Mr. President, Mr. Speaker, distinguished members of the Kentucky General Assembly, Lt. Governor and Mrs. Abramson, other Constitutional officers, honorable members of the Court of Justice, honored guests, including Kentucky's First Lady, and my fellow Kentuckians …
For the seventh time, I come before you to report on the State of the Commonwealth.
Last year, I began this annual address by describing a new atmosphere of civility, a new attitude that had created a fresh willingness to engage in respectful dialogue and to seek consensus on difficult issues.
As a result, I said then that I was:
“Excited about the challenges ahead.
Optimistic about the chances of success.
And eager to get started.”
Well ... my confidence was rewarded.
Despite differences of party and geography, you and I collaborated in the spring of 2013 to pass the Graduation Bill … to further protect our families from the scourge of prescription drug addiction …
to expand infant health screenings …
to create a panel to investigate cases of child death or serious injury due to neglect or abuse …
to authorize financing for 11 building projects on our university campuses …
and to resolve a huge unfunded liability in our public pension system by reforming our benefits and raising $100 million in recurring revenues to finally put our system on the path to financial stability.
These were stubborn challenges.
But we ignored the partisan shouting match enveloping this country and made meaningful progress on fundamental weaknesses that have sapped Kentucky's strength for generations.
As a result of our efforts both last year and over the last six years, we are shrugging off an historic reputation for backwardness and instead are writing a new narrative founded on change and innovation.
And the nation has taken notice.
Over the last three months I've told Kentucky's story on influential programs like “Meet
the Press,” C-SPAN, CNN, the BBC, NPR, CBS Evening News and in the Wall Street
Journal and The New York Times.
These national opinion-shapers didn't want to talk about the usual Kentucky subjects of basketball, bourbon and horse racing – although those are interesting topics.
They wanted to know about Kentucky leading the way on providing affordable health care to all of its people and designing a high-tech benefits exchange that has become a national model.
They wanted to talk about Kentucky being in the forefront in adopting state-written and locally-implemented standards for education as required by Senate Bill 1 …
about Kentucky raising its dropout age …
about us setting new records in exports …
about us bringing thousands of jobs from places like India, China, Japan, France, Germany, Russia, Australia and Austria …
about us moving to No. 3 in building cars …
about us pushing the envelope on research in areas like advanced batteries and health sciences …
and about Kentucky outmaneuvering the competition to secure award-winning deals involving Ford, GE and Toyota.
In short, they wanted to talk about Kentucky as a leader in this nation.
The decisions that you and I made together during the worst recession in almost a century not only put Kentucky on a more sound financial footing – they also have made us a force in the 21st Century economy.
So thank you to everybody in this room and those watching at home who have worked with me on these issues.
Now, there is plenty left to do.
Today, we begin the 2014 session of the General Assembly amid an even more vitriolic national atmosphere.
Yet I stand here again feeling confident that we in Kentucky can ignore the pull of partisanship and make this session as productive and successful as last year's.
And we must do so, for the urgency remains.
We must continue to focus our attention not on the next headline or next election but on a collective vision of a stronger Kentucky.
What does that Kentucky look like?
It's a place where every person who needs a job has one …
where every child has the opportunity to be successful …
and where every family enjoys financial security and a high quality of life.
But core challenges continue to stand in our way, and although we have made significant progress, much more needs to be done.
What are those challenges?
• A population whose collective health stubbornly remains among the worst
in the nation.
• An education system that still isn't as effective as it needs to be.
• A workforce that isn't as trained and skilled as the marketplace demands.
• And an archaic tax system that works against us, not for us.
Tonight I want to talk about the progress we're making together toward achieving our
collective vision for Kentucky …
and about my agenda both for this 60-day session and for the coming year, because it's an
agenda that continues that progress by focusing on overcoming those pressing challenges.
Our top priority remains jobs.
Putting Kentuckians to work is the single-best thing we can do both for our families and our state.
The good news is that companies want to come to Kentucky, and Kentucky companies continue to expand workforces, facilities and production lines.
Our flexible economic development incentives and friendly business climate continue to be attractive.
In 2013, we announced 217 projects representing more than 12,000 projected new jobs. These projects represent more than $3.1 billion in investment.
Since you and I overhauled our incentive programs in 2009, we have used those programs to partner on over 600 projects representing nearly $7.3 billion in investment.
As these companies follow through with their plans, they stand to create or retain over 47,000 Kentucky jobs.
In 2012 we set a record with $22.1 billion in exports of Kentucky-made products and services. After the first 11 months of 2013, we were 14.2 percent ahead of that record 2012 pace – an increase that is second highest among all the states.
In the auto industry alone, exports were up over 43 percent through the first three quarters.
This year, Kentucky became the third-highest auto-producing state in the country – surpassed only by Michigan and Ohio.
And measured per capita, through October we were No. 1 among the top vehicleproducing states.
Toyota announced in April that its Georgetown plant will be the first-ever U.S. production site for the Lexus ES 350 model, the top-selling Lexus sedan in the world. It was part of a half-billion-dollar investment.
And Ford announced plans to produce the all-new 2015 Lincoln MKC model at the Louisville Assembly Plant.
It's no wonder that Site Selection magazine in November ranked Kentucky's business climate ninth in the nation in 2013 – up two spots from 2012.
And it's no wonder that Kentucky is leading the nation in new business creation.
Listen to this:
As touted by Bloomberg News, the most recent figures from the Bureau of Labor Statistics show that the number of new businesses in Kentucky has grown by more than 6 percent from a year ago.
That's by far the largest percentage increase in the country, and it's four times the national average.
Meanwhile, in Jefferson County, we are building the single-largest transportation construction project in the history of this Commonwealth.
In June, we ceremonially broke ground for the $1.3 billion Downtown Crossing – half of the long-awaited Louisville-Southern Indiana Ohio River Bridges Project.
In addition, in Covington last week, we took a big step forward on another long-needed bridge project that has been stalled for decades – the Brent Spence Bridge.
As required by the 2012 General Assembly, the Kentucky Transportation Cabinet and its Ohio counterpart submitted an initial financing plan to the Federal Highway Administration for the Brent Spence's replacement.
These bridge projects in both regions are strongly supported by their respective business communities because of the projects' dual economic impacts: Short-term they'll create construction jobs, and long-term they'll improve capacity by moving commerce and commuters for decades to come.
But we're not concentrating only on big projects and big manufacturers.
This year we created the Office of Entrepreneurship within the Cabinet for Economic Development to enhance existing efforts to help startup businesses every step of the way.
In November we also created the Kentucky Angel Investors Network to link private investors with entrepreneurs and start-ups.
Small and young companies are vital to our economic health.
By promoting innovation and entrepreneurial activity, we can improve Kentucky's competitive position in the world and enhance job creation at the same time.
We're also continuing to support my Hiring Kentucky Heroes initiative – which gives
military veterans and their spouses help in finding a job.
The war overseas has slipped out of the public consciousness.
But here in Kentucky, we're well aware that we have many sons and daughters – both on
active duty and in the Kentucky National Guard – who remain in danger zones even
today … and they will continue to have our full support both while they are on the
battlefield and when they get home and need help adjusting back to civilian life.
We have also begun an aggressive initiative in Eastern Kentucky called “S.O.A.R.:
Shaping Our Appalachian Region.”
That region has traditionally relied on the coal industry for much of its income and
But a stunning downturn in the coal market is exacerbating historic challenges in Eastern
Kentucky related to unemployment and poverty, deepening the suffering for many
S.O.A.R. will help the region develop and more importantly put into action new locally
oriented strategies to attack those challenges.
We kicked off S.O.A.R. with a big bang:
In early December, U.S. Congressman Hal Rogers and I – along with President Stivers and Speaker Stumbo – co-hosted a one-day summit in Pikeville attended by over 1,700 Kentuckians.
Almost every member of the General Assembly from Eastern and Southern Kentucky attended that summit – as did leaders in business, education, health, social services, the environment, tourism and energy.
It was a huge sign of engagement from regional leaders, and we heard a lot of suggestions.
A planning committee is sifting through recommendations and will deliver a report to the Congressman and me very soon.
As part of our commitment to tangible action, the Congressman and I are looking for a way to invest in high-speed broadband access across the region …
and I am also looking to find a way to finish “four-laning” the Mountain Parkway.
And I have a strong feeling that we may be receiving some news out of Washington as soon as tomorrow in support of S.O.A.R.'s goals ... and it's going to be great news.
We are at the beginning of a very long process to address these regional issues, but the Congressman, the President, the Speaker and I are determined to see this effort through, because every Kentuckian – ncluding every Kentuckian in Eastern Kentucky – deserves the opportunity to share in that vision of a better quality of life.
Now, to allow every Kentuckian that opportunity, it is time to tackle one of those core
We must enhance our ability to attract and retain jobs by modernizing our tax
Kentucky generally gets good marks for our business tax climate, but in many ways our
system of taxation remains archaic.
We need to revamp laws governing “what” and “how” we tax in order to improve our
economic competitiveness …
to reduce assessments that create an unlevel playing field for existing Kentucky
and to treat our working families more fairly.
The Blue Ribbon Commission on Tax Reform chaired by Lt. Gov. Abramson delivered
an array of recommended changes applying to businesses and our workforce, including
lowering the top individual and corporate tax rates …
broadening our tax base in the sales tax and retirement areas …
establishing an angel investor tax credit for certain investments in small businesses …
expanding the R&D tax credit to human capital …
and making changes that favor Kentucky-based companies.
Now, most of this isn't new – in fact we've been talking about tax reform for decades.
Kentucky has undergone 12 prior studies of its tax system since 1982.
And our current study's conclusions mirror the previous 12.
So …why are we ignoring these experts and economists?
If a person with a serious health condition visited 13 different doctors, and those doctors
all agreed on the same diagnosis and issued the same prescription, it would be foolish to
walk away without taking action.
My friends, it's time to take action.
I will present to you this session a tax modernization proposal with specific
recommendations on how to move our tax system into the 21st Century.
It will include a recommendation for a Constitutional amendment to allow our local communities to vote on a local sales tax for specific projects they may need.
I realize that tax modernization is a sensitive topic, especially in an election year.
But the people elected us to tackle difficult issues.
So engage with me on a core weakness that is keeping the Commonwealth from reaching its potential.
Look, Kentucky is developing a modern education system, a modern health care delivery system and a modern economy.
So why should the Commonwealth continue to hamstring itself by using an outdated tax structure?
We must take action to build a more competitive Kentucky.
Improving the health of our workforce is another huge challenge for the entire Commonwealth.
Too many hard-working Kentuckians do not have the security that a healthy lifestyle brings.
Because they haven't been able to afford health care coverage.
About 1 in 7 Kentuckians -- some 640,000 of us – are uninsured.
These people are not anonymous statistics.
They're our friends and family. Our former classmates and hunting buddies.
Farmers on the tractor … substitute teachers … seasonal construction workers … nurse's aides … new graduates at high-tech startups … grocery clerks.
You would be surprised at how many of Kentucky's uninsured you know.
Lack of health coverage puts their health and financial security at risk.
They get up every morning and go to work, hoping and praying they don't get sick.
They choose between food and medicine.
They skip visits to the doctor, hoping a condition turns out to be nothing.
And they live in fear and anxiety, knowing that bankruptcy is just one bad diagnosis
Furthermore, their children go long periods without checkups that focus on immunizations, preventive care and vision and hearing tests.
We as leaders have not only a moral obligation to help our uninsured, but we also have an economic responsibility to the Commonwealth.
The negative impact of so many uninsured has been a heavy anchor on our collective capacity.
It's decreased worker productivity.
It's kept our workforce from being as appealing as it should be to prospective businesses.
It's jacked up health-care costs.
And it's lowered our quality of life.
Kentucky ranks among the worst, if not the worst, in almost every major health category, from smoking to cancer deaths, preventable hospitalizations, cardiovascular and cardiac heart disease and diabetes.
That's why I seized the historic opportunity created by the federal government to address Kentucky's poor health in a transformative way.
We expanded Medicaid and – to link Kentuckians to private insurance – created a statebased health benefits exchange.
My decision to operate our own exchange was strongly supported by all the major players in the health-care industry, as well as the Kentucky Chamber of Commerce.
What we call “kynect” has become a national model.
Since Oct. 1, over 130,000 Kentuckians have used “kynect” to access health care coverage … many of them for the first time in their lives.
In addition, over 500 small businesses have completed applications.
Those numbers will continue to grow as we enter a new phase of the sign-up period.
But increasing health care coverage is only one of several efforts we began in the last few years to change the face of health care in Kentucky.
Among other steps:
• Reform with a capital “R” in Medicaid, going to a managed care delivery model that more directly links public spending to better health outcomes.
• Improving dental care in poor areas, especially for our children.
• Adopting the use of electronic records to improve record-keeping and coordination of care.
• Funding more screening to catch early stages of diseases like cancer.
• Increasing access to affordable treatment for substance abuse and other mental health challenges.
• And supporting the successful effort by the University of Kentucky Markey Cancer Center to earn official recognition by the National Cancer Institute.
The prestigious NCI-designation will improve access to new drugs, treatment options and clinical trials, as well as making available millions of dollars in federal research grants.
But we are not finished.
All of these ongoing efforts give us a framework to attack Kentucky's poor health on a variety of fronts.
So in the next few weeks, I will unveil a new initiative that will intensify our efforts.
The initiative will identify a number of goals and the strategies to meet them for the next five years in Kentucky.
One of those goals will be to cut Kentucky's smoking rate by 10 percent by 2018.
Kentucky ranks 50th in smoking, which contributes to nation-leading rates of heart disease, respiratory illnesses and other chronic diseases.
Tobacco use is the single-biggest factor negatively impacting our health.
During this session, I will again support comprehensive, statewide smoke-free legislation.
More than two-thirds of the states and 38 cities and counties within Kentucky regulate toxic smoke in public places.
In fact, nearly half of all Kentuckians live in communities who already do this.
We must fill in the map and protect all our people.
We also need legislation to ban the sale of e-cigarettes to minors.
Other goals will include:
• reducing the number of uninsured in Kentucky …
• cutting our obesity rate …
• reducing cancer deaths by increasing screening rates and requiring HPV vaccinations for both young girls and young boys …
• reducing heart disease …
• further improving dental care …
• and addressing mental health challenges.
I plan to have specific targets for many of these goals so that Kentucky can measure its success.
Kentucky's leaders must recognize the direct relationship between a healthier, more productive workforce and our ability to attract and retain good-paying jobs for our people.
Another big topic this session will be public safety.
There are a number of issues on which we need to take action.
The first issue involves substance abuse.
Over the past six years, we've worked together to reduce meth labs, ban synthetic drugs and address the prescription drug epidemic in a meaningful way.
Now we must focus on heroin, which has made a resurgence across the country and in Kentucky.
In 2011, there were 22 overdose deaths in Kentucky involving heroin.
Only two years later, in the first nine months of 2013, there were 170.
Increased heroin usage demands that we take a more aggressive approach on both the law enforcement side and the treatment side.
It's also time to align Kentucky's booster seat regulations with federal recommendations, because our current laws are not protective enough.
Kentucky requires booster seats for children under 7 years old who are between 40 and 50 inches tall.
But federal highway safety officials and pediatricians recommend booster seats for children up to age 9 and 57 inches tall, because it's safer.
In a recent study in Kentucky, 70 percent of the 142 children seriously hurt in accidents were 8 or 9 years old -- falling outside of the protection of Kentucky's current law.
Because of improper seat belt positioning, they became trauma patients, with horrible internal injuries.
We can – and we must -- better protect our children with a simple change in the law.
In addition, given the vulnerability of schoolchildren and construction workers, we need to consider creating “no-phone zones” – areas where drivers aren't allowed to talk on phones while driving.
And we must extend domestic violence protection to unmarried couples.
Kentucky's current protective order law does not apply to dating couples who do not live together.
Violence is violence and abuse is abuse, whether you're in a married relationship or a dating relationship.
Kentucky is the only state without any civil protection for victims of violence in a dating relationship.
We're behind the times … way behind the times.
Our people, particularly our teenagers, also deserve this additional protection.
And finally, let's discuss education.
I talk to business executives almost daily about what they need to make their companies successful.
They tell me that factors like low taxes, incentives, good roads, logistical support and low utility rates are all important.
But their No. 1 concern is their workforce – finding enough talented, skilled, energetic, healthy and educated workers.
Many years ago, Kentucky's national story when it came to education was cause for embarrassment.
Scores were low, and on most measures we lagged far behind.
But thanks to decades of hard work and aggressive policy changes, Kentucky has carved out a new reputation as a reform-minded state that is innovative, bold and determined.
That new reputation was further strengthened early in 2013, when Education Week's annual Quality Counts report ranked Kentucky in the top 10 states in student performance and education progress …
and a few months later, when a Harvard study ranked us eighth in student performance improvement over the last two decades.
We also rank sixth in the number of teachers earning National Board Certification.
So now, when our educators attend national conferences, they are barraged with questions from leaders in other states who want to know:
How is Kentucky doing it, and how can they replicate our success?
Since I became governor, our efforts have focused on three areas:
• Improving early childhood education.
• Raising the graduation rate.
• And increasing the college and career readiness of our students, who will become the workforce upon which Kentucky's economic future depends.
In the first area, early childhood, we have coalesced around a concept called “kindergarten readiness” and are implementing a kindergarten entry screener to evaluate where incoming students stand on cognitive, physical and emotional skills.
Three weeks ago, our efforts received a game-changing boost when we were awarded a $44.3 million Race to the Top grant to improve early learning programs for thousands of Kentucky preschoolers.
Here in Kentucky, the initiative is called the All-STARS plan -- Accelerating learning Statewide Through an Advanced Rating System.
I will seek legislation needed to implement the goals of the All-STARS plan which will provide for more accountability and better transparency throughout our state's early childcare system.
Getting our children off to a better start in life – all of our children, not just those in wealthy, two-parent households – will dictate our success as a state.
In the second area, graduation rates, we are making huge strides.
Our graduation rate improved from 69.7 percent for the class of 2000 to 79.9 percent for the class of 2010.
This year, Kentucky joined other states in using a more accurate way to measure the number of students who graduate.
Our rate of 86 percent – when measured against the most recent data from other states – ranks us among the top states.
And that rate will continue to improve as we implement the Graduation Bill passed last session and other important supports for these at-risk students.
As you recall, Kentucky's 173 school districts had the option of increasing the compulsory school attendance age from 16 to 18 for the 2015 school year, with the bill becoming mandatory once 96 of the districts had done so.
Well, it didn't take long.
We exceeded that goal in just two weeks, and the First Lady and I are so proud of our education community for stepping up so rapidly.
So far, 140 of our 173 districts have adopted that new policy.
The third area, college and career readiness, is a measure of whether our schools are doing their job.
In 2010, only 34 percent of Kentucky high school graduates were adequately prepared to take the next step in life.
Today, that number is 54 percent – putting us on target to meet the 2015 goal of 67 percent.
That's a huge jump, and it is partly the result of new standards for learning that hold students and teachers to a higher bar.
Since 2011, public school educators have been using the Kentucky version of Common Core academic standards in English/language arts and mathematics, which define the minimum that students should know at each grade level.
Core Content plays down rote memorization, and instead gives students the skills that today's workplace demands: creative and critical thinking, problem solving, collaboration, creativity and communication.
As the first state to adopt the standards, Kentucky won national recognition in a variety of places. TIME magazine, for example, said we “barreled headlong into the future.”
And I love the headline of the article in TIME: “What Every Child Can Learn from Kentucky.”
We were also the second state to adopt the Next-Generation Science Standards, and now we're creating standards for social studies and arts and the humanities.
We also are implementing a new model of secondary career and technical education to make it more accessible to students at an earlier age, more rigorous academically and better aligned with both postsecondary requirements and employer needs.
Furthermore, we have seen a 28 percent increase in the number of students transferring credits from our two-year colleges to our four-year programs.
The bottom line: We are fitting the pieces together to create a seamless, cradle-tocareer education system that is better preparing our students for this complex world.
I know that you and I want nothing less than to produce the brightest minds in the world and to create a workforce that companies fall all over themselves to come to Kentucky to hire.
And we're getting there.
But ladies and gentlemen, that progress is in jeopardy with every dollar we cut out of education.
Throughout the recent historic recession, you and I protected SEEK, the basic funding formula for classrooms, from cuts.
But preserving funding isn't enough.
From 2000 to 2008, SEEK grew an average of 3.4 percent each year.
But from 2008 to 2014, it grew zero percent – even as enrollment expanded, costs increased, and local support in some areas dropped.
Furthermore, to balance our budget during the recession, we eliminated funding for textbooks and significantly reduced funding for teacher training and school safety.
Now, despite these austerity measures, Kentucky's education community still made tremendous progress for our children, placing Kentucky on the leading edge of education reform in this country.
But they have stretched every dollar they have as far as they can -- and now they're out of options.
To add to the pain, Kentucky schools are facing the delayed impact of the federal sequester cuts.
They will have to figure out how to make up the loss of approximately $28 million in federal funding in the current fiscal year, with the potential for an additional $28 million hit in the next year.
If we continue to cut or freeze education funding, our schools face the prospect of laying off significant numbers of teachers, greatly increasing class room sizes and letting technology and equipment grow more outdated and useless.
We are in danger of losing all of the positive momentum which has been built up.
And I am not going to allow that to happen.
I am determined to find money to reinvest in education – even if I have to make harmful cuts in other areas to do so.
Over the last six years, you and I have been partners in eliminating fat from a somewhat wasteful, bloated bureaucracy.
We've cut some $1.6 billion in state spending, reduced the budget 13 times and trimmed the state workforce to its smallest size in four decades.
Much of that needed to be done.
And we continue to find more efficient ways to run programs and to make revolutionary changes in huge cost areas like Medicaid, Corrections, pensions and employee health care.
But in balancing our budgets during the recession, we were sometimes forced to cut far too deeply, decimating many programs and services that Kentuckians desperately need.
And those cuts damaged our ability to build a stronger future.
We cannot continue making progress by paying teachers less than they deserve …
by ignoring needs like textbooks and technology …
by delaying research into innovative energy production …
by pricing college out of reach …
by leaving needed cancer screenings unfunded …
and by retreating from things like child care and mental health services.
My friends, we need more resources to make needed investments in our future.
There are two possible sources of significant new revenue.
One we already talked about -- tax reform.
A more competitive tax structure will, as the economy grows, also stabilize longterm revenue – not because of higher rates, but because it's aligned with today's economy, instead of one that existed a century ago.
Broadening our tax base and improving our business climate will help stabilize our future budgets.
Another source of new revenue is expanded gaming.
Again this session I will ask you to place a Constitutional Amendment on the ballot related to expanded gaming.
Over the years several economic studies of various gaming scenarios have projected potential Kentucky tax revenues in the hundreds of millions of dollars.
But regardless of the amount, allowing gaming is a way to keep Kentucky tax revenue at home – instead of letting Kentuckians' entertainment dollars fund roads and schools in Ohio, Indiana, West Virginia and other states.
Now I realize there are many arguments for and against gaming.
But there's no reason to deny the people of Kentucky an opportunity to vote “up” or “down” on this issue.
They want to vote on this issue, and we should let them decide whether to continue allowing Kentucky tax money to flow across our borders or to keep it here at home.
Look, I recognize that some of us will have differing opinions on what tax reform and gaming and perhaps even education re-investment should look like.
But we have proven over the last few years that here in Frankfort we can work through those differences and pass meaningful legislation that strengthens our capacity and builds a better quality of life for our people.
My friends, we must not be distracted in that effort.
In the last few years, the tone of discourse in this country has grown louder, uglier and more hateful.
In Washington, you find leaders focused on keeping power, not helping people.
They point fingers instead of reaching across the aisle.
They tear down instead of building up.
And they preach intolerance instead of inclusion.
That's why we have government shutdowns, filibusters, continuation budgets and a myriad other examples of counter-productive gamesmanship.
And out here in the rest of the country, too often office holders and voters have let themselves get caught up in this “take no prisoners” approach to politics.
Fueled by social media and talk radio, we're losing the ability to listen ... we're losing the ability to treat each other's opinions with respect and to overcome differences.
My friends, we must resolve not to let that happen here in Kentucky.
We must remember that we are Kentuckians first and Democrats and Republicans second.
During this 60-day session, and in the year ahead, I believe that we in Kentucky can continue to show our Washington colleagues what leadership really looks like.
We need to take bold, decisive action to build a healthier, more educated and bettertrained population.
And together, I believe we can.
Thank you and good night.