Legislative sessions are usually messy, and this year was no exception. Before the first gavel fell, most observers predicted gubernatorial politics would cast a shadow on the session, and many predicted little would be accomplished.
Despite this, the Kentucky Chamber of Commerce approached the session with an aggressive agenda to advance Kentucky, and we were able to affect measurable progress in all five areas of the chamber’s strategic plan: improving the education attainment of Kentuckians at all levels; modernizing government; promoting wellness and healthy Kentuckians; preparing Kentucky to successfully compete in the global marketplace; and expanding Kentucky’s role as an energy leader.
Significant legislation passed to address corrections reform, workplace wellness programs, healthcare taxes for business, and education management improvements. However, the legislature missed opportunities to act on three pieces of legislation that were critical to Kentucky’s business climate. The Senate did not hear legislation to address the persistent dropout problem in Kentucky schools. The House did not act on proposals filed to develop a more efficient tax code, nor to address Kentucky’s $28 billion unfunded pension liability. Rather than gathering around the table in search of a solution to these key issues, legislators stayed in their respective corners … heels dug in deeply.
The greatest success of this legislative session was the passage of HB 463, legislation designed to reform Kentucky’s overcrowded and financially unsustainable prison system. This legislation addresses an area of excessive spending identified by the chamber’s Leaky Bucket report in 2009. It will save the commonwealth $422 million over the next 10 years. At the same time, the bill also will protect the public and provide treatment for offenders whose drug addiction spurs their criminal behavior.
The chamber fought to influence passage of several business-friendly bills:
• SB 12 improves accountability in schools by allowing superintendents to play a greater role in principal selection.
• SB 114 authorizes health benefit plans to offer incentives to members who participate in a voluntary health plan wellness program.
• HB 255 alleviates administrative burdens for business by aligning Kentucky’s health insurance tax exclusion law with that of the federal tax law.
• SB 108/HB 201 saves court costs for small businesses and the court system by raising jurisdictional limits.
The chamber successfully helped block legislation that was bad for business and bad for Kentucky.
• SB 151 would have changed the makeup of Kentucky’s Public Service Commission by electing commissioners, which would politicize the process of reviewing rate cases and potentially raise energy rates.
• SB 45 and HB 281 would have raised healthcare costs by making pseudoephedrine a prescription drug.
• HB 3, SB 6 and HB 111 would have created a patchwork of state and local immigration laws, thus increasing the administrative burden for employers.
The most difficult issue addressed was how best to handle the $166 million shortfall in the Medicaid budget. The governor and House of Representatives wanted to shift money from 2012 and fill the hole in next year’s budget with projected savings raised from efficiencies; the Senate argued the only responsible way was to implement cuts across state government and replace those funds only if the savings could be realized.
The Medicaid debate grew contentious and ended with a special session and several line-item vetoes by the governor. In the end, the shortfall was addressed by shifting money from next year’s Medicaid budget and spending it this year. If savings are not realized by managed care, there will be a significant budget problem next year.
All in all, progress was made in 2011, but there’s still much work to be done. The Kentucky Chamber has already begun developing its business agenda for 2012 and will continue to work on these issues during the interim.
*For a full breakdown of what passed, what didn’t and what it means to your bottom line, download the Chamber’s Results for Business report at kychamber.com.