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ONE-ON-ONE - February 2004
by Ed G. Lane
'The Tax and Spend Mentality Is Alive and Well in the House Democratic Caucus'
State Senate President offers his perspective on government issues
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David L. Williams
David L. Williams has served in the General Assembly for 19 years, being first elected to the Kentucky State House of Representatives in 1984. Two years later, he won an open seat in the State Senate. Since then, he has ascended the leadership ladder in the Senate, serving as caucus chairman, minority and majority floor leader. He made history when he became the first Republican ever elected to serve as Senate president on January 4, 2000.
Williams currently represents the 16th District, which encompasses six counties along the Tennessee border, stretching from Monroe in the west to Whitley in the east.
A native of Glasgow, Kentucky, Williams graduated from the University of Kentucky in 1975 and earned his law degree from the University of Louisville in 1977. He is a practicing attorney in Burkesville and is married to fellow attorney, Robyn Edmonds Hays. |
Ed Lane: The political pundits have made a big deal about you having to share the leadership of state government with Ernie Fletcher. How is your working relationship with the governor?
David Williams: I’ve known Governor Fletcher for a number of years, since before he entered the state House of Representatives. I like him personally, I respect his intellect. He is well-intended and hard-working, and we have an excellent working relationship. We don’t agree on everything, but we have very productive meetings when we meet. We have regular meetings. It’s really great to work with someone that you have as much trust in as I have in him. As president of the Senate, it’s crucial to have a trusting relationship with the chief executive officer. It makes the decision making process so much easier. He’s a good man and I really enjoy the relationship that we have. Any suggestion that there might be a division between Governor Fletcher and David Williams is just wishful thinking on behalf of people who don’t want this governor to succeed.
EL: The governor and the General Assembly seem to be inclined to move forward with tax modernization. How do you assess the current mood of legislators regarding restructure of the tax code?
DW: The governor’s continued enthusiasm concerning tax restructuring has improved the chances of it happening. Speaker Jody Richards and the Democratic leadership in the House say that there’s going to have to be strong leadership by the governor for this to happen. It appears the House is going to get their wish – because this governor is going to provide strong leadership.
The governor continues to have enthusiasm in spite of skepticism by people like me who have been in Frankfort a while. I have great concerns as to whether the House is ready to deal with the sort of tax reform that Kentucky needs or whether the Democratic leadership in the House will use tax restructuring as an opportunity to try to promote some sort of scheme to redistribute wealth.
Democrats may try to affect social policy instead of using the tax structure as a source of adequate revenue to provide necessary services, or they may look at this legislation as an opportunity to pass tax increases to fund the social programs and other experimental programs that they frequently champion.
This year, it appears that Democratic incumbents are going to have more Republican opponents than ever. It’s going to be a very dicey atmosphere over in the House. Democrats in the House and even one in the Senate are already talking about working for tax reform. Democrats always add a lot of conditions, which virtually makes tax reform impossible. I have great confidence that the sort of tax bill that the governor would introduce would be one that in all probability would have success in the Senate; the question is what will the bill look like if it ever gets through the House.
EL: Are you concerned that Kentucky’s “tax modernization” may turn into “tax increases”?
DW: If it turns into that in the House, then there will be no “tax modernization.” The goal of “tax modernization” is to have a predictable, adequate, fair, and competitive tax structure which will grow with the economy and provide more money in the future so that the General Assembly won’t have to keep messing with the tax structure. People in business want is a predictable tax structure; one that they can rely upon – so businesses can make long-term plans and won’t have some unforeseen intervention because of a change in tax structure. It’s really important that we go about modernizing taxes in a very methodical sort of way, with the inclusion of input from the private sector as to what the impact on employment or industry might be. That’s the reason the process will take a while.
EL: Could you provide a couple of examples of what the General Assembly could do to modernize the tax rate? For example, could you lower the sales tax rate, but expand it to cover services?
DW: There are a lot of things that have been suggested – plugging certain loopholes as far as what is a taxable event in Kentucky would be one of them. A lot of companies that operate in the state actually have some of their business processes or steps taxed in other states when Kentucky could very well capture those tax revenues. This is not a matter of increasing taxes on any particular business, it’s just a matter of where they are taxed, not what or how much they’re taxed.
EL: How closely will the Senate be able to work with the House on the budget and tax legislation?
DW: Members of the committees and the leaders talk to each other. I don’t know how this tax reform/tax modernization is going to advance because I don’t know how political the House Democrats are going to be. It would appear to me that the Democrats are already firing a few political shots and they have a hard group of legislators to handle.
The tax and spend mentality is still alive and well in the House Democratic caucus. You already have people banging for more money for this or that. Some House Democrats never want to talk about what sort of outcome we have; they just want to talk about how much more money we can spend. They believe that if we spend more money then we will have a better outcome. I don’t necessarily believe that.
All across America, companies in the private sector are becoming more productive. They are looking at their management structure. They’re taking a look at efficiencies they can apply and they’re getting the best return they can for their investors.
The investors in state government are the taxpayers. Our goal, as members of the legislature, should be to work collaboratively with the governor to make sure we get the best outcome for the money that we spend.
EL: A recent article indicated that a Kentucky state employee, with salaries, benefits, retirement, etc., probably costs the taxpayer around $50,000 on the average, per year. One thousand employees cost $50 million per year.
DW: All the various components of personnel costs – including salary, benefits, retirement, insurance – is the greatest expense we have in state government. And the state has an extremely generous retirement plan that is unequaled in the private sector. For example, an individual could start working for state government at age 18 and at age 40, after having worked 22 years, they could buy five years and have a complete 27-year retirement. They would, in effect, be paid from the time they are 13 years old.
Their retirement would be based upon their three highest salary years and the state would guarantee life insurance and retirement benefits for the rest of their life – to be paid for by the citizens of the Commonwealth. Under the current law, retired employees can go back to work immediately under some different retirement plan or even the same retirement plan under a service contract. At some juncture we are going to have to look at a personnel study. Should pay caps be set at certain levels that you reach at a particular job description? If someone works in state government for 30 years and receives incremental pay increases, they could have job duties for which they are paid far in excess of what the market should support, just because they’ve been here for so long.
EL: Does Kentucky give annual pay increases of five percent to employees?
DW: That is the law now. The General Assembly has to suspend the law to give an increase of less than five percent.
EL: Were you pleased with the reorganization of the racing commission?
DW: The governor picked good people to be on the racing commission. I like the concept of the holistic approach to promoting racing. I am a little reticent to see appointments of an outgoing governor not given full faith and credit because every governor has the authority to make appointments until the last day, last minute and last hour. It’s just part of the governor’s authority. But I understand that there was some concern about the prior racing commission and I support the governor.
EL: Budget director Brad Cowgill asked the presidents of Kentucky’s state universities to “give back” education dollars to help balance the budget in the coming fiscal year. Were you pleased with the way the budget director and the presidents handled this issue?
DW: It was encouraging to see the presidents of the universities come to Frankfort and have input into how the reductions will be implemented. Postsecondary education in Kentucky has received the largest increases in spending, with the exception of Medicaid. I believe the General Assembly has done a good job of beefing up higher education.
There is one problem in higher education. There doesn’t seem to be adequate accountability to the legislature. Under the new system, state universities and colleges don’t have line item appropriation or departmental appropriation, at least to the level that they previously did. They have their own budget committee over at the Council on Postsecondary Education and legislators don’t know whether the same operating cost efficiencies are being applied to university systems as we try to apply to the rest of state government. One of university presidents’ duties is to come forward and convince the General Assembly of their good stewardship.
EL: What is your assessment of the state’s elementary and secondary education system?
DW: I’m very concerned that we address the achievement gap that exists in elementary and secondary education. Children of color and children of poverty have been left behind in some of the improved results that we receive from the Kentucky Education Reform Act (KERA). If you isolate these two groups, the rest of Kentucky children have progressed very well under the KERA. It’s unconscionable that Kentucky allows any identifiable group of children to be left behind. Programs such as the “Read to Achieve Initiative” will emphasize that every child reads at grade level by the third grade. We’ve also emphasized adult education and adult literacy programs and the programs we’ve initiated have received national awards along those lines. We need to make sure our state has a culture of learning and that every Kentuckian will have the opportunity to be a more productive citizen. That will have more impact upon the economic viability of Kentucky than any other thing that we can do.
EL: How would you describe the growth of Kentucky Community and Technical College System (KCTCS) under Dr. Michael McCall?
DW: KCTCS is one of the real success stories of Kentucky’s higher education reform. It has made top quality education in the form of technical and academic education available to working men and women. Since the difference between technical and more academic education is really blurred right now, KCTCS under the leadership of Dr. McCall is a prime example of how you take education where the rubber meets the road.
EL: A number of manufacturing jobs in Kentucky have been lost to foreign countries due to globalization. Price competition makes it necessary for Kentucky companies to use foreign manufacturers to build high-quality, lower-cost products. What will Kentucky’s future be like in the global economy?
DW: Not only is the United States losing manufacturing jobs; now we find Mexico is also losing jobs to the Asian subcontinent. We live in a time of great dynamic change. Not only are manufacturing jobs going off-shore, but engineering and other technical jobs are also going off-shore as these services are provided through the Internet. We just have to make sure that Kentucky is as competitive as possible with a fair tax structure, an attractive regulatory system, and an advantageous labor market.
EL: Kentucky’s Office for the New Economy (ONE) is promoting technology, research and commercialization. How important is this effort to Kentucky’s economic future?
DW: The Office for New Technology can be very important. Has it been very important up to this juncture? I would say no. Much of the money that ONE has spent has been a parceled out to the legislative districts of various legislators of influence. That is an area that needs to be looked at very closely. ONE does not need to be a subterfuge to get capital construction projects around the rest of the budget process on the Council on Postsecondary Education.
EL: One of the difficulties in effectively and efficiently running state government is “fund” accounting. Is there a possibility of changing to “activity-based cost accounting?” Such a change would allow managers to determine the unit cost of providing services and to compare those costs with those for similar services provided by private business.
DW: The state needs the capacity to not only do financial audits, but to also conduct program audits to determine operating efficiencies. The state needs to apply the best accounting procedures that are available to accomplish all the efficiencies that are possible. The private sector often hires better and more accurate experts than government does. In the past, there’s been a tendency to continue in the same way rather than to be innovative and look for cost-saving measures. That’s one of the exciting things about having new leadership in Frankfort. We have some high-quality cabinet secretaries, a budget director and others who seem intent upon applying the best business practices possible. It’s crucial that we do that.
EL: Is there inertia that will be hard to overcome in order to get bureaucrats in Frankfort to think about a new accounting system?
DW: Presently, the state is working on new accounting systems, software and processes to make sure that government is more accountable.
EL: Is there any chance of modifying the operating hours of state government to make its services more “user friendly” to working taxpayers? No major business in Kentucky closes its offices at 4:30 p.m.
DW: Closing offices at 4:30 p.m. should not be a benefit of being a state employee. There should be latitude among the several agencies to apply hours that would be the most convenient for the people they serve. Government ought to be responsive to the hours when people need to come. There will be an increasingly important access to state services through the Internet. We have to make sure that government uses all the technology possible to make sure it can do electronic transactions so people do not have to come to government offices at all.
EL: Medicaid is a $4 billion program in Kentucky which may have a $500 million shortfall. How serious is this problem and how will the shortfall be solved?
DW: It is a serious problem. The state is going to have to take a look at providing efficiencies in the Medicaid program to make sure eligibility requirements are enforced; to review medical services that are provided by the providers – who’s the gatekeeper there; to look at the richness of the benefits Medicaid provides compared to what our working folks are able to afford out in the private sectors as far as insurance policies are concerned; and to look at incentives to more efficiently manage use of the program. There are a lot of things that can be done in the management of Medicaid.
EL: Kentucky’s financial condition declined rapidly during the last few years of the Patton administration. In your judgment, what factors caused this serious problem?
DW: I can’t draw a direct correlation between anything the Patton administration did as being primarily responsible for the downturn. Kentucky is a small state and like other states is subject to a downturn in the national economy. The Patton administration was not successful in creating a healthy labor environment and some actions they took had a detrimental effect – like trying to implement mandatory collective bargaining for state employees by executive order. I believe that was one of the major factors that caused Kentucky not to get the automobile manufacturing plant in Elizabethtown – and that would have been a real boon for the state.
Ed G. Lane is chief executive of Lane Consultants Inc. and publisher
of The Lane Report.
edlane@lanereport.com
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