Lexington, KY - At January's Lexington Forum meeting, guest speaker Adam Edelen, chief of staff to Kentucky Governor Steve Beshear, provided a frank and candid glimpse at the current economic challenges of Kentucky state government. With six months left in the current two-year budget cycle, the state, he said, currently faces the most significant financial crisis of the past century, marked by a revenue shortfall just shy of half a billion dollars and a budget that has demonstrated negative growth for only the second time since the Great Depression.
The situation was not just created by the past few administrations, Edelen said. Rather, it has been fostered by a culture in Frankfort which has included slashing billions of dollars in taxes over the past 10-12 years and utilizing up to $35 million in underground storage funds to balance the budget, without "filling the tiller back up."
"We have cut below the line," Edelen said. "We've created a system of unsustainable budgets, ones that are structurally imbalanced. Add that to an economic crisis, which we're in right now, and the prescription is disaster."
Edelen said the greatest compliment one can offer is to be blunt; and blunt, he was. But while the picture he painted was alarmingly bleak, Edelen remains confident that the Beshear administration is "clear-eyed and focused" on how to turn the dire economic situation around. Budget cuts are inevitable, he acknowledged, but the administration is focused on not diminishing the progress the state has made on key issues, such as education.
"The governor has said - - and I think it's a central truth - - if you value everything equally, you don't value anything at all," Edelen told guests at the forum meeting. "So this is a great opportunity for us to determine our key priorities." Those priorities are education, public safety, and the health care "safety net" that includes services like Medicaid. Cutting those services would be irresponsible, he said, in a time where so many people need help. He cited the "enormously successful" gains the state has made in education since the 1997's Kentucky Higher Education Reform Act.
The state government has been charged with making some difficult decisions, Edelen continued, including calling for 4 percent cuts across the board in other areas that aren't key priorities, a 70% increase in the cigarette tax, and a number of other processes that will "create more revenue in general to try to shore up the general fund in the short term," he said. These aren't quick fixes, and won't restore the health of the state's economy, he emphasized; rather, they are intended as short-term solutions to get the state through the end of the fiscal year.
"There is no better demonstration of the clear cut choices that we have got to make over the next three weeks, than the cigarette tax," he said. "It's time we ask ourselves as Kentuckians, what do we value? Do we value educated children who have a chance to compete in a global economy, or do we value cheap smokes? Do we value being able to make investments in infrastructure, that will create jobs for people for generations to come, or do we value cheap smokes? Do we value affordable health care for every child in Kentucky, regardless of the wealth of the family they were born into, or do we value cheap cigarettes?"
"The fact of the matter is Kentucky is a national leader on things we don't want to be a national leader in," Edelen continued, referring to statistics that include the percentage of children and pregnant women who smoke. "When we talk about the kind of Kentucky we want to live in, let's just not talk about the economic situation that will define us, quite frankly, for the next couple years to come. Let's talk about visualizing the kind of Kentucky that we want to live in, that we want our children and grandchildren to live in: one that is healthier, more educated, one that is more prosperous, one that is more affluent."
Edelen cited North Carolina as a state to look to in example - - while they share many similar demographics with Kentucky, North Carolina decided in the 70s that they couldn't rely on the tobacco economy to grow them anymore, and decided instead to invest in education.
"Those investments in higher education created a research triangle, which has not only provided an inordinate amount of opportunities for North Carolinians; it has become a global magnet for talent," he said. "And that's how you compete, that's how you grow, that's how you prosper in a new economy, and you can't do it on the cheap."
"We can't cut our way to prosperity, as a former boss of mine said; we've got to grow our way out," he added. "But it's a delicate balance. In an economy like this, it's not the time to raise taxes so high that it retards entrepreneurial growth; we don't want to do that at all. We've got a lot of tough choices to make."
Throughout his talk, Edelen emphasized the imperative that the overarching conversation about the state's economic challenges be broad-based and non-partisan. It's essential that it "get beyond an ideological bent, or a knee-jerk opposition to new taxes," he said. "The magnitude of our challenges dwarf the petty politics of Kentucky's past."
The next Lexington Forum breakfast meeting will take place at 7:30 am on February 5 at Annette's City Cafe, 431 Old Vine Street. Featured guest speakers Andrew Fore and Tom Myers will present findings from a recent trip to Canadian tundra, where they documented the effects of climate change on polar bears. The annual Forum at Noon will be held on January 27 at the Hyatt Patterson Ballroom, featuring the State of the Merged Government address with Lexington Mayor Jim Newberry. The meeting will also serve as a celebration of the Forum's 25th anniversary and will honor past forum presidents. Tickets are available at www.LexingtonForum.org.