|
ONE-ON-ONE - April 2005
by Ed G. Lane
'We Stayed the Course, We Didn't Flinch'
With the budget debates over, Gov. Fletcher looks back at the legislative session and a 'rocky' first year
 |
Gov. Ernie Fletcher
Gov. Ernie Fletcher was elected to his present position in 2003, becoming the commonwealth’s first Republican governor in 32 years. Prior to his election, Fletcher served in the U.S. House of Representatives from Kentucky’s 6th Congressional District and was a member of the House committees on energy and commerce in addition to chairing the Policy Subcommittee on Health. His legislative service began in 1995, when he was elected as state representative for the 78th District. With 12 years as a family practice physician – including two years as the CEO of the Saint Joseph Medical Foundation – Fletcher was tapped by then Gov. Paul Patton to help reform Kentucky’s healthcare system. Fletcher also has experience as an Air Force fighter pilot and a lay minister. He holds an engineering degree from the University of Kentucky and graduated from UK’s College of Medicine in 1984. |
Ed Lane: What a difference a year makes. The recent passage on the state’s budget and tax modernization are done deals. Could you briefly comment on how President David Williams and having a Republican-controlled Senate influenced finalization this legislation?
Gov. Ernie Fletcher: I think that’s very clear – a year has made a tremendous difference. The Senate was a lot of help in passing this legislation. You have to go back to the first session, back last year. My administration could have compromised to the point where we got very little tax reform, but the Senate stood with me. They didn’t compromise on the tax reform and that enabled passage of the whole package – at least 80 percent of what I wanted. The Senate was very, very important in enabling that.
Senator Williams (R-16th District) was extremely influential in the negotiations this year. He held his ground and yet was able to work in a bipartisan way. He reached out to the Democrats, particularly Senator Ed Worley (D-34th District). They worked well together. He provided good leadership. I think the changes in my staff as well as some of the changes in leadership in both parties helped us move things along.
EL: What about Speaker Jody Richards (D-20th District) and the Democrat-controlled House of Representatives?
EF: I work primarily with Representatives Rocky Adkins (D-99th District) and Harry Moberly (D-81st District), who seem to lead the effort on the House side. House members worked very well with our administration. They decided that it would be in the best interest of the Commonwealth if we worked in a bipartisan way and they really reached out to do that, particularly Rocky Adkins as well as some of the other Democrats.
EL: What about your new team of legislative aides?
EF: There’s no question my staff was helpful. I think putting out an austere budget -which was what my staff felt we could afford without tax modernization - versus offering a budget that would build Kentucky’s future with tax modernization, was much in part due to the strategy suggested by Stan Cave, who became my chief of staff after the first year. Additionally, Brian Crall, deputy secretary of the executive cabinet, helped manage our legislative efforts. Both Stan and Brian have a great deal of experience in the legislature and a lot of personal relationships. Their long history of trust with the legislators helped our administration establish a working relationship that allowed us to move not only tax modernization and a budget that will build Kentucky’s future, but also a number of other pieces of legislation that are important for the state’s future.
EL: Would you speak to your effectiveness after serving more than a year as governor?
EF: There is no question that my administration had a rocky first year, if you’re looking at it from the outside. During our first year we stayed the course, we didn’t flinch, we presented our agenda for Kentucky’s future. The policy was right, and generally when the policy is right you end up succeeding because it’s very easy to educate folks if you’ve got the right message. We completed forums all across the state. I think our message was delivered at the right time and peaked right at this session. So, from that standpoint we’ve been effective. I’m still learning – I hope to always be learning whatever job I have the opportunity to do. The first year was a learning process for me, but at the same time, we stayed the course and laid the foundation to get some things that have been attempted for the last several decades and yet hadn’t been done.
EL: There were plenty of editorial comments from Kentucky’s press about the failure to pass a budget.
EF: There’s no question that comments in the press were critical of the General Assembly for not passing a budget last year; the legislators felt a tremendous amount of pressure. I think that helped get budget and tax modernization legislation passed.
EL: Would you talk about the strong showing of the Republican Party in the November 2004 election?
EF: We needed bipartisan votes in the House and the Senate to pass legislation. The November election had a tremendous impact, particularly in the House where Republicans gained seven seats. Jeff Hoover (R-83rd District), our Republican leader, stepped up to the plate. He was an integral part of negotiating the tax modernization bill, and was involved in the conference committee on the budget and taxes. He wouldn’t have been there had we not gained those seven seats. Last year, I realized that we weren’t going to get tax modernization or a budget passed when the House Democrats walked away from the table. At that time, I really focused on elections and said the best thing I can do is help elect some legislators that will work with me. We were able to do that. Now I think that both the Democrats and Republicans realize that it’s probably better to work in a bipartisan way.
EL: What did you consider to be the three major negatives for the citizens of Kentucky when there was no budget?
EF: During this last year, my administration was able to maintain all the services to Kentucky and actually we were able to save about $250 million because we operated government very efficiently. But the real disadvantage to the citizens of Kentucky is the fact that state government was not able to invest in the future. The executive branch could not establish any new programs. We basically had a continuation budget, which did not allow additional investment into education, it did not allow us to build some of the things that were needed. We were able to legally work around limitations on a few occasions – particularly with the technical and community college in Bowling Green – but that was only due to the fact that Warren County Judge Executive Mike Buchanon (R) stepped up to the plate and did it on his own, and the state came back later and assumed responsibility for that project.
With no budget, Kentucky has some pent-up demand. That resulted in a large number of projects and bonding effort out of this budget that was just passed. It is important during tough economic times to invest in the future and to make sure our universities have the opportunities to be top research institutions in the nation. All of those goals were laid aside when there was no budget.
EL: When the General Assembly fails in its constitutionally mandated responsibility to pass a budget, what problems does this create for the governor?
EF: Normally a budget would give my administration a pattern and we would be implementing that. Without a budget, we had to first spend a great deal of time writing and planning on a continuation budget – if you will, a services plan. That required us to put a lot more time in than we normally would have and that’s always a distraction from other things you’d like to be doing. Additionally, we spent a great deal of time in court and planning the court case. We also had to make day-to-day decisions on spending, which normally would not have been necessary. So, it consumed a great deal of our time, it also cost us litigation expenses and it did not allow us to do some new programs that we’re very interested in doing – for example “read to achieve.” We had to put that program on hold until we were able to get the budget passed.
EL: Do you want Kentucky’s Supreme Court to make a judicial ruling regarding how state government should be operated when there is not an approved budget?
EF: Whatever my opinion, it’s pretty clear the Supreme Court is going to make a decision on it. That will probably be welcomed from the state at large, so we do have some indication of what will happen in the future.
It is my strong opinion that the inaction of one branch of government should not impair the ability of another branch to fulfill its responsibility. The fact that the legislature abdicates its responsibility by not passing a budget should not keep me from providing services to the people of the Commonwealth of Kentucky. I would hope that the Supreme Court will recognize separation of powers. If that’s the Court’s ruling, it will put a tremendous amount of pressure on the legislature to pass a budget. With no budget, the General Assembly turns over the operation of the government to the executive branch and the legislators will have very little say about how the money will be expended.
EL: The cost of pensions for state employees is rapidly escalating because of increased longevity, early retirement options, and double dippers. Do you plan to ask the General Assembly to enact legislation in order to protect the fiscal soundness of the state’s retirement plan?
EF: There is no question that what’s called the “legacy cost” of state government is growing at an unsustainable rate. I’ve committed to making sure that state employees that are promised benefits will get them. I think we’re going to have to look at modifying future retirement benefits. We’re going to be evaluating that and studying it. The failure to make changes within the next few years will make it more difficult to fix benefits in the future. Right now, a lot of our employees come to work for the state realizing that they may take less pay than offered in the private market but knowing they will receive good retirement and benefits.
EL: If I’ve correctly interpreted what you’re saying, any changes made in the pension plan would relate more to newer state employees; they wouldn’t affect employees that are almost ready to retire.
EF: Absolutely. State government needs to keep its promise to those people.
EL: Health care for employees is another escalating cost center for state government. What is the plan to address this issue?
EF: In 1999, an LRC study said that the state employee health care plan is unsustainable – yet nothing has been done about that. State government was capped on the amount of spending for health care insurance due to no budget. Administratively in 2004, we tried to make some changes in health insurance. As you know, that resulted in me calling a special legislative session in 2004, which really did not address the major concerns of health care insurance benefits and costs. A blue-ribbon committee is now reviewing our insurance coverage. Health care costs are a major challenge – not only in Kentucky, but also nationally.
EL: You continue to recruit new executives for state government. How difficult has it been for you to fill key positions with qualified leaders?
EF: We’ve done real well. As a matter of fact, I think our administration has put together one of the most talented cabinets that the Commonwealth has seen. We have people that sacrifice – as far as pay and other benefits – to come and work for state government. That’s allowed us to put together a very good administration. It’s always a challenge to get talented people, no matter what your business is. We’ve been very effective at getting people with outstanding talents and abilities to come and serve their Commonwealth.
EL: Do you have any major slots that you’re still trying to fill?
EF: One of the things my administration did not do was to take a hatchet approach to eliminating positions. As a matter of fact, a majority of positions are probably folks that have experience and been with state government for a while. We felt that was important for continuity. That’s allowed us to operate government and to get more efficiency. But, it’s also important that we continue to put together the management team that has the vision of saying, ‘let’s make government a lot more efficient and get more value for every tax dollar.’
 EL: What is your top priority now that tax modernization and the state budget are final?
EF: We still have major challenges in Medicaid reform that are very important. We need to make sure that we can afford the program, and improve the quality of health care. Health in Kentucky is a real challenge – we have some of the highest rates of cancer, lung disease, stroke, and diabetes in the nation.
We are also looking at a comprehensive teacher compensation plan to make sure we retain and attract quality teachers. The program will make sure that we continue to provide professional development for our teachers. That’s going to be a big emphasis.
With new legislation, we now have the opportunity to take advantage of Kentucky’s more business-friendly job environment. Economic development is going to continue to be a major focus of mine.
EL: With tax modernization, do you anticipate that state government will begin to create a surplus so the depleted “rainy day” fund can be replenished over the next few years?
EF: A lot of my focus in the last week since the legislature passed the budget is how to get the reserve trust fund built up. As we review what I will do regarding line item vetoes in the budget, a major focus is the reserve trust fund. We’re going to be working on that because the reserve trust fund will have more of an impact on the state’s bond rating than any other factor. That’s a real challenge, because the way the budget was put together, a lot of that money was committed other places. We’re going to do everything we can to make sure Kentucky keeps a strong bond rating.
EL: The newspapers have editorially criticized spending $1.7 billion in new bonding. What is your response to this, and does it have anything to do with catching up on limited bonding from the previous year?
EF: As I mentioned previously, state government hasn’t had a budget that’s invested in building the future of Kentucky for three or four years now. This year’s budget is the result of a lot of pent-up demand. Many projects have been on the drawing board for a decade. It is important that we build Kentucky’s future.
The other thing, when you look at the level of projects, you have to take into account the fact that the state’s cost on these projects went up ten percent over the last year. We’re paying a much smaller interest rate than ten percent on our bonds. Sometimes the longer you wait to do these projects, the more costly they are. Taxpayers actually get more value for their tax dollars if we build now rather than waiting a few years, when new construction costs are higher.
EL: Your gubernatorial campaign targeted waste and fraud as areas where possible savings in state government could be generated. Without being specific, how are your administration’s efforts to make government more efficient progressing?
EF: My administration has reduced the number of employees by about 1,500. We’ve done that without across-the-board layoffs, which I promised that I would not do. We’ve also been able to find efficiencies that have resulted in about $250 million of savings to taxpayers, and we saved that in the first eight to 12 months. We’re going to continue that effort to find more efficiencies. Through attrition and retirement, we’ll reduce the personnel level and increase the productivity of state workers. We’ve invested a lot in technology. Our technology here was woefully inadequate and out-of-date – we were still using COBOL and there were only two living folks here that could write in COBOL. State government needs to increase the productivity of its workers through technology. That really hasn’t occurred in the past and that’s an area in which my administration is focusing.
EL: You recently indicated that you wanted to run for a second four-year term. Why do you want four more years as governor?
EF: I have enjoyed being governor even though it’s been a rough year. We’ve been very, very busy, the pressure has been constant because of no budget, but we saw the results of staying the course. We got most of our tax plan passed; we got a budget passed. We got a number of pieces of legislation, which include: methamphetamine bill, small business initiatives, health care (newborn screening, e-health), read-to-achieve, elderly maltreatment, a faith-based office established here. We’ve got some tax reform incentives that will do a lot of things, tuition tax credits, and we even got the smiley face off the license plates. So, we’ve had a very, very successful year.
EL: The General Assembly voted to pay farmers from the Agricultural Diversification Fund to make up for the elimination of Phase II payments, even though farmers will receive a quota buyout from the federal government this fall. Are you concerned about depleting a significant amount of the funds in the diversification program, or do you feel Kentucky’s farmers are in distress and need this money?
EF: It was a real balance. I would have like to have maintained the money in the ag development fund, which allows us to diversify the agricultural industry in Kentucky. Such things as promoting a bio-diesel plant, promoting cattle, branding, marketing, and diversification into other areas like aquaculture. We are going to lessen our ability to promote those things, but the payout is extremely important because many farmers had depended on the Phase II money that was eliminated as a result of the North Carolina case. Kentucky still will have some money in the ag development fund, and hopefully this payout money that goes to farmers will allow them individually to do the diversification that they need. With the tobacco quota buyout, I’m hopeful that the additional money coming into the agricultural community this fall will also help diversification as well.
EL: Toyota plans to start building hybrid cars in the United States. Will Kentuckians build this new car in Georgetown?
EF: There’s no question – we’ve been very, very focused on that. Part of the tax modernization plan included some environmental stewardship credits, which is a rather unique approach of saying that we will provide additional credits for companies that produce products that are environmentally friendly. This is focused on trying to attract hybrid manufacturing through Toyota, as well as Ford. Both of those companies are now involved and going to be more involved in producing hybrid cars.
EL: Delta Air Lines, Kentucky’s major air transportation provider, is having financial difficulty and may have to declare bankruptcy. Are you concerned that operational problems at Delta could impact the state’s economy?
EF: We are. That’s always a challenge. The airline industry is very competitive. We have had a number of new airline companies locate in Kentucky. But Delta has been an outstanding company, a good community member for the Commonwealth of Kentucky and we are concerned about that – we’d be willing to work with them in any way that we can. They’ve made some adjustments – I know even their pilots have taken some responsibility and have been willing to take some salary reductions to help Delta get through this tough period.
EL: How would you summarize your first year as governor?
EF: What we’ve done this last year is begin to turn the state in a different direction. We’re bringing our focus toward opportunity. That means that yes, we have to have an educational system that is top-notch. We also realize that Kentucky has to create jobs for our graduates so they will be able to stay in Kentucky. Kentucky’s tax modernization plan will create at least 10,000 new jobs in the first year. It will allow us to go out and market Kentucky effectively. We have done a good job this last year globally. We’ll be increasing our focus on international trade, we’ll be establishing an office in China, we’ve got a Chilean delegation that will be coming up, we’re going to increase our trade with Latin America. We’ve gotten some barge tax reform that will help us increase our logistics from a barge and river standpoint. We’re focusing on the new UPS hub with the expansion of their ability to handle packages of increased weight. All of that points toward increasing jobs for Kentucky. I think it bodes well for a better future.
Ed G. Lane is chief executive of Lane Consultants Inc. and publisher
of The Lane Report.
edlane@lanereport.com
Back to One on One Index
Back to the April Issue
|
