“Gov. Beshear’s administration does a great job of celebrating mediocrity. I think if you ask the average Kentuckian – in no way do they feel like we’re in the stages of a robust kind of comeback for our economy.” –Julia Crigler, Kentucky State Director, Americans for Prosperity
Gov. Steve Beshear’s recent victory lap touted an $82.5 million deposit of what he calls “surplus” funds into Kentucky’s “rainy day fund.”
Beshear claims it’s a “sign of a healthy economy” and attacks his critics who “keep running their mouths about how bad things are,” reports WHAS-TV’s Joe Arnold.
However, I’m concerned that Kentuckians who hear the governor’s glossy spin about a robust recovery will lack motivation to confront the serious challenges offered by a status quo that includes a dire public-pension crisis.
While the truth poses inconveniences to politicians frantically seeking legacies beyond having grown government and their constituents’ dependency on it, Kentuckians deserve to hear it anyhow.
So in the spirit of Beshear’s statement that – as Arnold reports – “his best defense are the facts,” let’s look at some:
- Fact: The $82.5 million deposit in the savings account was possible because the state didn’t pay its bills.
“So yes, if we don’t pay our bills, we can put money in a ‘rainy day fund’ and pat ourselves on the back,” Western Kentucky University economist Brian Strow said on KET’s “Kentucky Tonight.”
“If we had paid for the pensions as we’re supposed to, it would have been more than eaten up,” Strow said in reference to the rainy day fund deposit.
While the legislature took some baby steps in 2013 to address the pension crisis, most of the benefits of those changes won’t manifest for decades. Meanwhile, the system’s unfunded liabilities continue to grow.
- Fact: George Mason University’s Mercatus Center ranks Kentucky’s fiscal health at No. 45, meaning only five states are in worse condition.
Unlike the vague Site Selection magazine award touted incessantly by Beshear showing Kentucky supposedly ranking first in a nebulous “most new projects per capita” category, we actually know something meaningful about how Mercatus Center researcher Eileen Norcross arrives at her rankings.
She ranks Kentucky No. 47 in “budget solvency,” No. 44 in “long-run solvency” and No. 46 in “trust fund solvency,” which compares state debt to personal income.
Arnold concludes his coverage of Beshear’s announcement with the governor claiming that Kentucky doesn’t need to look at economic-enhancing policies such as right-to-work and getting rid of punitive personal income taxes like better-performing states are doing because “we were number one; they weren’t,” again referring to that Site Selection award.
Nos. 47, 44 and 46 are a long way from the top, governor.
- Fact: According to the Bureau of Labor Statistics (BLS), Kentucky does rank No. 1 in one category: the percentage of jobs requiring only a high-school degree.
“Our wages reflect that,” Strow said. “When we don’t have a high level of education, we’re not going to command wages the other states get, and this is one of the reasons we’re in the bottom five in terms of household income.”
- Fact: While government revenues and spending have increased steadily in Kentucky each year since 2010, BLS numbers reveal that private-sector weekly earnings are up less than 1 percent annually since Beshear took office before the Great Recession arrived.
In fact, much of the increased tax revenue touted by Beshear can be attributed to lower gas prices that give individuals more disposable income to spend on items most likely to be subject to a sales tax.
But is that really evidence of higher wages, better jobs and a booming turnaround, as the governor and his supporters contend?
Claiming a robust economy while personal incomes remain stagnant and government revenues, spending and programs become more bloated is like a Kentucky college basketball coach declaring a spectacular season has occurred even when his team lost more games than it won.
In such a case, I’m certain there would be no lack of motivation to confront the status quo.
In search of a legacy, Gov. Steve Beshear has resorted to taking “victory laps” in attempts to convince skeptical Kentuckians that the commonwealth’s economy is roaring back.
However, hard facts from the Bureau of Labor Statistics show employment and earnings in the commonwealth are “barely back” to where they were when Beshear took office in December 2007:
We just passed the 103rd anniversary of the late Nobel laureate Milton Friedman’s birthday while witnessing a maddening rush toward mammoth minimum-wage hikes, led by out-of-touch and economically illiterate do-gooders – from the White House to the Kentucky governor’s mansion and even to members of the Lexington-Fayette Urban County Council.
As I witness this economic and political madness, I can’t help but wanting to offer a remix on Simon and Garfunkel’s “Where have you gone, Joe DiMaggio? Our nation turns its lonely eyes to you,” to “Where have you gone, Milton Friedman? Our commonwealth needs your wisdom more than ever.”
Fortunately, while Friedman has “gone away,” YouTube remains.
So does our ability to answer: “What would Friedman say about the attempt to increase Lexington’s minimum wage by a whopping 40 percent – from $7.25 to $10.10 an hour?”
We don’t have to guess what Friedman, who was a mental giant despite being diminutive of physical stature, would say. He left it with us in his own words.
Friedman would call the efforts by council member Jennifer Mossotti to raise the minimum wage in Lexington a misguided attempt to help the poor.
“You are doing nothing of the kind,” Friedman would say, as he did in a past interview on Public Television’s long-running “The Open Mind” with the late Richard Heffner. “What you are doing is to assure that people whose skills are not sufficient to justify that kind of a wage will be unemployed.”
The do-gooders point to studies showing that raising the minimum wage will not affect employment. But just like not all minimum-wage increases have the same impact on each area of a nation, state or even a community, so not all reports on the issue dig deep enough.
Many take surface views and lack any historical perspective.
As a result, they have little or no interest in what history teaches concerning the minimum wage’s effect on particular groups and simply propagandize that raising the minimum wage doesn’t negatively impact employment.
He would bring economic and common sense – both of which he possessed in abundance – to the discussion, noting that such a conclusion fails to consider how raising the minimum wage affects young people.
“It is no accident that the unemployment rate among teenagers in this country is over twice as high as the overall unemployment rate,” Friedman said. “It’s no accident that that was not always the case. Until the 1950s, when the minimum wage rate was raised very drastically and very quickly, teenage unemployment … was nothing like the extraordinary level it has now reached.”
Not only is teenage unemployment suffering; so, too, is teenage employment.
Western Kentucky University economist Brian Strow, Ph.D., noted in a recent study that the youth-employment rate fell from 47 percent to 27 percent between 1990 and 2014.
“Youth employment is almost half of what it was 25 years ago,” he wrote.
Political advocates of raising the minimum wage, including council member Mossotti and her band of community organizing, entitlement-minded protesters, run away from discussing the impact of a minimum-wage hike on young people almost as fast as the Republican establishment is running away from presidential candidate Donald Trump.
The fact that you never hear them express any genuine concern about this aspect of the proposed policy should raise serious doubts among a group of elected council members in a city that includes 30,000 students bleeding University of Kentucky blue.
Common sense alone tells you: that’s a lot of potential unemployment and brings home an important point made by Friedman in a Newsweek column nearly a half-century ago: “The true minimum wage is zero—the amount an unemployed person receives from his nonexistent employer.”
We at the Bluegrass Institute send our condolences to the family of Ed Lane, a friend of the Bluegrass Institute.
Lane, who passed away Sunday night at the age of 73 after battling cancer for more than two years, was publisher of The Lane Report, one of Kentucky’s premier business magazines, and a longtime Lexington Urban County Councilman and commercial real-estate broker.
Read more about this great Kentuckian in the business-news magazine he founded.
Kentucky’s Professional Growth and Effectiveness System (PGES) has problems
It’s inevitable human nature: If a person’s own organization is being held accountable for job performance scores, and if the organization’s own staff self-awards those scores, then those scores are going to get inflated to the point of meaninglessness.
A good example of this truth played out with Kentucky’s now defunct writing portfolios for school accountability program that ran under the also defunct KIRIS and CATS assessment programs. Teachers awarded students’ scores for the writing portfolios but the schools were then held accountable for those scores. As a consequence, serious inflation in portfolio scores was found by every single audit ever performed on the program.
But, Kentucky’s educators seem to have a slow learning curve. When the state’s Unbridled Learning accountability program started up, it was announced that elements would be added to the formula for the Program Reviews in subjects like Arts and Humanities, Practical Living and the operation of the writing programs in schools. Those Program Reviews were to be self-scored by staff in each school.
The inevitable result, as I wrote about in June, was that the first audit of the Program Reviews found notable inflation in scores. This was no surprise – it was just human nature.
At today’s Kentucky Board of Education meeting a discussion was held about obvious problems with yet another self-scored element that was to be added to the Unbridled Learning formula – the results from the teacher and principal performance evaluations conducted under the Professional Growth and Effectiveness System (PGES). To the board’s dismay, it turns out the vast majority of performance awards were in the two successful categories of “Accomplished” and “Exemplary.” A presentation of the score results showed that a whopping 93.5 percent of the teachers in the state got an overall job performance rating in one or other of the two success categories. Inflation for school leader job performance was equally bad with 89 percent scoring in one of the two performance success categories. To be honest, the scores are so unreasonably high that I don’t see how they can be useful in any way.
Those incredibly high school staff job rating scores didn’t sit well with school board members when it was pointed out that only around half of the state’s students were scoring proficient or better on the state’s KPREP reading and math tests. It was very quickly apparent to the board that adding the PGES scores into Unbridled Learning would instantly result in inflated overall school results that would undermine the credibility of the whole program.
The board wisely chose to reverse their earlier decision and removed the PGES from Unbridled Learning for now.