Within 60 days of taking the oath of office, and swearing to have never “fought a duel with deadly weapons within this State nor out of it” and some other stuff, Governor Matt Bevin is required by Kentucky’s Constitution to present a budget to the state’s legislators. While not the focal point of his outsider-turned-insider campaign, Bevin did mention education and infrastructure plenty during his campaign but without going into great detail. Kentucky will finally get a comprehensive look at Bevin’s plans for these and other issues when he introduces his first budget to the Kentucky General Assembly on Tuesday, Jan. 26.
How Bevin handles these issues will be of great interest to lawmakers, folks representing employees of these various sectors, as well as reform-minded Democrats and Republicans. His predecessor, Governor Steve Beshear was forced to cut the budget multiple times — primarily due to the recession — but took great strides to limit cuts to education and infrastructure projects. Whether Bevin follows this same path will finally give Kentuckians some serious insight into who Matt Bevin the Governor will be and how he plans to steer the ship of state during the next four years.
Since the elections in November, there has been a lot of activity. In one of his last acts through an executive order, Governor Beshear restored voting rights for 140,000 felons who had completed their sentences. Governor Bevin rescinded the executive order just before Christmas, saying it should be left to the legislature. While there will be legislation this session, it is still unknown what the legislation will look like, or what its chances of passage are.
The major political fireworks have occured in the lower chamber of the state legislature. Two Republican House members won statewide races, meaning they resigned from their House seats on Jan. 4 when they were sworn in to office — Ryan Quarles is now the Commissioner of Agriculture, and Mike Harmon is the State Auditor. Two Democrat House members switched parties in December: Denny Butler from Louisville and Jim Gooch from Providence. In a move lauded for its bipartisanship by some, and reeking of political posturing to weaken Democratic control of the House, two other Democrat House members accepted appointments from Governor Bevin: John Tilley, appointed as the Secretary of the Justice Cabinet, and Tanya Pullin, appointed as an Administrative Law Judge. This leaves the makeup of the State House at 50 Democrats and 46 Republicans, with four special elections to be held on March 8.
The first day of the 2016 legislative session was Tuesday, Jan. 5, and all government business must be finished by April 15. In that time, lawmakers will be dealing with a number of issues — each of which could be argued is more important than all the others. Let’s take a look at what challenges could greet lawmakers in 2016.
Pension crisis
Pensions are almost universally recognized as the most daunting issue facing the General Assembly. The state employee plan has only 19 percent of the money it needs, and might be the worst-funded pension plan in the country. Running on his successful business career during the campaign, Bevin argues that the system is unsustainable and proposed creating a new defined-contribution plan for future government hires that would resemble 401(k) plans used in the private sector. This has been opposed by Speaker Greg Stumbo and House Democrats who currently control the lower chamber. Teachers’ pensions are facing a $14 billion shortfall that resulted from years of the system not meeting its assumptions, whether due to lack of investment returns, not enough payroll growth, or the state failing to contribute more than what is statutorily required. Actuaries predict our teachers’ retirement needs around $500 million each year in additional funding to fully cover the benefits that were promised to them. During the 2015 session, Kentucky Teachers’ Retirement System estimated that a $3.3 million bond issue would save the state around half a billion dollars annually by 2026. But the legislature didn’t reach an agreement then. So here we are again.
Kynect and Medicaid
Healthcare, one of the most dominant issues in the 2015 election, should also prove to be a difficult and divisive issue — it was during the campaign. In 2011, Steve Beshear issued an executive order to create Kentucky’s health insurance exchange under Obamacare, better known to most as Kynect. Supporters say the exchange, along with the expansion of Medicaid to cover those making 133 percent of the federal poverty level, have improved public health by dramatically increasing the number of Kentuckians with health coverage. About 500,000 Kentucky consumers have enrolled with Kynect since it opened enrollment in 2013, most of them falling within the Medicaid expansion. But Bevin and opponents say that the state-run exchange is duplicitous since the federal government can also run the exchange, and eliminating it will save Kentucky $28 million in its annual budget. Two weeks ago, the new administration announced that Kynect will continue to sell the federally subsidized health insurance through Jan. 31. However, the state also directed the advertising agency to cancel all further promotion of the exchange. Proponents have pointed out that the award-winning marketing of the program was one key reason for its success. Is this the first step toward undoing Kynect? Dismantling Kynect would have a one-time cost of $23 million, according to Audrey Tayse Haynes, outgoing Secretary of the Cabinet for Health and Family Services. More importantly Bevin has signaled his desire to roll back the number of Kentuckians eligible for Medicaid or try an entirely new system. Don’t be surprised if this is an issue over which both sides are prepared to dig in their heels.
Tax reform
Comprehensive tax reform has been something both Democrats and Republicans have called on for years — the only problem is that the two sides have never fully agreed what it would look like. In 2012, Governor Beshear created a Blue Ribbon Task Force for Tax Reform with 23 leaders from various sectors including businesses, education, health care and advocacy communities, as well as lawmakers from both sides of the aisle. The commission voted to approve 54 proposals, but tax reform was never taken up by the legislature. Bevin has said tax reform is necessary to make Kentucky more competitive with our surrounding states. Specifically, he stated that he wants to get rid of the inventory tax and death tax, neither of which were agreed upon by the bipartisan Blue Ribbon commission.
Right to Work
Striking the same note of making Kentucky competitive with other states in regard to business, Bevin has promised to bring “Right to Work” to the Commonwealth. However, due to Democrat control of the State House, this issue has stalled when the Senate has sent opportunities to act in past years.
Coal, energy and the EPA
Bevin spoke a lot about coal during his election, pledging to fight any obligations under the Clean Power Plan. In a letter to the Kentucky Coal Association, he promised his “administration will resist (the) EPA and their draconian regulatory agenda.” Bevin signaled his commitment to that energy philosophy when he appointed Charles Snavely, a former coal executive with 35 years of experience in the mining industry, as the Secretary of his Energy and Environment Cabinet. Within weeks of being appointed, Snavely has already sent a petition to the EPA calling for a reconsideration of the carbon dioxide rules of its Clean Power Plan, the nation’s first rules to restrict power plant pollution. When the rules were first announced, at the urging of Governor Beshear, the Federal Government agreed to allow individual states to formulate their own reduction plans to be implemented by 2030. By working with federal regulators, Beshear ensured that Kentucky would have the opportunity to submit their plans or extension requests by 2016. Jurisdictions that don’t comply risk EPA implementing a plan on their behalf. To be fair, 41 states are determining their options. While all of this is debated at the state level, this will likely end up before the U.S. Supreme Court, as most other Clean Air Acts have. But politicians never let reality get in the way of a good squabble, and we can expect the new Secretary of Energy and Environment will be ready for the fight. Expect this to be brought up during Bevin’s State of the Commonwealth address on Jan. 12.
Transportation and infrastructure
Public Private Partnerships (P3), agreements between the public and private sectors that allow for greater private sector involvement in infrastructure projects, have already proven to be successful in Kentucky, such as the east end bridge (managed under Indiana), student housing at University of Kentucky, and the successful FirstBuild collaboration between University of Louisville and General Electric. P3 projects can also include bridges, which means “tolls” to some legislators, just like the east end Ohio River Bridge that Indiana was responsible for. Similar bills have been filed in the last couple of legislative sessions that include large transportation projects in Kentucky, but they have been met with contention by several legislators in Northern Kentucky who see the legislation as a mandate for tolls on the Brent Spence Bridge between Covington and Cincinnati. If the bill includes language that removes the toll option of the Brent Spence Bridge, the bill will be more welcome.
Education and charter schools
Educators, and education advocates have several reasons to lobby their state legislators during the upcoming session; to name a few, charter schools, teachers’ share of the aforementioned pension crisis, computer programming, overall school funding, the Kentucky Core Academic Standards and performance-based funding for universities are all expected between now and April 15. Bevin, channeling Abraham Lincoln with his “Team of Rivals” appointment of Hal Heiner as Secretary of Education, indicated early on that charter schools was at the top of his education priorities list. A foe of Bevin’s in the Republican Primary last spring, Heiner has long been a supporter of charter schools. But the road to charter schools is long and faces many potential pitfalls, not just House Democrats who have consistently opposed charter schools.
We’ll see …
This is the first session for the new Governor, and it will be his first budget proposal. He did not campaign on one big issue, but several, nor did he make any promises for projects that carry a large price tag. Without any legislative record or experience in the public sector, to a certain degree he remains a mystery to both parties. And while Bevin assumed the position of “mandate,” given the dismal low number of voters that turned out on his election day, it’s likely that he doesn’t feel pressure to produce big changes quickly.
We’ll see what happens three weeks from now on Jan. 26 when Governor Bevin delivers his inaugural Budget Address and gives the Commonwealth and the legislature his priority and wish lists, and perhaps even some specifics. •
Sherman Brown is a Principal with McCarthy Strategic Solutions, a bipartisan government relations firm in Frankfort. Check him out on Instagram @ShermanBrownKY and on Twitter at @ShermanBrown
