just a matter of less than two months, but we are going to modernize and simplify our tax code,” he said. “We are going to get rid of the inventory tax in this state. We are going to get rid of the death tax in this state.”
Part of the initiative to revamp the tax code, and look at other economic areas will be part of an attempt to send a message that Kentucky is business friendly.
Fighting federal overreach
State sovereignty will likely be a term Kentuckians get used to hearing under Gov. Bevin. In his speech Tuesday, Bevin said that his administration would not let regulatory agencies in Washington D.C. to “wag the dog of Kentucky.”
Promising to “shut that redundant system down,” Bevin repeated promises to transition away from the state’s health exchange, kynect, to the federal health exchange in 2016. Following Indiana’s lead, Bevin promised to shift Medicaid enrollees to a new plan in a “thoughtful, intelligent way.”
With Indiana Gov. Mike Pence looking on, Bevin said that he was going to copy his model.
“I am not above copying what other people are doing well. … I attempt to copy what they’re doing and avoid any mistakes they’ve made thus far,” Bevin said.
Former Democratic Gov. Steve Beshear, who issued an executive order creating kynect under the Affordable Care Act, has advocated its retention as he leaves office.
On Tuesday, he told Pure Politics that he spoke with Bevin in the days after the election about keeping the program, and he hopes Bevin’s advisors will convince the new governor to reconsider his position.
“We’ve got 500,000 Kentuckians out there who are a lot better off because they are covered by health care, and that’s going to make this commonwealth better,” Beshear said after the inauguration. “I know that he wants to make the commonwealth better, so hopefully they’ll see that in a different light as they learn more about it.”
Asked whether “a good, hard look at the numbers,” as Beshear suggested, would cause Bevin to pivot on kynect, the former governor was unsure.
“Tomorrow the hard part begins,” he said. “It’s time to govern, and, you know, he’s going to have to sit down and work with the legislature, both Democrats and Republicans, to see what can be done to keep the commonwealth moving forward, so it’ll be an interesting time as always.”
Repeating his campaign promise, Bevin said he would ensure there is competition for public education dollars under starting under public charter schools.
By starting with a public charter system Bevin intends to allow the “momentum” carry charter schools forward in Kentucky. With competition for dollars, Bevin predicted that it would improve educational outcomes for students.
Senate President Robert Stivers said the state can afford to enact school choice.
“It depends on how you implement it,” the Manchester Republican said. “I think what most people have seen is the opportunity to do school choice in the two major metropolitan areas of our state, especially in Jefferson County, where we’ve had such failure among those schools and particularly African-American ends of Jefferson County.”
Stumbo hasn’t closed the door on considering charter schools in Kentucky, but he said he isn’t convinced of their effectiveness in improving educational outcomes.
“Just saying that this is the magical silver bullet, you’re going to have to prove it to me because I know what worked,” he said. “The education reform act worked, and I point to my district as a shining example of how it worked. We have moved from the bottom of the list up into the top 10 in Floyd County’s public school system.”
Rep. John “Bam” Carney is a social studies teacher at Taylor County High School and called Bevin’s proposal for school choice and charter schools a “smart start” in tandem with public schools.
While introducing charter schools may not be something that works statewide in Carney’s opinion, “parents should have options, particularly if you’re in parts of the state where the schools are failing your students,” he said.
“I’m a public school teacher and I believe in the public schools, but competition is not bad for folks, and frankly many of our schools do need competition,” Carney, R-Campellsville, told Pure Politics.
When it’s all said and done, Bevin in all likelihood won’t see his legislative agenda cross the finish line in its entirety next year with Democrats holding the House of Representatives and Republicans in control of the Senate.
But for Senate President Pro Tem David Givens, it’s the long-term view that matters.
“I think as you’re continuing to see this state become more and more conservative as they vote, we’ve had Kentuckians that have been conservative in their social values and their fiscal values for a long time,” said Givens, R-Greensburg.
“We’re finally starting to see those voters showing up and pulling that conservative lever in the voting booth, and I’m excited about what the future holds for us in Kentucky.”
Reporting by Pure Politics Managing Editor Nick Storm and political reporter Kevin Wheatley.
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