Kentucky Chamber of Commerce calls for public-private funding strategies to stop ‘bass-ackwards’ budgeting

07/23/2013 11:50 AM

State legislators should change the law to more easily engage in public-private partnerships to save tax revenue while making sure key functions like state parks and water service keep going, the Kentucky Chamber of Commerce recommended Tuesday.

David Adkisson, president of the chamber, said Kentucky needs to invest more in education. Instead, lawmakers start the budgeting process every two years by adding up all the set expenses, such as public employee pensions, Medicaid and corrections department.

“We think that’s kind of bass-ackwards,” Adkissson told business leaders at the chamber’s annual meeting at Louisville’s Marriott Downtown.

Adkisson presented the chamber’s latest report on what Kentucky’s government can do to improve public policy, and thus Kentucky’s business climate. The report “Private Solutions to Public Problems,” recommends that state, county and city governments look for ways to hire more private contractors, turn over some functions to private firms in order to save money or engage private companies to help pay for projects, such as bridges.

“What I would contend today is that KY is not where it need to be in terms of public-private partnerships,” Adkisson said.

Some functions and services ripe for turning over to private firms, according to the report, are highway rest areas, wastewater treatment plants, lottery management and state park management.

“I would love to see this happen in the state of Kentucky,” Adkisson said, adding that he’d also like to see the ability to “serve a glass of wine there, but that’s a different issue.” (Alcohol sales aren’t allowed in state parks.)

The report recommends several steps. – enacting legislation aimed at public-private partnerships for infrastructure projects, such as roads and bridges. Tolls would be a common way to repay private bond holders. – Creating a state public-private-partnership office or unit to encourage developments. – And creating a council similar to Virginia’s that analyzes government activities that could lend themselves to partnerships, handles contracts and publishes data about such agreements for transparency.

Adkisson told Pure Politics that the chamber hasn’t proposed language for a bill or identified a lawmaker to sponsor a bill yet. But Democratic Caucus Chairman Sannie Overly sponsored a bill earlier this year aimed at public-private partnerships for road and bridge projects.

Chamber officials also met with officials in Gov. Steve Beshear’s office, considering most government functions that would lend themselves to public-private partnerships are in the executive branch.

Adkisson said the state already seems to be moving in that direction, such as the hiring of private firms to managed Medicaid billing and coverage for that program.

And that goes back to the state’s money issues. As the report says:

“While important progress has been made to rein in the unsustainable spending identified by the Chamber (with recent major reforms in the penal code, the public employee retirement system and the move to a statewide Medicaid managed care), the erosion of education funding continues to threaten the future of the state and its citizens.”

The trend has been that education funding has dropped as a percentage of all state spending. Higher education funding made up 16.9 percent of the state budget in 1986-1988. It was 12.2 percent in the most recent two-year budget. K-12 education dropped from 48.2 percent to 43.8 percent in that span, according to the chamber’s report.

And as Kentucky lawmakers prepare to craft the next two-year budget, existing money won’t be enough to curb that trend.

“No one expects the economy to cure the state’s budget problems in the foreseeable future,” Adkisson said.

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