April 10, 2018
OP-ED: KENTUCKY’S FINANCIAL FUTURE REQUIRES TOUGH DECISIONS
by Governor Matt Bevin
For many months, we have been working to resolve the toughest financial crisis Kentucky has ever faced, a crisis that began many years ago and that previous governors and legislators either negligently handled or ignored. It is now snowballing out of control. Nothing about this process has been easy. That does not, however, take away from the present reality that we are facing, or from the difficult decisions that must still be made.
On Monday, I vetoed both the budget and tax bills. By failing to significantly reduce the pension debt, while also increasing our overall spending, the legislature is proposing to continue Kentucky’s dangerous fiscal habits by making promises to our citizens that we already know we cannot keep. Have we not learned our lesson? These tax and budget bills suggest that we have not.
It would have been easy to yield to the emotion and hysteria, give in to the special interests and sign the bills into law. That would have been the wrong thing to do, however, because it hurts the working class and small business owners who have no voice in Frankfort. In both 2015 and 2016, Kentuckians sent a powerful message at the voting booth, mandating a change in the status quo and demanding a break in Frankfort’s longstanding habit of fiscal irresponsibility. I was elected, with a majority of the vote in 106 of our 120 counties, to help build a solid financial future for Kentucky. That is what I am fighting to do.
While folks may disagree on how we got here, there is one thing that is beyond dispute. Our $60 billion pension liability hurts every Kentuckian. It equates to more than $13,500 in debt for every man, woman and child in Kentucky. Where is that money going to come from?
The pension bill took a step in the right direction to stop further digging but did virtually nothing to fill in the hole of debt that had already been dug. It failed to decrease our unfunded liabilities—rejecting reasonable changes that even the Kentucky Education Association (KEA) and the Teachers Retirement System themselves admitted were legal and would have lowered the pension liability.
The KEA has been unwilling to discuss true reform that will ensure that their system remains solvent for current retirees, active teachers and the next generation of teachers. Although many current and former teachers are willing to share responsibility for fixing a broken system, the KEA continues to be unreasonable and unfair to Kentucky’s educators, taxpayers and working families. They want Kentucky’s working class men and women, most of whom have no pension plan themselves, to be the funding source to pay off almost 100% of the $60 billion pension liability. The KEA doesn’t want to contribute anything to solving this crisis.
The vision of economic growth that I communicated in my budget address in January was predicated on the assumption that we would create a pension fix that would allow us to aggressively pay down our debt. During that address, I thanked the General Assembly for the economic seeds they had planted in the short session of 2017. I applauded the efforts that led to record-breaking economic growth last year. I also cautioned that continued growth was dependent on the 138 members of the General Assembly doing the right thing and making tough decisions going forward.
What the General Assembly has done, though well intentioned, is listen to a loud, emotional minority and write a budget check that Kentucky taxpayers cannot afford to cover. In our budget proposal, our administration proposed money-saving cuts to 70 different non-critical programs. These cuts are necessary given the current fiscal realities in our state. The General Assembly’s budget bill chose to ignore those realities by restoring much of that spending and proposing nearly $600 million more in spending than we recommended. The result was a tax and spend budget that, after further analysis, is also unbalanced by at least $50 million.
I have repeatedly called for true tax reform and modernization. The tax bill I received from the General Assembly fell well short of that, instead placing an increased tax burden almost entirely on the backs of hard-working Kentuckians. These men and women are too busy working and raising their families to come to Frankfort and yell at legislators. They also can’t afford to pay lobbyists to yell for them. Nonetheless, they deserve to be heard because they are the ones paying for nearly everything.
These two bills discourage job growth by repealing the Jobs Retention Act. I have received calls from many Kentucky job creators who are very concerned about the unintended consequences of these rushed bills. This tax and spend proposal would also leave our emergency fund virtually depleted, depriving us of critically needed reserve funds should Kentucky experience a natural disaster or downturn in the economy. Credit rating agencies will frown on this. That will hurt Kentucky.
The positive possibilities ahead of us are endless if we can get our financial house in order. We must not be shortsighted. We must not continue the bad practices that got us into this mess.
We should all share in fixing the problems we face. Hard-working Kentucky families keep the Commonwealth moving, and I will not accept a plan that puts our financial burdens only on their shoulders. On Monday, I took a stand for working class Kentuckians by vetoing the budget and tax bills.
We can do better than this and, I believe, with input from the job creators, taxpayers and thoughtful legislators in both chambers, we will do exactly that. United we stand. Divided we fall.
