Progress slow and difficult in Frankfort

The 2012 session of the Kentucky General Assembly and the subsequent special session illustrate that progress and compromise on key issues remain difficult to achieve. After spending much of the first half of session trying to craft new legislative districts, the legislature made substantial progress on many key issues; however, a number of priorities fell short. The good news is the legislature passed a two-year budget on time that was, by nearly all accounts, a fiscally responsible plan to fund government services without higher taxes. The legislature implemented a number of Chamber recommendations by reducing the state’s level of debt and eliminating a substantial portion of the structural imbalance by relying on fewer accounting gimmicks and the use of one-time monies for recurring expenses – a practice common in recent sessions.

SUCCESSES DURING REGULAR SESSION
Perhaps the greatest relief for business was legislation that addressed the interest on the debt the state owes to the federal government for unemployment insurance. Without a mechanism to repay this interest, Kentucky employers would have faced a disastrous $420-per-employee tax penalty for a total cost to business of more than $600 million. Working with the Gov. Steve Beshear’s administration and business groups, legislators addressed this problem in a bipartisan way that provides for both the interest payment and opportunities for future tax relief. Ultimately, this critical legislation passed the House and Senate unanimously.

Legislators also passed a career-based education initiative, and legislation to simplify local business tax filings. Limited progress was also made on addressing concerns with the public pension system.  Lawmakers crafted incentives for auto manufacturing lobs, and a law to improve the regulatory process. They were also able to pass a reasonable compromise that addresses the proliferation of meth labs.

In the waning hours of the regular session, an impasse over road funding and road projects turned what would have been a successful conclusion into a disappointing end that resulted in a contentious blame game and a special session. The transportation budget and a compromise to address prescription drug abuse failed to pass in the regular session, so Gov. Beshear called lawmakers back immediately to address these issues. Both items passed in the five-day special session, but a number of other issues will have to wait until next year.

In addition to bills that are enacted, another way to measure the success or failure of any legislative session is to note whether any anti-job business legislation is passed. Fortunately, a number of such measures that were opposed by the Kentucky Chamber were defeated. Legislation that would have increased health and legal costs for businesses was defeated. The defeat of these measures was a positive development for the 2012 session, but business that remained unfinished overshadowed these victories.

UNFINISHED BUSINESS
A number of successes for the business community were achieved in a difficult political environment; however unfinished business remains. Several key education issues were unaddressed during the 2012 session. Despite the introduction of many compromise proposals, lawmakers left town without coming together on legislation to prevent 16-year-old students from dropping out of high school. They failed to enact charter school legislation to address persistently low-performing schools. They also failed to pass several Senate measures to improve the quality of teachers in the classroom.

Lawmakers also did not address one of the most persistent problems faced by our signature thoroughbred industry. For years, other states have been out-competing Kentucky and threatening our position as Horse Capital of the World. The availability of expanded gaming in nearly every other horse-racing state has resulted in a significant job loss for Kentucky – a trend that studies indicate will continue as long as the industry here is denied a level playing field.  Unfortunately, despite a strong coalition of supporters, lawmakers failed to advance a proposal to allow the people of Kentucky an opportunity to vote on the issue of expanded gaming. The General Assembly also missed opportunities to improve the health of Kentuckians. A measure to limit smoking in public places, a proposal to provide incentives for wellness plans in the workplace and a measure to limit frivolous lawsuits that raise health care costs all fell short.

CHALLENGES REMAIN
Kentucky faces persistent challenges that demand our attention. The public pension and Medicaid systems pose the greatest fiscal challenges to our prosperity. Our tax code, which is being evaluated by a gubernatorial commission right now, needs reform to make Kentucky more competitive. We must also ensure our labor policies are not a hindrance to job growth as we see neighboring right-to-work states out-compete us. Finally, we must reform our legal climate to slow the increasing costs of civil litigation on Kentucky employers.

The legislative process is designed to be deliberate; however, these and many other issues will require swift action to create a competitive workforce and foster job creation and prosperity in Kentucky. We appreciate the support of our members and your willingness to be engaged in the legislative process to help us make a difference.

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