By Dave Adkisson
President & CEO
The closing of the 2013 General Assembly at midnight Tuesday was more remarkable than its warm, gushy opening the first week of January.
Remember January? The governor invited legislators to the Mansion for dinner, making an important, if primarily symbolic gesture, toward the new legislature. Legislative leaders and the governor, speaking to more than 1,000 state business and political leaders at the Kentucky Chamber Day event a few days later, declared a new atmosphere of bipartisanship and civility that would lead to real progress for the commonwealth.
(Attendees were overheard taking bets on how long that campfire spirit of “Kumbaya” would last. After all, legislative sessions are expected to devolve into political gamesmanship and/or warfare before the clock strikes midnight on the last day.)
Thirty legislative days later, we can reach conclusions based on what happened. In spite of major philosophical differences on some emotional issues and competing political agendas among key players, the bipartisan atmosphere in Frankfort, by and large, was sustained and produced real, measurable results for the commonwealth.
Compromises enabled bills on public pensions, hemp, university bonding and the high school attendance age to reach the governor’s desk, and those are just a few examples.
In the eyes of the business community, fixing the state’s broken public pension system wasn’t everything in this session – but it came close, representing a fundamental opportunity for the state to get its financial house in order.
We’ve been hammering on this issue for six years. With more than $30 billion in promises made to state workers and current retirees and less than 50 cents put aside for every $1 of promises made, Kentucky’s system is one of the worst in the country. Our bond ratings have been downgraded, making it more expensive for state and local governments to borrow money for necessary projects.
A compromise solution to the problem followed months of work last year by an interim legislative committee headed by Republican Sen. Damon Thayer and then-Representative and Democrat Mike Cherry. With the help of the Pew Charitable Trust and the Laura and John Arnold Foundation, a hybrid of a traditional, defined benefit pension system and a modern, defined contribution plan was advocated.
With bipartisan leadership in the Senate by new Senate President Robert Stivers and Minority Leader R. J. Palmer, Sen. Thayer’s Senate Bill 2 passed that chamber with strong bipartisan support, 33-5.
House leaders, specifically Speaker Stumbo, questioned the structure of the proposed new system, but focused more on the need to find a way to pay for it.
Gov. Steve Beshear was willing to consider the hybrid plan, but said he wouldn’t accept a plan that didn’t include a way to pay for it. He wasn’t going to put the costs of fixing the pension system ”on the backs of our schoolchildren.”
The process stalled. “We have to have reform in this session” ran up against “We have to find a way to pay for it.” Our Chamber stepped up our outreach with a sizeable buy of radio advertising in early March on 200 radio stations, insisting that pension reform needed to happen in the 2013 session.
The governor weighed in, convening countless meetings of legislators in his office. To some, his willingness to roll up his sleeves was a refreshing show of executive leadership on one of the toughest issues to confront Frankfort in years.
President Stivers, to his credit, had pledged to set a new tone in the Senate. All indications to-date from Republicans and Democrats is that he has fulfilled that pledge without compromising his party’s principles.
Speaker Stumbo showed his political creativity by trying several times to find a funding source that was palatable to a majority of his members. The possibility of a tax increase on cigarettes, a tax on an expanded lottery and a trade-off with revenues that were flowing into the road fund were concepts that were eventually discarded. Ultimately, the governor negotiated a plan between the leaders of both chambers that garnered enough votes for the House to approve not only the pension fix, but a funding plan to pay for it.
Stumbo’s late-evening speech on the House floor was brilliant for giving his members political cover for a difficult vote and for straightforwardly addressing the concerns of some of his key Democratic constituencies – namely employee unions that didn’t want to see any substantial changes to the state’s pension system. Most Republican House members, even those concerned about the proposed revenue measures, stepped up and supported the pension fix.
The business community, as we noted several times, would have preferred a pure 401-K. But in the realities of the business world, you don’t always get all you want and are willing to settle for what will work.
In this session of the General Assembly, bipartisanship won out on the biggest issue of the day. Pragmatism and democracy prevailed. And Kentucky is better off for it.