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Kentucky labeled a ‘sinkhole’ state

September 12, 2012 By Leave a Comment

Recently the Institute for Truth in Accounting (ITA) released an updated Financial State of the States report. Unfortunately, Kentucky has ranked near the bottom with regards to state debt and taxpayer burden. I can’t be the only person growing weary of low rankings for the Commonwealth.

The ITA points out that a lack of transparency and truth in government accounting have left taxpayers blind to just how much debt their states have been accumulating.

The report analyzes all 50 states and ranks them with Kentucky coming in at #46 (with 50 being the state in the most precarious situation.) Kentucky’s overview points out several reasons for the ranking being so low:

Kentucky statutes require the legislature to pass a balanced budget. One of the reasons Kentucky is in this precarious financial position is state officials use antiquated budgeting and accounting rules to report Kentucky’s financial condition. Since employee retirement benefits are not immediately payable in cash, the related compensation costs have been ignored when calculating balanced budgets. Additional problematic accounting methods include recording loan proceeds as revenues and delaying the payment of bills.

Almost $27.3 billion of state employees’ retirement and other costs have been pushed into the future. Each taxpayer’s share of the financial burden is $23,500.

Notice that a significant portion of that debt is related to public pension liability, something The Bluegrass Institute has covered in depth in our Future Shock series. This is certainly one of the greatest threats to Kentucky’s financial situations.

When will Kentucky’s leaders stop ignoring state debt issues and embrace policies that will catapult us to to the top of the list rather than keeping us hanging around the bottom?

 

Filed Under: Reduce Government Spending, Transparency and Accountability Tagged With: , , , ,

‘Medicaid managed care blues’

March 27, 2012 By Leave a Comment

A recent article about Medicaid managed care in Kentucky features quotes and research by Bluegrass Institute scholar Dr. John Garen.

The article titled “Medicaid Managed Care Blues in the Bluegrass State” by Kenneth Artz is a great overview of the situation that Kentucky now faces. It is no secret that Kentucky’s Medicaid program faces significant challenges. The most notable problem is the fact that without serious reforms, the current program is simply not sustainable.

John Garen, an economics professor at the University of Kentucky and a Bluegrass Institute adjunct scholar, says that the state’s Medicaid program was unsustainable regardless of the shift to managed care.

“It’s not unlike Medicaid in other states,” said Garen. “Prices are increasing just as the numbers of eligible folks going onto the rolls are increasing. It’s been growing just a few percentage points every year, but it all adds up. With the ObamaCare mandate expected to force more companies to no longer offer employee health insurance, even more are expected to join Medicaid. This will further increase costs.

“All of this adds up to Medicaid expenditures increasing faster than economic growth,” Garen said.

Garen authored “An Unsustainable Path: The Past and Future of Kentucky Medicaid” which made numerous recommendations about how the stat’s Medicaid program could be turned around.

There’s no time to waste as this problem becomes more serious by the day!

Filed Under: Increase Free Markets, Reduce Government Spending, Smaller Government Tagged With: , , ,

Kentucky’s annual gamble

February 9, 2012 By 1 Comment

Kentucky lawmakers have had a strange love affair with expanding gambling. Every year, they gather and seem to get a little bit closer to handing a brand new revenue source to the various race tracks around the commonwealth.

The chief argument against expanded gambling in Kentucky seems to be that it will have some corrosive impact on the culture. Whether or not that’s true, it’s important to understand that freedom can be rather messy. People sometimes fail to take advantage of the upside of basic liberties. People sometimes make bad choices. Expanded gambling offers people a chance to blow their whole paychecks on the turn of a wheel, a toss of the dice or the dealing of cards. And some poor souls choose that path. These facts should not be taken as an argument against freedom. Instead they’re an argument for people to make better choices on behalf of their families.

The side that tends to favor expanded gambling makes the point that Kentucky’s government needs the money. Budgets are tight, after all, and revenues from gambling will be the state budget elixir. There are so many things the government does that may have to be sacrificed if Kentucky doesn’t approve a tax on those who choose to gamble said paychecks for the chance at a better tomorrow.

Unfortunately, both sides of this debate are horribly misguided. Yes, you can lose your family’s source of sustenance on a roll of the dice. So what? It’s your job as an adult to make the right choices with your hard-earned income. Bright lights and the promise of big wins doesn’t absolve you of the responsibility to do right by yourself and those who depend on you.

And yes, expanding gambling could provide additional revenues to the government. So what? The problem with Kentucky’s government isn’t that revenues are lacking, it’s that Kentucky’s government is involved in too many activities that ought to be left to the voluntary sector. Should the government own a dozen or more state parks, golf courses or industrial parks? Should the government really be in the business of subsidizing entertainment venues in Lexington, Louisville, Corbin or Pikeville? Should the government be picking winners and losers with special “tax incentives” that favor some businesses over others?

Before you pick a side in the fight over expanded gambling in Kentucky, ask yourself this: Have Kentucky’s lawmakers been good stewards of your tax dollars thus far? Are there programs that lawmakers support that might ought to be cut in lieu of seizing a larger share of taxpayers’ earnings? Will a new tax really help lawmakers make ends meet?

I hope you’ll agree with me that giving lawmakers control over a bigger chunk of Kentucky’s economy is a bad bet.

Filed Under: Reduce Government Spending, Smaller Government, Transparency and Accountability Tagged With: , , , , , , , , , , ,

Pension reform in other states, so why not Kentucky?

February 4, 2012 By 1 Comment

Economist Brian Strow stresses the need for state pension reform in the Bowling Green Daily News:

A growing number of states have recently engaged in public pension reform, and rightfully so.

Unfunded state pension liabilities have been an albatross around the necks of more than one state balance sheet. Illinois, New Jersey, Wisconsin, Ohio, Michigan, Connecticut and Rhode Island have all implemented recent pension reforms to reduce unfunded liability. These include both Republican- and Democratic-run state legislatures. The Democratic governors of New York and California have each submitted plans to revamp their states’ public pension plans. Thinking Republicans and Democrats alike realize that public pension reform is not a conservative or a liberal cause. They realize it is about the math. States cannot make promises to public employees which exceed their ability to pay for them.

It is time for Kentucky’s state legislature and governor to engage in public pension reform here. The $30 billion plus hole in the state’s pension system isn’t going away. Rather, like an untended sinkhole, it is quickly expanding. Each year, Kentucky’s pensions are adding hundreds of millions of dollars in unfunded liability. Left unchecked, Kentucky’s unfunded pension liability is going to cripple the entire state’s economy.

The bandwagon of state pension reform is one worth jumping on. Failure to do so illustrates a fundamental misunderstanding of math. Such a misunderstanding will only get worse when our school budgets are cut to feed the pension monster the state legislature has created. Failure to reform our state pension system will cause our state to face yet another credit rating downgrade and drive us one step further to insolvency.

Read Lowell Reese’s devastating Bluegrass Institute report on Kentucky’s pension system here.

Filed Under: Increase Free Markets, Reduce Government Spending, Smaller Government, Transparency and Accountability Tagged With: , , , , , , , ,

Happy Chandler’s dangerous statism

January 20, 2012 By 2 Comments

In Burton and Anita Folsom’s new book, FDR Goes to War, the following quote appears …

[A]ll of us owe the government; we owe it for everything we have—and that is the basis of obligation—and the government can take everything we have if the government needs it. . . . The government can assert its right to have all the taxes it needs for any purpose, either now or at any time in the future.

The quote is from celebrated Kentuckian A.B. “Happy” Chandler, a former Kentucky governor and grandfather of current 6th District U.S. Representative Ben Chandler. The quote is among several statements offered during the debate over the Current Tax Payment Act of 1943. If you don’t like federal withholding on your paycheck, you have that legislation to thank.

Think about what Chandler is saying here. It’s a breathtaking assertion that individuals have no innate property in their productivity or themselves. Under Chandler’s view, the government may rightfully take whatever it wants from you for whatever purpose. Does Chandler’s view really leave any room for a government that derives its just powers from the consent of the governed? Is there any room for the protections provided by the Constitution? Does Chandler’s view leave room for the “inalienable rights” that we each possess by virtue of our existence? I don’t see how it could.

As Robert Higgs points out, if we can weather the dangerous claims of sweeping government power from people like Happy Chandler, we shouldn’t worry so much about the soft statism of gadflies like Elizabeth Warren.

You can watch Professor Folsom discuss his book here.

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