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5 Major Challenges Facing Kentucky's New Governor

After a day of celebration Tuesday on becoming Kentucky's 62nd governor, Republican Matt Bevin faces the stark reality of governing a challenged state.

By Jack Brammer

After a day of celebration Tuesday on becoming Kentucky's 62nd governor, Republican Matt Bevin faces the stark reality of governing a challenged state.

Looming before Bevin, a Louisville businessman who will be holding his first public office, are the immediate challenges of assembling a state budget, addressing shortfalls in pension plans for state workers and teachers, and finding affordable ways to provide health care for the state's needy.

He also must establish working relationships with two prominent Democrats -- House Speaker Greg Stumbo and incoming Attorney General Andy Beshear, the son of outgoing Gov. Steve Beshear.

"No doubt, Bevin has his work cut out for him," said Democratic political consultant Dale Emmons of Richmond. "Now, instead of making campaign speeches, he has to make policy."

Scott Jennings, a Republican strategist from Louisville, said Bevin is "inheriting a mess, a fiscal mess especially in pensions and health care. It will take much work to overcome them."

Crafting a two-year state budget

Seven weeks after Tuesday's inauguration, Bevin must present to Kentucky lawmakers a two-year spending plan for the state that will total more than $20 billion. By law, Bevin must propose his budget by the 15th day of the legislative session, which is Jan. 26.

That gives the new governor little time to put together how much each state program and agency will spend.

The problem gets more complicated since Bevin still has several major appointments to make. Some cabinets, departments and agencies will not have leaders to help craft their budgets.

The budget issue got heated last week when Bevin declared that he is inheriting a "financial crisis" from Beshear.

Tucked away in his announcement of John E. Chilton of Louisville as his state budget director, Bevin said Beshear is leaving Kentucky "burdened with a projected biennial budget shortfall of more than $500 million."

Beshear disputed Bevin, saying Bevin was just facing the reality of needs and requests surpassing available money.

"In the last few days, Bevin has tried to recast Steve Beshear by saying he's facing a shortfall in the budget," Emmons said. "That's a total fabrication. Beshear has said he is leaving the state with millions in surplus. That's just Bevin's way of lowering expectations for everyone who wants more money."

Political observers also will be watching closely to see if Bevin attempts to legislate through the budget process by proposing funds for new programs, such as charter schools.

Tackling financially strapped public pensions

The Kentucky Teachers' Retirement System, which is projected to have $14 billion less than it expects to need in coming years, is asking for more than $520 million next year.

Meanwhile, the state's annual recommended contribution to the Kentucky Retirement Systems is expected to top $880 million. It faces more than $10.9 billion in unfunded liabilities.

Jennings called the pension woes "the worst financial problem any governor of Kentucky has ever left a successor," noting that the funding level for the state's largest pension system has dropped from 52 percent when Beshear took office in 2008 to 17 percent now.

Bevin has suggested a 401(k)-style retirement system for new state workers, a proposal that House Democrats have long rejected. Reaching a compromise will prove difficult, Emmons said.

Providing health care for the needy

Bevin has said he wants to dismantle Kynect, the state's health insurance exchange, and repeal an expansion of Medicaid eligibility. Both were created by Beshear by executive order under the federal Affordable Care Act.

Beshear's move has allowed more than 500,000 Kentuckians to get health insurance, many for the first time.

At a retreat in Maysville last week, Senate Republicans said they will not block about $250 million in state spending needed to pay for the health insurance of more than 400,000 people on the state's expanded Medicaid program.

"It looks like Senate Republicans are trying to rescue Bevin from himself," said Emmons.

Emmons added that it will be interesting to see how many people are uninsured in Kentucky after Bevin's first year in office compared to this month's rate. The uninsured rate in Kentucky last year was 9.8 percent, down from 20.4 percent in 2013.

Working with Stumbo

Stumbo, who leads a slim Democratic majority in the House, has said he is "open-minded" about the plans of the state's second Republican governor in 40 years.

Aware that Republicans hope to wrest control of the House from Democrats in the 2016 legislative elections, Stumbo must push Democratic priorities while not coming across as an obstructionist. That title plagued former Republican Senate President David Williams when he spent years foiling the plans of Democratic governors.

"Greg Stumbo is not an obstructionist," Emmons said. "He has proven over and over that he will work with the governor."

Jennings said Senate Republicans "basically will be in line with Bevin and their working together will mean Stumbo can't block everything they do."

"He does not want to become the 'black hole' in the House where major legislation dies," Jennings said.

Getting along with Andy Beshear

Republicans fell short in November of capturing the office of attorney general, the state's top law-enforcement official.

The attorney general can make life tough for a governor. Just ask the last Republican governor, Ernie Fletcher, who was in office from 2003 to 2007.

Stumbo, then attorney general, got a grand jury to investigate hiring practices in the Fletcher administration. Charges against Fletcher later were dropped when the investigation ended, but a politically wounded Fletcher was unable to win re-election.

Some Republicans also are concerned that Andy Beshear, who takes office in January, may throw legal obstacles in Bevin's efforts to dismantle Kynect and repeal Medicaid expansion.

Bevin and the elder Beshear already have had words over the health programs, and several of the departing governor's staff are going to work for the younger Beshear.

"Republicans should note there will be a very good cop on the first floor of the Capitol in Andy Beshear," Emmons said. "I'm sure he will be fair and impartial but determined in upholding the law."

Jennings laughed at that remark and said there's "nothing like using state law enforcement for politics."

(c)2015 the Lexington Herald-Leader (Lexington, Ky.)

Caroline Cournoyer is GOVERNING's senior web editor.
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