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Tuesday, April 6, 2010

Lets Talk Kentucky State Politics

Lets start with a quick summary of where we are at in Frankfort:
  •  A budget hasn't been approved yet with only 2 days left in the current session (a short recess has been called until April 14th)
  •  A budget can still be passed after the end of the session but only if the Governor calls a special session
  • There is major disagreement between the House (controlled by Democrats) and the Senate (controlled by Republicans) that largely centers around a plan to add spending of roughly $1 billion for schools and other infrastructure projects around the state.  Sound familiar?
  • This additional spending comes in the face of mounting deficits at a state level that now projects at over $1.5 billion deficit over 2 years that is largely the result of increasing unemployment near 11% in Kentucky
Faced with such large deficits there are really only 2 approaches to avoid a fiscal crisis in the state - 1) Increase revenue 2)Cut spending. 
  1. The House plan includes a measure that would increase revenue by $270 million by letting a tax benefit for small businesses to expire for 2 years.  The Democratic leadership would like to avoid the tax label for this measure but lets be honest anything that increases revenue is a tax on somebody.  To be fair to Democrats the governor proposed casino gambling and it failed to gather enough support to generate the hundreds of millions that supporters projected.
  2. There doesn't seem to be much political will beyond the Republican controlled Senate to take the tough medicine necessary to bring expenses in line with revenues.  These are generally politically difficult decisions to make especially when it likely means a further reduction in jobs that the economy desperately needs.  Besides cutting services such as Pre-school and Youth Service Centers, which are desperately needed to avoid creating the next generation of problems for the state, the General Assembly should look at dealing with the real driver of current budget deficits - The Pension Crisis
Kentucky faces a large and looming crisis over pensions that isn't just a state issue or even a Kentucky issue but will affect the entire nation as well as counties and municipalities across the nation over the next couple of decades.

ABC News published a recent report on the crisis from a countrywide perspective but it is really starting to hit home for the state in 2010 and will only grow in coming years.  Even Fort Thomas will feel the impact.  While America has made the shift from defined benefit plans to defined contribution plans government has not quite made the switch and will now begin to feel the full weight of an aging population bearing down on it.  It is going to take real leadership in Frankfort to solve this issue and 25,000 temporary jobs from a few infrastructure projects is not going to solve this one.

The sides will likely come together in the final hour but watch closely over the coming year or two and even as the state's economy improves to see who is willing to step up with real solutions.

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