Will Kentucky be the New Kansas?

The Kentucky Republican Party’s ongoing campaign to privatize virtually the entire
public sector of the Commonwealth continues unabated. This is especially true for
public education.

This is part of the national agenda that has sailed through Kentucky’s General
Assembly in the past couple of years – right-to-work laws, charter schools, vouchers,
and a pension grab by the same financial sector that caused the Crash of 2008! (See
also the removal of the inviolable contract for new teachers and a strong push for a
future 401-k type pension system that will pay millions in fees to the governor’s hedge
fund buddies.)

The first order of business is to weaken the educational systems like the GOP has done
in Kansa and Wisconsin. In Kentucky for example, the General Assembly now
contributes only 28% of Murray State University’s operating budget; leading its
president to talk about the forced privatization of the university system and raising
tuition. Students will be forced to depend more upon student loans and high interest
private loans.

As to the pension bill (SB 151) that the Governor just signed, government officials have
harped repeatedly on the theme that defined-benefit plans have a “structural problem”
(i.e., are flawed in design). While this statement is the SOLE foundation for their
reasoning that the pension funds need to be changed, they offer no proof to back up
this statement. In fact, defined-benefit plans are not flawed. At their core, they are
nothing more than a simple, short equation: benefits required = a required rate of
return times the size of the portfolio.

The argument that the pension problem is a “structural” problem is not true; the
problem is a lack of funding. The structural issue is a smokescreen to justify the
politicians’ desire to let private money managers take over the investment of the pension funds, leading to large fees for people who contribute heavily in election
campaigns.

This national agenda, now adopted by the Kentucky GOP and modeled after Kansa,
goes far beyond pensions. They want to privatize Medicaid and Social Security;
weaken minimum wage, overtime, paid sick leave, and maternity leave; lower pollution
regulations; and reduce regulations in general – all while reducing taxes for the rich!
The 2018 General Assembly just reduced taxes by $80 million for businesses.
Economists will tell you that, in order to have economic growth, you have to focus on
productivity (and not just business tax reductions). This means maintaining an
educated, well-trained work force and improving infrastructure.

A Democratic Party alternative could replace Gov. Bevin’s ill- advised tax cuts with the
following priorities:

● Invest in education and health to unleash residents’ potential and boost
productivit.

● Launch public infrastructure projects to create jobs, spur growth, and promote
equit.

● Boost household incomes for shared prosperit. States can help families make
ends meet and improve children’s life chances with state earned income tax credits
and higher minimum wages.

● Clean up the tax cod. Scrapping ineffective special interest tax breaks, incentives,
and loopholes (Center on Budget and Policy Priorities, Erica Williams)

The tax cuts that state lawmakers have pursued have typically failed to produce
economic benefits for the broad majority. Such state tax cuts have squandered
resources that states otherwise could have invested in shared opportunity.

There is ample research that shows tax cuts to corporations and elimination of State
Income tax have a very small marginal effect on jobs and economic growth. (See
Center for Budget and Policy Priorities, Leachman and Mazero)

How do companies like large auto manufacturers choose the location for their plants?
Testimony from states like Alabama, Mississippi, and Kentucky has indicated that the
major factors are a well-educated workforce, proximity to a strong university, favorable
infrastructure, and quality of life in the area. Tax incentives are not the determining fac
In the words of Lt. Colonel Bill Cowan, a proud Republican and a retired teacher
and recipient of an Army pension, “the most reasonable and equitable solution is
to find new revenue sources... through changes in the tax code” which in our
view is to close the billions of dollars in giveaways is right on the mark.

Will Kentucky be the New Kansas?