One-On-One: Newly elected Senate president says state pensions system shortfall is correctable over time

Ed Lane talks with Sen. Bob Stivers about issues affecting Kentucky

By Ed Lane

Robert Stivers, the newly elected president of the Kentucky State Senate, has served in the Kentucky General Assembly since 1997. Stivers represents the 25^th District, which is comprised of Clay, Knox, Lee, Magoffin, Morgan, Owsley and Wolfe counties.

Sen. Robert Stivers, newly elected Senate president, participates in a 2012 committee meeting in the photo by the Legislative Research Commission.

In addition to his role as Senate president, Stivers also chairs the Senate Committee on Committees and serves as a member of the governing board of the Council of State Government, is an executive committee member of the Southern Legislative Conference, and is a member of the National Conference of State Legislators.

Stivers graduated from the University of Kentucky with a major in industrial management and a minor in economics, and earned his law degree from the University of Louisville. He served as the assistant commonwealth attorney from 1989 to 1993 and is currently a practicing attorney in Manchester, where the Clay County Chamber of Commerce honored him with their “Man of the Year” award in 2000.

Ed Lane: You won your first election for the Kentucky Senate in 1996. When you initially made the decision to run for elected office, did you envision that one day you would serve as both the majority leader and president of Senate?

Robert Stivers: Never even thought about it. Actually, I was introduced when I was running for the Senate and an elderly lady grabbed me. I was 34. She said, “You’re just too wet behind the ears for me.” That was true of me and my opponent, because neither of us had a concept of what we were getting into.

EL: As Senate president, what are your top priorities for the upcoming session, and what will be the main difference between your leadership approach compared to former Senate President David Williams?

RS: It’s very clear from recent dialogue that pensions are a high priority. For years there’s been a problem with the pension system; many pieces of legislation relating to pension and public health have originated in the Senate over the years. Healthcare is also a huge portion of our economy these days, and it affects everything we do.

I’m a lot different than former Senate President David Williams in style; he was a person who micromanaged everything almost to the extent of being a full-time legislator. Our constitution never envisioned elected officials being that way; we’re “citizen legislators.” My perspective is different in that I’m a person who builds consensus and coalitions versus one who has strong beliefs and wants to bring people under that tent to embrace those beliefs.

EL: Sen. Damon Thayer of Georgetown will serve as the new majority leader of the Senate, Sen. Katie Stine of Southgate will serve as Senate president pro tem, and R.J. Palmer will continue as the Democratic leader of the Senate. Could you make a brief comment about each senator and your relationship with him or her?

RS: I’ve known Katie ever since I came to Frankfort. She was in the House when I was elected to the Senate and she roomed (during legislative sessions) with my state Rep. Barbara Colter. Katie loves to get into the details. She is very prompt in what she does and makes a good impression because she is always well prepared.

Sen. Thayer probably almost fits Kentucky’s motto – and its horse racing industry. Damon is “unbridled in his spirit.” He has just unbelievable energy; sometimes you have to put reins on him, but his intentions are good. He is just a ball of fire all the time but quite capable.

Sen. Palmer is probably the complete opposite of Sen. Thayer. R.J.’s personality is one more along my line – a little bit more laid back, with a measured approach. R.J. is easy to work with, and what you see is what you get. He is not out to embarrass anybody and wants to sit and work and see what can be done. But, without being disrespectful or disagreeable, R.J. will definitely make his point if he doesn’t agree with you.

Sen. Robert Stivers, R-Manchester, is sworn in as Kentucky Senate President.

EL: Last year, Franklin Circuit Court Judge Phillip Shepherd ruled the redrawn legislative districts for the 2012 primary and the Nov. 6, 2012, general election were unconstitutional. New districts for House and Senate members must still be revised, since the judge’s order left the existing districts in place for the election year 2012. When will the General Assembly resolve this matter?

RS: I don’t want to see redistricting coming up at this time, so we can keep politics out of this 2013 regular session. There are no elections this year, so let’s discuss policy. That’s been my No. 1 position regarding how the Senate and House should work with the governor this year. With the work the General Assembly did last year, the House and Senate can have new district maps that meet the constitutional requirements ready to go and immediately be moved upon at the start of the 2014 session.

EL: The state’s pension fund and healthcare obligations for retirees and future beneficiaries are estimated to have a $33 billion unfunded liability or $7,600 per capita for every Kentuckian. The state’s retirement plans (pension and healthcare benefits) seem to be perceived by the public, business and legislators as the major issue facing the General Assembly this year. Independent analysis by national media rate Kentucky’s retirement fund (and its underfunded status) as one of the most financially distressed in the United States. How is the General Assembly going to address this significant financial issue during the current legislative session?

RS: The Kentucky Senate has been talking about pension reform for years. Some people say the General Assembly created the problem. The legislature, ever since I have been in the Senate and in its leadership, has funded to the recommended or greater amount than the Kentucky Retirement System stipulated to the Senate as being the appropriate contribution – each and every budget cycle. A lot of people don’t realize that the Senate relies on the retirement system’s independent actuaries and has funded to that recommended amount or greater. It is not a problem that is irreversible. Over a period of time, the pension system will correct itself provided there is a legitimate plan that accomplishes that goal and is passable by the legislature.

EL: How much of an impact has the Federal Reserve’s low-interest-rate policy had on Kentucky’s pension funds investments?

RS: It’s a death by a thousand cuts. Everything including low interest rates is a part of the pension fund’s shortfall. Changes in the state’s portfolio affect the actuarial soundness of the funds, as do cost-of-living adjustments. It might be right to give cost-of-living adjustments, but not necessarily in these lean times when there is minimal inflation. The General Assembly needs to evaluate COLAs annually to determine if an increase in benefits is appropriate instead of making COLAs a standard provision year-in and year-out.

EL: Do you think the General Assembly will be enthusiastic about and approve the city of Lexington’s modifications to its pension plan?

RS: If there is a mutual agreement between the police and firefighters unions and the city of Lexington, I don’t see why the General Assembly would have any questions about it. In fact, I’ve already been in discussion with Judy Taylor (Lexington’s lobbyist) and Mayor Jim Gray about helping to draft legislation that reflects what the new pension agreement would be.

Kentucky Senate President Robert Stivers

EL: New legislation has been pre-filed and some issues are holdovers from prior legislative sessions. Other than retirement benefits, what are other legislative issues?

RS: Casino gaming: Most people know casino gaming is not a position I favor, but it’s not an issue that I go out advocating for or against. Gaming is not getting a lot of attention or conversation in either chamber of the General Assembly at this time.

Medical marijuana and industrial hemp: Two different things. I don’t see medical marijuana going very far, very fast. As to industrial hemp, there is probably going to be a lot of discussion on it because there seems to be a belief that hemp is a potential economic development opportunity for Kentucky. It goes back to the question of drugs and what is hemp’s viability in relation to the potential exposure to increased drug use or the unintended protection of illegal marijuana in addition to industrial hemp.

Local option tax: Kentucky’s tax laws are generally not in conformity with allowing taxes to be controlled on the local level. Granting the ability to tax to cities is a tax reform that probably isn’t going to go very far, at least in my perspective.

Pill mill law revisions: There are discussions on making revisions to correct some unintended consequences that came along with the initial legislation. Those changes can be easily addressed.

EL: How are EPA regulations impacting Kentucky’s coal mining industry and the state’s economy?

RS: Coal mining is declining. Virtually every week the Senate office receives a press release advising more layoffs are coming. It’s evident when you look at how far Kentucky’s coal severance tax has declined (down 24 percent in FY13 through Dec. 31, 2012) because of reduced sales. The coal severance tax is a mechanism of price and volume. In this case, it’s not the price; it’s the volume that’s declined.

EPA emission standards are going to be applied equally to entities that have carbon emissions, so Kentucky will not be at a serious competitive disadvantage. But because Kentucky is dependent on coal-energy power generation, the new emissions standards are having a heavier impact on our state. But the EPA is not only involved in the coal industry. Talk to the people at Keeneland, and they will tell you they are having problems with the EPA right now about the runoff of equine waste products. The farming industry, construction, coal and utilities are also having to deal with a lot of regulations that are mandated by the federal government either through the EPA or the U.S. Army Corps of Engineers.

EL: How would you describe your working relationship with Gov. Steve Beshear and Speaker of the House Greg Stumbo?

RS: Over the last several years, I’ve worked closely with the governor – apart from being the Senate majority leader – because of two unusual and tragic circumstances that took place in my district a year ago when tornados hit Salyersville and West Liberty. Working with each other so much, our relationship has become very congenial and candid.

I’ve known Greg Stumbo for 18 years. He is quite the politician, quite the strategist, and I know that he is very in tune with the sentiment of his caucus and staff. Sometimes he treats his position as speaker of the House like he is in a very high stakes poker game – he plays his cards close to the vest, puts on his poker face, and sometimes bluffs you.

There’s going to be areas where Greg and I won’t be able to agree. Republicans don’t always agree with Republicans, and Democrats don’t always agree with Democrats. But in my opinion the parties have to have dialog and a candid conversation about “you can do this or can’t do that.” With dialog, a lot issues on which the politicians are not in agreement can be discussed, and sometimes an agreement might be reached.

EL: Recent financial data from the office of State Budget Director Mary Lassiter indicate FY13 General Fund revenue year-to-date through Dec. 31 increased 3.8 percent over the same six months of the last fiscal year. Revenues for December 2012 increased 4.9 percent compared to December 2011. Is year-to-date revenue growth meeting your expectations, and what is your revenue outlook for the balance of the fiscal year?

RS: Yes, the state is in a much better financial position. I’ve been here when there’s been negative growth. But I also have to say “yes” with a little caveat, because part of the FY13 revenue increase was due to the state’s tax amnesty program. A lot of uncollected revenue that was not forecasted or budgeted came in unexpectedly in November. December data gave me a more optimistic outlook because some amnesty revenue probably did leak into December, but still to have that type of growth around the Christmas cycle shows me that Kentuckians are out there spending money.

Sen. Robert Stivers recently married Regina Crawford, field representative for U.S. Senate Republican Leader Mitch McConnell.

EL: What is the status of a Kentucky Health Benefits Exchange created under the Affordable Care Act (Obamacare)?

RS: There are a lot of differing views on the health exchange. The governor’s office feels it can go forward and implement the healthcare exchange under the Affordable Care Act. The Senate is somewhat leery of that position. Kentucky has received over $250 million from the federal government to implement a health exchange. I think the exchange is going to be very difficult to manage and costly for Kentucky. For lack of a better term, Kentucky is going into “Star Trek mode” – boldly going where no man has gone before – and that’s a little scary because of the cost. Kentucky has to be very careful coming out of the recession. As a legislator, I do not want to put the state in a position of having to raise tax revenues to implement a healthcare plan that has been mandated on Kentucky by the federal government.

The governor’s office thinks it can move forward and set up a health exchange without approval by the General Assembly. Some of the elected members in the legislature believe the governor needs our approval. Sen. Julie Denton has filed a bill to make it clear the governor would have to have the legislature’s approval. Under the Kentucky constitution there are three branches of government. The elected representatives of the citizens set the policy and the budget; the governor and the government bureaucracy operate in accordance with the laws and budgets established by the General Assembly. Some believe that the governor can go ahead with a health exchange and has the ability to set that policy, but I don’t. The judicial branch interprets what the legislative and executive branches of government do within the framework of Kentucky’s constitution and statutes.

EL: At the Kentucky Chamber of Commerce legislative dinner on Jan. 10 you mentioned that the recent prior weeks had been very busy and exciting because of political and personal changes that were occurring, including your marriage to Regina Crawford, who is the field representative for U.S. Senate Republican Leader Mitch McConnell. Do you have any updates?

RS: The most powerful political woman in Central Kentucky has the ear of U.S. Sen. McConnell and the ear of the Kentucky Senate president. She’s energetic, bright and intelligent, and I know that I married well above myself. I think Sen. McConnell understands her value. She attends events and represents him well and provides him a very good service of understanding of what his constituents in the Central Kentucky area are doing and thinking. I think Regina’s underpaid; she’s well worth every dime the U.S. Senate pays her. We have a good and wonderful relationship.

Ed Lane (edlane@lanereport.com) is chief executive officer of Lane Consultants, Inc. and publisher of The Lane Report.