ONE-ON-ONE
- July 2001
by Ed G. Lane 'Education is
State Government’s Most Important Job’
Halfway through his second term, Gov. Paul Patton
confronts a budget shortfall, collective bargaining and
those pesky Republicans
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Governor
Paul Patton
Lawrence County native Gov. Paul Patton, 64, was
elected to his second term as the
Commonwealth’s chief magistrate in 1999, the
first person to accomplish that feat in nearly
200 years. After graduating from Louisa High
School in 1955, he earned a mechanical
engineering degree at the University of Kentucky
in 1959. He spent the next 20 years building a
successful coal business based in Pike County,
then turned to public service. He has served as
Kentucky’s Deputy State Transportation
Secretary, and was elected to three terms as Pike
County Judge Executive. In 1991, Patton became
Kentucky’s Lt. Governor under Gov. Brereton
Jones, and also served as Secretary of the
Economic Development Cabinet. He has chaired the
Southern Regional Education Board, and the
Southern Growth Policies Board. He and his wife
Judi have four children and three grandchildren. |
Ed Lane: One of the more pressing issues facing your
administration is a projected shortfall in tax revenues
that will require a reduction in spending. How serious is
this problem?
Governor
Paul Patton: It’s serious. Kentucky will
probably have the largest shortfall on record as far
as absolute dollars, and one of the largest as far as
percent of state revenue. It’s going to require
that we reduce some expenditures and delay the
expansion of some programs.
EGL: Will the
state have any residual carry-over dollars from this
fiscal year?
GPP: We
have some. We’ll be using the Budget Reserve
Trust Fund - that’s exactly what the fund is
for. Once the economy recovers and expenditures are
adjusted to a lower level of revenue, Kentucky has to
make concrete plans to replenish the Budget Reserve
Trust Fund. That will be the real test – whether
or not we have the fiscal discipline to replenish it.
EGL: Where
are tax revenues declining?
GPP: The
sales tax, which is the second largest source of
state revenue, accounts for around 80 percent of the
shortfall. Actually the personal income tax, which is
the largest source of state revenue, is not that far
below projections. It appears that talk of a weaker
economy ahead has caused people to cut back on
consumption.
EGL: What is
the approximate percentage of the budget cut compared to
total spending for the coming year?
GPP:
Because of one time sources of money to make up the
shortfall, the total cut in spending won’t be
that large. Now if we try to hold education harmless
from any cuts, and that’s 65 percent of the
budget, then the remaining 35 percent could take a
larger cut.
EGL: Since
the U.S. and Kentucky economies have been running at high
productivity and employment levels for several years,
would it not have been better to be more conservative in
estimating future tax revenues?
GPP: The
forecast was made in January, 2000 by an independent
group of state economists. They did forecast a
slowdown of the economy, but the slowdown in Kentucky
and the effect on manufacturing has been greater than
was anticipated.
EGL: The
Kentucky economy relies heavily on automotive
manufacturing with Ford, Toyota and General Motors all
having manufacturing plants here. Do you have any data
that indicate how the automotive segment of the economy
is faring?
GPP: In
my judgment, the downturn in automotive is not as bad
in Kentucky as we might expect. The net effect, so
far, appears to be less overtime. To my knowledge, we
have not had any layoffs or work weeks shorter than a
standard work week applied to any of the Kentucky
automotive plants.
EGL: Even
with a shortfall in projected revenues, will next
year’s spending still be greater than in this fiscal
year?
GPP: I
anticipate the total amount of money expended by the
Commonwealth will increase, but it won’t
increase by the amount that was first budgeted. Of
course, state employees will get a 5 percent raise
and that will be implemented. One of the ways
we’ll save money is not to fill vacant positions
unless they are an absolute necessity.
EGL: Who is
the lead person in your administration managing the
budget cuts?
GPP: Jim
Ramsey is the chief financial officer in state
government and he will be taking the lead; he will
present options. Then Skipper Martin, Crit Luallen,
Jim and others will evaluate where the cuts will be
made.
EGL: Even
with the strong growth of the Kentucky economy over the
last four years, a number of counties – especially
in Eastern Kentucky – have high unemployment rates
and declining population. Describe your plan to develop
regional business parks in these economically
underachieving areas.
GPP: The
population decline in Eastern Kentucky has been
occasioned by the fact that the coal industry, under
tremendous price pressure, has had to increase
efficiencies to the point where about the same amount
of coal is now produced with about half of the
workforce of 20 years ago. Today, there are less jobs
in Eastern Kentucky and people have had to leave. In
’92, the legislature committed one half of the
coal severance tax, which would be $75 million
annually, to build a new economy in Eastern Kentucky
based both on manufacturing and intellectual
productivity. The cornerstone of this effort is the
creation of six or seven regional business parks.
Until recently there was no place to locate
manufacturing facilities or other types of businesses
that create basic types of jobs in Eastern Kentucky.
EGL: Is that
because of the mountainous terrain?
GPP:
Eastern Kentucky is a heavily populated, mountainous
area where virtually all of the accessible, level
land that is out of the flood plain has already been
used for residential or commercial purposes. There
just was no place for major manufacturing activity.
We had to develop business parks, and we have done
that.
EGL: How
difficult is it to motivate a group of counties to agree
on jointly developing a regional park and sharing the
costs and tax revenues?
GPP:
We’ve gotten good cooperation. The most
efficient way to develop a business park economically
is to try to find 300 or 400 acres. That is hard to
do in Eastern Kentucky. At this time the state is
still looking for two sites, one in Pike county and
one in Harlan county. Personally, it’s very
frustrating because Pike is my home county. We have
looked at two or three different sites but there are
obstacles to getting them developed at an affordable
cost.
EGL: What
incentives are available to companies locating in these
regional business parks?
GPP:
Having a place to locate businesses, which most every
community has, only gets you into the game. The
state’s fundamental incentive for rural
counties, the Kentucky Rural Economic Development
Act, has worked very well. In addition to KREDA,
which is available in virtually every one of these
counties, an additional on-the-job training program
for employees has been established. This plan will
insure employers that as they begin to bring on an
untrained workforce, any reduced productivity because
of the lack of training will be compensated for by
supplementing the wages until the workforce gets up
to maximum productivity.
EGL: Will
recent reforms in postsecondary education benefit
development of the regional business parks by helping
employers recruit and/or train more qualified employees?
GPP:
Community and technical colleges are the only
state-supported higher education institutions in
Appalachian Kentucky. We depend very heavily on them.
They’re becoming very responsive to the needs of
the community and the employers we’ve been able
to induce to locate in Eastern Kentucky.
EGL: Economic
development is a long term endeavor. Critics of the
regional business parks editorialize about low occupancy
levels. What is a reasonable timetable to achieve success
at these parks?
GPP:
Twenty years. I truly believe if we continue all of
these programs, including the Coal Severance Tax
program and an active marketing effort that is led by
the governor, because governors can do things other
people can’t do, in 20 years we could make a
fundamental difference. We’ve had enough limited
success to know that businesses can prosper in
Eastern Kentucky. It’s just the process of
convincing decision makers around the world that they
can profit by moving there.
EGL: What are
Secretary Gene Strong’s (economic development
cabinet) and Deputy Commissioner Jerry Johnson’s
(coal county development) responsibilities on this
special project?
GPP:
Jerry Johnson’s Department for Coal County
Development is a part of the Cabinet for Economic
Development, managed by Gene Strong. Jerry works very
closely with Jim Navolio, Commissioner of the
Department of Business Development, to present
Appalachia and Kentucky in its most favorable light.
The Department of Coal County Development’s job
is to get these business parks up and running.
EGL: You
recently announced that labor unions could represent
employees working for the executive branch of government.
Statewide business and governmental organizations seem to
be concerned because of the long term implications union
representation could have on the management of city and
county government, as well as state government. The
Kentucky House and Senate seem to view unions in
government as a legislative matter, not one to be ordered
by an executive directive of the Governor. How would you
respond to these issues?
GPP: Of
course, public employees have always had the right to
form a union. What I actually did was set up a formal
process by which I would recognize those unions, if
they were in fact formed, and carry on discussions
with them about changes that we might need to make in
the conditions of their employment. The difference
between government and private employment is –
governments are not mandated to discuss with
employees their conditions of employment; businesses
are. I believe that government ought to live by the
same laws that it makes businesses abide by;
government makes businesses listen to its employees
and government ought to also listen to its employees.
What I’ve done is not a legislative matter,
it’s not binding on future governors. I said,
“I will listen to you if you want to form a
union.”
EGL: Has
anybody said they want to form a union since you made
your announcement?
GPP: I
know that there are people out there talking to
employees and explaining to them why they believe
that union representation would be to their benefit.
Since the program doesn’t start until July 1st,
we have not yet heard from any employee groups.
EGL: Do you
envision that groups like the state police and department
of education will request union representation?
GPP:
There are about nine different classes of employees
eligible for union representation; I believe everyone
knows what the rules are. Keep in mind that about 32
states have some kind of collective bargaining for
their employees. Allowing employees to have input
into their conditions of employment is not a novel
concept, and I personally believe it is productive.
EGL: Under
Kentucky law, if the majority of the employees vote to
have a union represent them, everyone in that department
would then be bound by that. How does that work in state
government?
GPP:
State employees would not have to pay dues. Now in
the private sector that is a requirement, but there
is no such requirement in the public sector. If the
majority of the people in a department select a
particular organization to represent them, then that
organization would speak for all of the employees in
that unit, but all the employees would not have to
pay dues.
EGL: Only the
ones that voted for it would have to pay dues.
GPP: I
don’t know who would have to pay. Whoever
volunteers to pay dues.
EGL: During
the last decade, the Republican party has gained
influence on a statewide basis and most recently won
control of the state Senate. How has dealing with
Republicans in the Senate impacted your efforts as
governor?
GPP:
It’s had an effect. Republicans are totally
driven by what they believe to be maximum political
advantage. In the past, most legislators in Kentucky
supported whatever they believed was best for the
state and sort of trusted the people to make a
judgment about whether or not that was the correct
thing to do after they had done it. Many of the
Republicans that are refusing to even address serious
issues have in the past been supportive of some of
the things that we are now proposing to be done. But
they’re voting as a block. And so, as a result,
on issues like justice for the coal miners,
Republicans wouldn’t even consider the subject.
They knew that they couldn’t stand up and vote
against the coal miners. So, they just refused to
even allow the bill to be voted upon in committee. On
the issue of solid waste, many of the Republicans
supported our program, but they were not permitted to
vote on our bill. It was gutted before it ever got to
the floor of the Senate. Those are just two examples
where, voting as a block, Republicans are preventing
meaningful debate and decisions on real issues, and
they’re doing it for political purposes. Now, I
don’t think they’re coming out politically
ahead, but evidently Republicans think they are.
EGL: How
would you describe your working relationship with Senate
president David Williams?
GPP: We
have no direct relationship with the president of the
Senate. We do work on a staff level with the
Republican caucus.
EGL: House
Speaker Jody Richards and David Williams may be very
influential in helping to reduce spending in next
year’s budget. Do you expect a team effort on this
issue?
GPP:
It’s the executive branch’s responsibility
to restructure the budget. Now we’ll certainly
keep the legislature informed. We’ll be working
with the chairs of the appropriations and revenue
committee – Richie Sanders, Jr. and Harry
Moberly, Jr. We will keep them informed and listen to
their reactions and their inputs, but the fact of the
matter is that the budget responsibility is ours.
EGL: The
Council on Postsecondary Education headed by Gordon
Davies is working to recruit Kentuckians of all ages to
attend colleges, universities, trade and technical
schools. How is this effort progressing?
GPP: So
far, the Council on Postsecondary Education has
functioned well. Attendance at our postsecondary
institutions has increased, particularly at community
and technical colleges. During a strong economy
that’s positive and shows that that program is
working.
EGL: KCTCS is
working to re-engineer colleges and technical schools so
that training at these institutions will be compatible
with jobs in industrial and technological employment. How
have Kentucky businesses responded to these innovations
in education?
GPP:
KCTCS must provide the traditional liberal arts
curriculum that allows students to get two years of
education and transfer to a traditional four-year
baccalaureate program, and they continue to do that.
But also being responsive to the needs of individual
communities and employers, which can vary around the
state, has been a very successful change.
EGL: The
Kentucky Science and Technology Council, directed by Kris
Kimel, received funding to develop technology business
incubators around the state. What are your expectations
for this program?
GPP: This
is a part of our new initiative to expand the economy
of Kentucky in the area of technology, bringing the
latest technology to bear in the various
manufacturing and other business processes in
Kentucky, and having more businesses that are based
on intellectual capital is a part of our whole
effort. It’s what we need to do and I think it
will be productive.
EGL: Lee Todd
was recently elected president of the University of
Kentucky. His mission is to make UK a top ranked research
university. How much energy should UK direct toward
helping build the economy of Kentucky?
GPP: All
of our universities are an integral part of
Kentucky’s effort to build an economy based on
intellectual capital. And the University of Kentucky,
as our flagship institution, must take a leading
role, and I know that Lee Todd understands that and
will make sure the institution assumes that role.
EGL: The
University of Louisville, under the leadership of John
Shoemaker, has been very aggressive in helping boost
Louisville’s business environment. Are U of L’s
efforts, along with those of Bellarmine University and
Jefferson Community College, to work with UPS’s Earn
and Learn program, the types of programs you would like
to see around the state?
GPP: This
is a very unique program that has helped United
Parcel Service meet its workforce needs, which are
rather unique. The program is a great example of our
higher education institutions realizing that they
must take into account both the employer’s and
the students’ needs. And that’s what
Metropolitan College did. It recognized that the
employers had a unique need for a workforce in the
middle of the night. The student had to be able to
get a decent amount of sleep, so the schools
rearranged the curriculum to meet the student’s
and the employer’s needs.
EGL: Recently
several environmental groups and newspaper editorials
asked you to place a moratorium on electric energy
production plants in Kentucky. Have any of the energy
generation facilities received incentives from the state
to locate in Kentucky and what are the economic issues in
this regard?
GPP: In
fact, Kentucky does have an incentive program for
coal-fired units, and I assume that coal-fired units
intend to take advantage of those incentives. I know
of no incentives that have been offered for natural
gas-fired units.
EGL: Why do
you think Kentucky is so popular for new electric plants?
GPP:
Central location and distance has a lot to do with
the cost of transmitting electricity. Many natural
gas pipelines cross Kentucky, coming out of Louisiana
and Texas going to the northeast. The electric power
companies can tap into a gas line at the point near
to where they can tap into a transmission line. That
makes Kentucky a great place to locate one of these
gas turbine peaking units.
EGL: So far,
during your time as governor, what has been the
highlight?
GPP: Our
success in promoting education. Our particular niche
has been to promote the postsecondary education
reforms and we followed that up with our early
childhood program and our adult education program.
Education is state government’s most important
job and we’re proud to be a leader for
education.
EGL: Your
administration has generally received high marks from
business leaders. Are you flattered by what the business
community is saying about your efforts?
GPP:
Well, I appreciate that, but we have really governed
from the standpoint of what is right. And we’ve
made decisions, such as collective bargaining, that
have had the potential to downgrade our overall
approval rating. There are people in the business
community that feel we have abandoned our commitment
to make Kentucky a business friendly place. And of
course, that’s certainly not true. But if people
will judge us in the total context of all the things
that we’ve done that they like and they dislike,
then I’ll accept that judgment, and I think it
will be fairly positive.
Ed G. Lane is
chief executive of Lane Consultants Inc. and publisher of
The Lane Report.
edlane@lanereport.com
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