This column originally appeared in the October 1, 2015 edition of the Louisville Courier-Journal.
By: Scott Jennings
“Kentucky is back, and we’re back with a vengeance…”
If there’s a catchphrase associated with Kentucky Governor Steve Beshear’s final months in office, it is this one.
He said it in his State of the Commonwealth speech in January. He was still on message in August at the Kentucky Farm Bureau’s State Fair Ham Breakfast. He says it everywhere he goes.
But three troubling issues have surfaced to cast a pall over Beshear’s pronouncement and create a gloomy backdrop in front of which Matt Bevin, Jack Conway, and Drew Curtis are conducting their campaigns for governor. With 15 to 20 percent of voters who may still be up for grabs, fashioning innovative solutions to these three problems could be the key to winning this race.
The first problem undermining Beshear’s argument dropped on September 1, when Standard & Poor’s lowered Kentucky’s credit rating to “A+” from “AA-.” The Courier-Journal’s Tom Loftus explains: “The move puts Kentucky near rock bottom in S&P’s credit ratings of the 50 states. Only New Jersey (‘A’) and Illinois (‘A-‘) have a lower rating from S&P.”
The cause of this downgrade is “Kentucky’s substantially underfunded pension liabilities that are the result of chronic underfunding…placing long-term pressures on the state’s finances,” according to S & P analyst John Sugden.
Despite some progress made on this problem in recent years (driven largely by state Senate Republicans), the next governor will deal with a pension crisis that has been decades in the making and will be decades in the solving. Meanwhile, Kentucky is now known as a state that doesn’t have its financial act together because of tens of billions in unfunded public pension liabilities.
The second problem has to do with health insurance costs. Embedded in Governor Beshear’s “vengeance” argument is his implementation of Obamacare, which has dropped Kentucky’s uninsured rate largely by putting 400-thousand people on Medicaid. Some people—110-thousand—did find private coverage through Kynect, the state’s health insurance exchange, although a great many of them already had private health insurance, lost it under Obamacare, and were forced onto the exchange against their will.
Those non-Medicaid insurance customers got a rude awakening a few weeks ago when the state announced massive rate increases. As WFPL Radio reported, “all but one of the 13 insurers selling individual and small-group plans in the state are raising rates.”
But it gets worse, WFPL says, because the “carrier designed to provide the most affordable plans…will see a 25.1 percent rate increase for individual plans this year.” And this is on top of a 20 percent rate increase last year.
The report says it all: “Funded by a federal loan made available through the Affordable Care Act, its massive back-to-back rate increases suggest things aren’t working as planned.”
The next governor must decide whether Kentucky can sustain such a large chunk of its population (more than 25 percent) being on Medicaid, and whether the private exchange is actually working when rates are skyrocketing.
The third problem has to do with new census data showing Kentucky’s poverty rate up and household median income down.
According to the Kentucky Center for Economic Policy, a liberal think tank, “Kentucky’s overall poverty rate went from 18.8 percent in 2013 to 19.1 percent in 2014 while median household income in Kentucky fell from an inflation-adjusted $44,097 in 2013 to $42,958 in 2014.”
For African Americans the story is worse. The Courier-Journal’s Phillip Bailey reported that blacks in Kentucky “saw their average yearly incomes drop by more than 11 percent” and that the poverty rose “at a rate four times more than the rest of the state from 2013 to 2014,” with nearly one-third of African Americans now living in poverty. Black incomes dropped from $30,183 to $26,735.
Since the recession, economist Paul Coomes told the Lexington Herald-Leader this summer that Kentucky is “slipping, relative to other states, in terms of average pay.” This fact is driving more people into poverty, including children.
In Eastern Kentucky, nearly 40 percent of children are now living in poverty. Statewide, there are 25-thousand more children living in poverty than when Beshear took office, according to the Kids Count Data Center.
While Kentucky’s unemployment rate has dropped to 5.2 percent, it is at least in part because people are dropping out of the workforce altogether. In December 2007, when Beshear was sworn in, 61.5 percent of able-bodied Kentuckians were working or looking for work. Today, just 56.3 percent are actively participating in the labor market. Kentucky has 81,558 thousand fewer people participating in the workforce than when Governor Beshear took office, despite a civilian, non-institutional population increase of 156-thousand between December 2007 and August 2015. There are 71,259 fewer people working in Kentucky today than when Beshear took his oath.
These mighty problems—pensions, health care costs, and economic prosperity—await Kentucky’s next governor. Everything he does must be aimed at confronting these things because, to those Kentuckians facing joblessness, falling incomes, rising poverty, and skyrocketing health care costs, it must feel as though someone has indeed taken vengeance upon them.
Scott Jennings is a former advisor to President George W. Bush and U.S. Senator Mitch McConnell. He is a partner at RunSwitch Public Relations and can be reached at firstname.lastname@example.org or on Twitter @ScottJenningsKY.