Op-Ed: Undermining Kentucky’s Foundation Not a Lasting Solution to Pension Challenge
April 30, 2016
Following the governor’s vetoes — which included eliminating thousands of college scholarships for low-income Kentuckians — the new state budget for the next two years is now set. While the budget makes necessary contributions to our underfunded state pension plans, the damage it inflicts on the sources of our Commonwealth’s prosperity are a real reason for worry.
In looking for much-needed money to shore up the pension plans, the governor and General Assembly took resources away from the systems that keep all of us educated, safe and healthy. That makes 16 rounds of budget cuts between 2008 and 2018, or a “lost decade” for the investments that build thriving communities, from good schools to infrastructure.
While everyone knows we must more aggressively pay down our liabilities, doing so by sacrificing investments that pay off over time is not a sustainable solution. This course will harm our economy and quality of life, making it even harder to right our fiscal ship. It’s pretty simple: If we want to prosper, we have to invest as a state. You can’t get something for nothing.
In the coming months, we’ll face some of what economist Charles Schultze once called “wolves at the door” problems because of this budget: immediate harms ranging from tuition increases and higher student loan debt to restricted access to human services and employee layoffs.
But the bigger challenge from continued underinvestment is what he called “termites in the basement” problems. Budget cuts slowly eat away at the foundation of our Commonwealth, doing lasting damage to the systems and structures we need to grow.
Thriving communities and a prosperous society are built on shared contributions we make through our budget. We’re all better off when our schools are great, when more Kentuckians can finish college, when our population has improved health and our businesses can compete with the help of a modern infrastructure.
But this budget makes inadequate investments and relies on tenuous one-time funds unlikely to be available next time around. Unless we find more resources, chances are we’ll face more budget cuts in two years or an unacceptable reversion back to our old habit of skipping pension contributions.
The problem of growing pension liabilities is just a symptom of a deeper challenge: a tax code with an increasing number of holes that drain our revenue stream. Underfunding pensions was a way to delay facing that problem, but it has just made debt pile up.
There is a clear way out of this mess. It involves cleaning up the tax code of some of the billions of dollars in breaks, many of which benefit powerful interests. That’s the way we create a budget that keeps our promises while allowing us to finally reinvest in Kentucky. After decades of studies and talk about the issue, most everyone knows that’s what we must do. But our political leaders need to hear a call for change more clearly and directly.
That’s why we’ve joined a wide variety of organizations and leaders across the state to form a new initiative called Kentucky Together. It’s working to deepen understanding about the importance of the budget to our well-being and the need to end some tax breaks so we can better invest in what works.
And we’re not waiting until the next budget session comes around in two years. We’re starting today and we need you to join us.
Visit www.kentuckytogether.org to learn more. Host a presentation with your organization or community, share videos from the website that make clear the benefits of public investments and the problems with our tax code, and contact your elected representatives about the need to take action.
In the past, Kentucky has made progress in education, health, environmental improvement and more when we’ve had the resources to invest. Look no further than the strides we made in our schools after we raised resources in 1990. But any leader in any sector today will tell you shrinking revenues are the main barrier to further advances.
Kentucky’s widely-cited motto recognizes that we rise and fall together — that’s why we call ourselves a Commonwealth. It’s time our policies change to reflect that founding truth.