KyKurmudgeon

Gee, how time gets away from you when your return to work after 2 1/2 weeks of R&R coincides with the opening of an organizational session of the General Assembly, not to mention having to report for two months of jury duty. But hey, jury duty may provide a pleasant respite from watching the perennial clash of political egos that occurs whenever lawmakers convene. Anyway, now that I’m back from the holidays, it’s time to get kurmudgeonly again. So, on to the quickies.

1. It appears the House of Representatives underwent a major transformation while I was away. Democrats apparently picked up about 20 more seats, giving them a majority of 85 votes or so. At least, that’s the total when you add up the number of D votes incumbent Speaker Jody Richards and his challenger, Rep. Greg Stumbo, claim to have on their side going into Tuesday afternoon’s leadership elections. Someone is going to find out a few of their “friends” have been lying to them.

2. OK, back to square one on the little matter of the state pension plans’ $27 billion unfunded liability. Square one is the fact that a major portion of that unfunded liability accrued from, duh, 15 years of underfunding in a succession of budgets passed by the General Assembly. (Square two is the soaring cost of health care, but we’ll leave that for another day.) So, after lawmakers failed to enact pension reforms in the 2008 General Assembly, Gov. Steve Beshear calls them into special session and got a reform bill passed that included getting the state headed in the right direction (albeit with miles and miles to go) on adequate funding of the retirement systems. It was arguably the primary achievement of his first year in office.

Now, in what can only be described as something of a U-turn, Beshear has proposed giving cities, counties and school systems a break on meeting their funding obligations to the pension plans. Sure, cities, counties and school systems are struggling during these economic hard times, just like everyone else. But allowing them to stretch out their contributions over a longer period of time, as Beshear proposes, denies the systems not only a portion of the money they are due now but also the investment return that money would produce in the coming years. Although Beshear’s plan might ease the pain now, it would exacerbate the problem of unfunded liability by taking the same short-sighted, irresponsible approach to funding that caused a big portion of this mess in the first place. Bad idea. Very bad idea.

3. Beshear just doesn’t get the whole “public perception” thing in this Adam Edelen-Bob Babbage deal. What the public sees is a top-ranking administration official who is now the governor’s chief of staff maintaining a partnership with an influential lobbyist for at least a year after joining the administration. And even though Beshear, Edelen, Babbage and all their friends try to rationalize it from now until the cows come home, the public will still see exactly the kind of good-ole-boy croynism Beshear promised to eliminate from state government. That’s a damaging perception for the Beshear administration. And even if the Edelen-Babbage partnership produced no benefits from the state for Babbage, nothing is going to change that perception now. The time for eliminating that perception was prior to Edelen joining the administration. That was when the partnership with Babbage should have been terminated. And Beshear should have made it happen before bringing Edelen on board.

4. It didn’t take long after the elections for the remodeling of Senate offices to resume, albeit on a somewhat more modest scale that originally envisioned. Still, in the present revenue environment, even modest remodeling comes across as extravagance.

5. Count me with Rep. Tim Firkins, D-Louisville, on his proposal for a cut in lawmakers’ pay during this revenue crunch. Sure, it wouldn’t mean much in the grand scheme of a projected $456 million shortfall for this fiscal year. Like the cuts Beshear, Lt. Gov. Daniel Mongiardo and several top administration staffers volunteered to take, cutting legislators’ pay would be strictly symbolic. But there’s a lot to be said for such symbolism when others are feeling real pain from the budget reductions.

Jeff Derouen, chief of staff for Lt. Gov. Daniel Mongiardo for the past year, will become executive director of the state Public Service Commission effective Jan. 1. An official announcement is expected Tuesday afternoon, according to Jill Midkiff, deputy communications director for Gov. Steve Beshear.

Mongiardo’s name is on any short list of potential Democratic candidates for the U.S. Senate in 2010, when Republican Sen. Jim Bunning’s seat will be on the ballot. It’s likely Derouen’s move will prompt speculation about what it means in relation to Mongiardo’s plans. I have no clue on that one. But I understand it was a voluntary decision on Derouen’s part.

1. Gov. Steve Beshear’s signature campaign issue, putting a casino gambling amendment on the ballot in hopes of eventually recapturing the $300 million to $500 million in revenue flowing from Kentucky into other states’ treasuries, went nowhere in this year’s General Assembly session. Facing a $456.1 million revenue shortfall in the current fiscal year (and who knows how much in the next one), he’s proposing a 70-cent increase in the cigarette tax that, if approved, won’t come close to filling that void. So Monday, he created a Commission on Philanthropy to look at ways the state’s charitable foundations can get more bank for the buck in such areas as health early childhood education. The combination of these circumstances has put an image in my mind that I can’t shake. It’s the image of Beshear sitting at street corner with a tin cup in his hand begging for alms to pay for services the state should be providing.

2. Speaking of casino gambling, the fact that a task force Beshear created to study the future of horse racing in Kentucky failed to include any recommendation on expanded gambling in the report it issued Monday is completely mind-boggling to me. How can a panel that supposedly has just a tiny bit of interest in making sure this state’s racetracks stay competitive with their counterparts around the country ignore expanded gambling when purses at tracks in several other states are supplemented with proceeds from that source? How does this panel expect Kentucky tracks to remain competitive without help from expanded gambling? By sitting with its own tin cup on the street corner opposite Beshear?

OK, so Illinois Gov. Rudy Blahgojevich is the public face of public corruption du jour after his arrest for allegedly trying to sell President-elect Barack Obama’s Senate seat to the highest bidder. But we in Kentucky have such a fine tradition of sending our elected officials off to the hoosegow, the state that produced Operation BOPTROT (”Bless your heart” for that kind contribution) and had a couple of former U.S. representatives doing federal time at the same time not so many years ago must be vying for the top ranking in the nation in the public corruption category, right?

Well, no. According to a weekend story in The New York Times, Florida plays the public corruption game as well as its flagship university plays football. From 1998 through 2007, 824 public officials in the Sunshine State were convicted on federal corruption charges. New York came in second with 704, followed by Texas and Pennsylvania. California and Ohio tied for fifth. The rest of the Top 10 were Illinois, New Jersey, the District of Columbia and Louisiana.

Kentucky, with 242 public officials getting nailed by the feds during that time period, finished 14th. Respectable (or should that be disrespectable?) but no threat to win the national title. Oh, well, at least we made the Top 10, at No. 9, when the rankings were based on convictions per capita. So, there’s at least some reason to hold our head up, uh, down, uh, whatever.

Sunday’s column:

FRANKFORT — As a short-term solution for the $456.1 million revenue shortfall the state faces this year, Gov. Steve Beshear’s proposed mix of spending cuts, tax increases and employee furloughs seems sensible and minimizes the pain.

Sure, lawmakers from both parties will object to one detail or another. Some started squawking immediately when they learned Beshear’s plan would use excess severance tax money that normally would go to coal counties to help balance the state’s bottom line.

And no doubt, Beshear’s proposal will undergo an extreme makeover before it emerges from the General Assembly. But he has provided a reasonable starting point for discussions about addressing this year’s revenue shortfall.

And therein lies part of the problem with Beshear’s plan. Its scope is limited to an immediate crisis largely created by a recessionary economy that most experts say hasn’t hit bottom yet.
So, if Beshear and state lawmakers deal only with the shortfall in this year’s budget, the state can expect to be staring at another gaping hole in next year’s budget six or eight months down the road. Indeed, one facet of Beshear’s plan could exacerbate any shortfall in next year’s budget.

When they enacted the two-year budget last spring, lawmakers balanced next year’s bottom line with the help of $144 million from the state’s “rainy day fund.” Beshear wants to pull that money out of next year’s budget and use it this year. He would replace it with proceeds from an increased cigarette tax.

But replacing that $144 million would eat up nearly all the annual revenue generated by 70-cent increase in the cigarette tax, leaving little or no new money to use in dealing with another shortfall.

And that assumes Beshear has the kind of powerful friends at 1-800-MIRACLE who can help him persuade lawmakers in a state with a substantial population of smokers to pass an increase of that size.

After Beshear made his plan public, Secretary of State Trey Grayson called it a “quick fix,” adding that Kentucky needs comprehensive tax reform. Although we may not agree on what that tax reform should entail, Grayson is right about the need for it.

Speaking at a recent Kentucky Association of Counties conference, Beshear told a gathering of local officials, “The bottom line is that I have absolutely no intention, no intention whatsoever, of surrendering or retreating from the mission of government … to improve the quality of life for each and every Kentuckian in each and every one of our counties.”

He has delivered variations on those comments often during his first year in office, a year marked by budgetary woes. It’s a recurring theme that suggests Beshear doesn’t want to settle for being a caretaker governor. Frankly, though, what he offered Thursday in response to the current shortfall was the plan of a caretaker governor.

If adopted, it would keep the engine of state government running — on idle, but running — for the next six months. But it would do nothing to prepare Kentucky for the next revenue crisis, which almost surely will come at the end of that period.

As noted often in this column, and in the Herald-Leader’s editorial columns, Kentucky needs a more stable revenue base that is better able to weather economic down times.

Though desirable for a variety of reasons, including the health of Kentuckians, an increase in the cigarette tax will not provide such stability. Even casino gambling, which Kentucky also needs for a variety of reasons, won’t provide any real stability because it relies on discretionary income, which gets a little harder to part with during economic downturns.

Extending the sales tax to services, while perhaps lowering it, can help provide stability to the revenue base. And never has there been a better time to make that argument than now, when people aren’t buying that many new “things” but still need to service their old ones.

Everyone expected Beshear to propose an increase in the cigarette tax. But it’s disappointing that he stopped with the expected proposal, the caretaker proposal, instead of using this crisis to make the case for putting Kentucky on more solid revenue ground and preparing it for future crises.

His reach ultimately might have exceeded his political grasp. But he at least would have reached.

1. Although they don’t mean diddly about filling a $456.1 million hole in the current state budget, thosevoluntary 10 percent pay cuts Gov. Steve Beshear, Lt. Gov. Daniel Mongiardo and senior members of the governor’s staff will take in 2009 make for a nice piece of symbolism. None of these folks, who earn more than $100,000 a year each, will feel the kind of pain others will suffer from another round of cuts in state funding of education and crucial social services. Still, their small gesture was a laudable one. Legislative leaders, who are as responsible as anyone for failing to generate adequate revenue for any of the state’s operations other than their own, should be ashamed if they don’t join in the sacrifice.

2. Who woulda thunk we would see the day when U.S. Sen. Mitch McConnell, Kentucky’s fund-raising king of kings, would have to borrow money to stave off a challenger? But the Politico Web site reported last week that McConnell borrowed a total of $1.8 million in the closing days of his race against Democratic challenger Bruce Lunsford. The multimillionaire Louisville businessman may now be a three-time loser as a candidate, but give him credit for making the heretofore seemingly invincible McConnell work up such a sweat.

3. McConnell’s fellow Republican senator from the Bluegrass State, Jim Bunning, has said repeatedly that he will seek re-election in 2010. I hear he reiterated that stance during a teleconference with reporters Tuesday. But some of the recent whispers on the Kentucky political winds are starting to suggest otherwise. We’ll see. Assuming Bunning is the R candidate in ‘10, Democrats would be wise to get a name contender in the field shortly early in 2009 - unless they have another Lunsford on their bench who can self-fund a pricey campaign on short notice. Anyone else would have to start working early to raise the kind of money needed to pose a serious challenge to an incumbent senator.

Former state Budget Director Mary Lassiter, who retired at the end of October, will reassume her old duties Feb. 1, Jay Blanton, communications director for Gov. Steve Beshear, confirmed Tuesay. Blanton said Lassiter currently is working for the governor on a voluntary basis. John Hicks has been acting budget director since Lassiter’s retirement.

Lassiter, a state employee for 25 years before retiring, returns at a time the state faces yet another budget crisis. Beshear currently is putting together a plan for dealing with a projected $456.1 million revenue shortfall in this year’s budget. He has said he will reveal that plan, which is expected to include a proposed increase in the cigarette tax, later this week.

No doubt, the administration will take some flak for rehiring Lassiter because of its “double dipping” aspect. But count me among those who think that double dipping can save the state money in such areas as health insurance and has often allows the government, and the people it serves, to benefit from the valuable experience a retiree can bring to the job. Lassiter, who was widely respected by members of both parties in the legislature, certainly has valuable experience in dealing with budgetary matters.

Sunday’s column:

FRANKFORT — In year-end interviews last week, Gov. Steve Beshear told members of the media that expanded gambling is on the “back burner” heading into the 2009 General Assembly session. He should move it to a front burner.

Sure, the little matter of a projected $456.1 million revenue shortfall for the current budget year, which is almost half over, preoccupies Beshear at the moment. And the earliest a constitutional amendment, the only politically viable way of authorizing expanded gambling, could be approved is November 2010, which means it won’t do diddly to solve Kentucky’s short-term revenue woes.

But one of the talents we expect in our governors — indeed, in all our political leaders — is the ability to multi-task, to think and plan in terms of both immediate crises and long-term needs. And nothing about the rough patch the state is going through at the moment undercuts the two compelling arguments for legalizing casino gambling: to capture for our own treasury the hundreds of millions of dollars in revenue Kentuckians are contributing to bordering states by gambling at their casinos and racinos, and to keep Kentucky’s signature racing industry competitive with its counterparts in states where purses and breeders’ incentives are supplemented with the profits from expanded gambling.

If anything, a recession that evokes comparisons to the Great Depression lends urgency to the arguments for expanded gambling. All the experts and all the indicators suggest our economy hasn’t bottomed out yet. If the worst is yet to come, Kentucky’s revenue problems will extend beyond one budget year and even beyond one two-year budget cycle. So, settling for a short-term fix to the present crisis would be, well, shortsighted. What’s needed is both a bandage to stop the bleeding now and a stable new source of revenue to help keep it from recurring.

While the oft-discussed increase in the cigarette tax can serve as a bandage of sorts, it is not a long-term fix. Over the course of a full year, a 70-cent increase per pack would produce about a third of the revenue needed to offset the current $456.1 million shortfall.

Expanded gambling wouldn’t completely cure the state’s perennial budget problems either. A real cure won’t be found until lawmakers tie the state’s tax structure to the service sector of the economy, the sector more resistant to recessions.

But the $300 million to $500 million in revenue legalized casinos could start generating as early as 2011, when the economy likely still will be recovering from its current malaise, would greatly expand the bandage applied by an increased cigarette tax and would be a more stable source of future revenue.

So, why push a casino amendment in 2009 if it can’t be on the ballot until 2010 and won’t start generating revenue (assuming voters approve it) until 2011?

Because it chances of passing the General Assembly will be better in the upcoming General Assembly that you could expect them to be in the last two sessions of Beshear’s first term.

If the amendment is put on hold until 2010, as some in the Thoroughbred industry apparently prefer, it runs up against election-year politics. Specifically, lawmakers would be asked to cast a tough vote in a year when half of the Senate seats and all of the House seats are on the ballot.

It should be noted that one of the seats on the ballot next year currently is occupied by Senate President David Williams. Who really thinks he’s going to let a casino amendment through the upper chamber while running for re-election?

The following year, 2011, is a gubernatorial election year. Assuming Beshear seeks a second term, who really thinks the Republican-controlled Senate will give him a victory during his re-election campaign?

Getting a casino amendment through the legislature, particularly the Senate, will be problematic anytime. But with no scheduled elections generating an increase in the normal level of political posturing during legislative sessions, 2009 offers Beshear his best chance to deliver on his main campaign issue.

This is no time to be timid. With the state in a revenue crisis, this is a time for a governor to lead for the short term (cigarette taxes) and the longer term (casino gambling).

After two weeks of desk duties at the Herald-Leader mother ship and another week of vacation during which I managed to do a fair imitation of a turkey by getting stuffed on Thanksgiving Day, I’m back, at least for a couple of weeks. Now, if someone would please remind me what a person does with a blog, I can get back to work. (Just kidding, sorta.) Anyway, let’s ease back into the routine with a few observations about some of the news from the last three weeks.

1. You know, for people who get and keep their jobs through what are essentially popularity contests, politicians can be really dense about appreciating the public perception created by their own actions. One example of that in recent weeks was Gov. Steve Beshear signing off on a 25 percent bump in salary (from $80,000 to $100,000) for a position he tapped friend and campaign donor Ralph Coldiron to fill in the Department of Homeland Security. At the time, Beshear knew the state was facing a projected shortfall in revenue for this fiscal year. He didn’t know the shortfall was going to be as much as the $456 million now estimated by the Consensus Forecasting Group, but he knew it was going to be significant. He also knew he was going to have to ask state agencies to cut back on funding the services they provide the public and/or ask Kentuckians to pay higher taxes. Under those circumstances, approving a salary increase for a position you’re naming a buddy to fill is, well, not very smart. It needlessly undermines the message Beshear will be delivering to the public and legislature over the next few weeks as he outlines his plan for dealing with a serious budget shortfall. A governor who plans to ask others to tighten their belts and make do with less needs to set the example with his own appointees.

2. Of course, Beshear is not alone among elected officials in Frankfort in being fiscally insensitive. A couple of recent stories (one in the Herald-Leader and another in The Courier-Journal) illustrated how profligate state lawmakers can be when traveling on the public dime. John Cheves’ story in the Herald-Leader dealt with the state police who provide security during out-of-state trips by Senate President David Williams and House Speaker Jody Richards, a practice that cost taxpayers $12,000 in just one month last summer. The Courier-Journal story by Tom Loftus reported that lawmakers in general spent $1.3 million of the public’s money on out-of-state travel between Jan. 1, 2006 and Oct. 31, 2008. Obviously, some travel by lawmakers to conferences and conventions can be beneficial since it can expand their knowledge about dealing with issues all states face. But state Sen. Tom Buford, R-Nicholasville, traved at public expense an average of more than 40 days a year during that time frame. Others among the General Assembly top frequent flyers averaged 25-30 days a year during that period. Considering the state’s budget woes in recent years, that’s excessive. And I can think of no legitimate justification for the state police escort Williams and Richards have been getting in their travels. After all, outside of Kentucky, who would know either man or what positions they hold well enough to target them for harm?

3. It would be way, way dumb of House Democratic leaders if they try to “steal” the 26th District seat from Rep. Tim Moore, R-Elizabethtown. Moore narrowly won re-election over Democratic challenger Mike Weaver, who held the seat prior to his unsuccessful 2006 campaign for the 2nd District U.S. House seat. Weaver and D leaders have discussed the possibility of contesting Moore’s election when the General Assembly convenes next month because of a malfuntion in a voting machine at one precinct. Such a contest would be settled by a vote of the full House, where D’s hold a sizeable majority. But Weaver and D’s leaders should end those discussions and accept defeat in the 26th District. Otherwise, they’ll only wind up looking as foolishly arrogant and petty as Williams and Senate R leaders looked when they tried to seat Dana Seum Stephenson despite court rulings that she failed the constitution’s residency requirement for serving as a state senator.

Hope you all had a spectacular Turkey Day.

1. It appears some Republicans want Mike Duncan, the chairman of the party’s national committee, to take the fall for the beating they took at the polls Nov. 4. Several reports indicate the Inez banker may have competition, perhaps from former House Speaker Newt Gingrich among others, if he seeks re-election in January. But it seems a bit odd to me that Duncan would become the scapegoat. After all, the R’s got their butts kicked because of President Bush’s disastrous policies on the economy and in Iraq, not because of the way Duncan ran the party machine. Any R who believes otherwise is in a serious state of denial. If there is any Kentuckian who should be blamed for the beating R’s took on a national basis, it is Senate Minority Leader Mitch McConnell, who has been Bush’s enabler in chief on all those disastrous policies.

2. When the Consensus Forecasting Group meets Friday, expect an even gloomier revenue projection than the $294 million shortfall Gov. Steve Beshear’s budget analysts predicted a couple of weeks ago. Expect that gloomier forecast to cause Beshear and House Democratic leaders to suggest an increase in the cigarette tax. But since the election didn’t produce any change in Frankfort’s political dynamics, don’t expect any increase to be passed because President David  Williams still mans his roadblock in the Senate.

3. A story in The Courier-Journal Tuesday reported that the Horseshoe casino (formerly Caesar’s) has paid $740 million in Indiana state taxes in its 10 years of existence. Some $215 million of that went back to Harrison County, where the casino is located. In addition, the county got another $100 million in profit-sharing. One Indiana casino contributed a total of $840 million to the public bank accounts in 10 years. Think what nine casinos could be contributing to Kentucky’s public bank accounts. But don’t think too hard about it right now, not with the roadblock still functioning in the Senate.