Gov. Beshear’s Top 10 Accomplishments of 2012

Governor Beshear released his top accomplishments of 2012 today. Press release below:

Commonwealth of Kentucky Office of the Governor
FOR IMMEDIATE RELEASE	Contact:	Kerri Richardson 502.564.2611 502.330.6633 Terry Sebastian 502.564.2611 502.229.6130

Gov. Beshear's Top 10 Accomplishments of 2012

Kentucky earns national recognition for job growth, education improvement

FRANKFORT, Ky. (Dec. 20, 2012) – Nearly 15,000 new and protected jobs in the Commonwealth.  Another practical, balanced budget, with $1.6 billion in reductions since 2008.  Marshalling federal and state resources to help families and communities recover from devastating disasters.  These are just a few of the accomplishments Governor Steve Beshear highlighted in his "Top 10 Accomplishments of 2012" released today.

"I'm proud of the work we have done this year to help our families recover from tough times, from prescription drug abuse to tornadoes," said Gov. Beshear.  "We remain focused on the goals we brought into the administration – to create new jobs and keep them here, to manage taxpayers' money wisely, and to champion initiatives to improve public health, education and workforce development.  We have garnered national accolades for our efforts in these areas, but we aren't working for recognition.  We are working to better the lives of our Kentucky families."

1.  2ND-HIGHEST JOB GROWTH RATE IN U.S., WITH THOUSANDS OF NEW JOBS

In October, the U.S. Bureau of Labor Statistics ranked Kentucky second in the nation for job growth rate over the past year, with a net increase of 2.6 percent.  That growth is more than double the rate of our nearby competitor states.  From September 2011 to September 2012, 47,000 jobs were created in the Commonwealth.

Kentucky's flexible economic development incentives and friendly business climate continue to attract more new and expanding companies to our state.  2012 was a banner year for job growth made possible by these incentives, with the announcement of 342 projects representing 13,051 prospective new jobs and 1,896 jobs saved. Those critical job-creation projects represent a more than $2.6 billion investment across the Commonwealth. 

Multiple national organizations have recognized Kentucky's prowess in nurturing and supporting businesses, including:

·        The Kauffman Foundation ranked Kentucky as one of the top 10 states for entrepreneurs, tied for the eighth-highest number of new startup companies;
·        CNBC rated Kentucky as the best state for cost of doing business;
·        State Policy Reports ranked Kentucky in the top 15 states for economic momentum;
·        Business Facilities magazine named the partnership between the Commonwealth and Ford Motor Co. as its national Economic Development Deal of the Year;
·        Trade and Industry magazine ranked the Ford Motor Company investment in Kentucky as one of the top 15 corporate projects in the U.S.;
·        Area Development magazine recognized Kentucky with a Silver Shovel Award, given to states which are the most successful in creating jobs and securing investments in new and expanding facilities; and
·        Southern Business and Development magazine named Governor Beshear its 2012 Person of the Year, based on his strong pursuit of economic opportunity for the state.

Major jobs announcements in 2012 include:

·        Anchor Packaging in Mount Vernon - $7.6 million investment, 150 jobs
·        Elovations Services Group in Erlanger - $13.7 million investment, 696 jobs
·        David Brown in Inez - $4.7 million investment, 24 jobs
·        iwis in Murray - $12.5 million investment, 75 jobs
·        Modern Transmission Development in Leitchfield - $3.7 million investment, 61 jobs
·        American Fuji Seal in Bardstown - $10 million investment, 45 jobs
·        Big Ass Fans in Lexington - $8 million investment, 150 jobs
·        Teletech Services Corporation in Hopkinsville - $12 million investment, 700 jobs
·        Amazon.com in Winchester - $20.7 million investment, 550 full-time, 600 seasonal jobs
·        CafePress Inc. in Louisville - $16.5 million investment, 592 jobs
·        Transcraft Corp. in Cadiz - $3 million, 80 jobs
·        Bluegrass Shavings in Liberty - $2.4 million investment, 50 jobs
·        GE in Louisville - $250 investment, 600 jobs
·        Plaza Recovery in Covington - $2.5 million investment, 250 jobs
·        Magna Seating in Shepherdsville - $20 million investment, 450 jobs
·        SMC in Nicholasville - $1.9 million investment, 94 jobs
·        Olympic Steel in Mount Sterling - $11.2 million investment, 40 jobs
·        Bingham McCutchen in Lexington - $22.5 million investment, 250 jobs
·        Berry Plastics in Madisonville - $96 million investment, 400 jobs

2.  POWERFUL PRESCRIPTION DRUG LAW SHUTS ILLEGAL PAIN CLINICS

The state's comprehensive prescription drug law, House Bill 1 (HB1) has been in effect for less than six months but already shows major positive impact in shutting down unlicensed pain clinics, reducing prescriptions of some of the most abused drugs, and accelerating investigations of medical providers with suspicious prescribing habits.

HB1 passed with bipartisan support in a special legislative session this spring.  The bill includes multiple elements to prevent the abuse and diversion of prescription drugs and to enhance law enforcement's tools to investigate illegal prescribing practices.

Since HB1 took effect:

·        20 of the state's known 45 pain management clinics have closed rather than submit to new rules that protect consumers. 
·        The number of medical providers registered to use the state's nationally recognized prescription monitoring program, KASPER, has more than tripled.
·        The number of daily KASPER reports has skyrocketed from less than 3,000 per day to nearly 20,000.
·        Prescriptions for some of the most abused or diverted drugs have dropped compared to a year before (Nov. 2011 to Nov. 2012), including:

o   Hydrocodone – down 16 percent;

o   Oxycodone – down 16 percent;

o   Alprazolam (Xanax) – down 20 percent; and

o   Oxymorphone (Opana) – down 48 percent.

Governor Beshear has joined forces with partners in state and federal government to close loopholes and enact policies to thwart fly-by-night providers and doctor-shoppers who wreak havoc on families and communities through prescription abuse. 

·        Gov. Beshear met with U.S. drug czar Gil Kerlikowske to advise him of Kentucky's multiple efforts to battle prescription drug abuse.
·        This spring, Gov. Beshear spoke at the National Prescription Drug Abuse Summit to call on the federal government and state to develop aggressive shared tactics to fight prescription abuse.
·        In March, Kentucky signed a multistate agreement to share prescription drug dispensing data with at least 20 other states, to provide a more comprehensive database to cut off access to abusers and identify problem prescribers. 
·        Governor Beshear added $6.1 million in new funding in the current budget for substance abuse treatment for Kentuckians enrolled in Medicaid.  That treatment includes individual therapy, group therapy, peer support and intensive case management. The funding will provide treatment for 5,800 adults and teens over the biennium.

3.  IMMEDIATE AND LONG-TERM HELP IN DISASTER RECOVERY

The March tornadoes that caused millions in damage and killed two dozen people, mostly in eastern Kentucky, are the 11th federally declared natural disaster of Gov. Beshear's administration.  After those storms, Gov. Beshear visited the disaster areas multiple times, and worked directly with the Federal Emergency Management Agency (FEMA) and state agencies to ensure the affected areas got needed relief assistance immediately.

The tornadoes damaged more than 2,800 homes.  Of those, 810 were destroyed.  FEMA provided $24.5 million for repair projects, and $10.2 million for individual assistance grants.

Gov. Beshear also accelerated state assistance to areas like West Liberty and Morgan County.  State agencies set up temporary offices in damaged areas within hours of the storm. The Governor directed long-term assistance as well, including providing funding for highway reconstruction and downtown redesign and rebuilding.

The summer brought scorching drought that affected nearly every Kentucky county.  Eventually, all but 3 of Kentucky's 120 counties were classified as drought disaster areas by the U.S. Agriculture Secretary.  Gov. Beshear worked with the state and federal partners to make sure farm families had access to relief assistance.

4.  FASTER, CHEAPER, SAFER:  KENTUCKY BRIDGES UNDER CONSTRUCTION 

By working across party lines with other governors, accelerating construction timelines and promoting competition among contractors, Gov. Beshear has ensured that Kentucky's critical transportation arteries are under construction faster than anticipated.  Moving quickly to build or repair these bridges will save tens of millions through increased competition and compressed timelines, and creates safer, more reliable transportation for Kentuckians.

·        Gov. Beshear joined Gov. Mitch Daniels of Indiana in August to break ground on the first construction phase of the Ohio River Bridges Project, which will build two new spans across the Ohio River in Louisville.  The governors, working together, identified practical solutions to cut costs to an attainable level. They also split the project, giving Kentucky authority over the downtown bridge and Indiana responsibility for the eastern span. Their combined efforts dropped project costs 40 percent from original estimates.  In November, the Kentucky Transportation Cabinet awarded the contract for construction of the downtown Louisville bridge to Walsh Construction Inc.  The contract is $90 million under estimate and the bridge is expected to be finished nearly 19 months ahead of schedule.
·        The Sherman-Minton Bridge in Louisville returned to service ahead of schedule following emergency closure in September 2011 after a suspicious crack was found during a routine inspection.  Kentucky and Indiana worked hand-in-hand to redirect traffic and expedite the repair, which was completed in February.
·        In December, Gov. Beshear joined Ohio Governor John Kasich to sign an agreement to begin the formal process for planning and building a new span alongside the Brent Spence Bridge in Covington.  The current bridge carries the entire load of both Interstate 71 and I-75 as well as local traffic.  It is classified as "functionally obsolete" because of its narrow lanes, absence of emergency shoulders and limited visibility on the lower deck.  A construction contract is could be awarded by 2014.
·        Govs. Beshear and Kasich also broke ground on another Ohio River bridge, this one spanning Ironton, Ohio, and Russell, Ky.  The Ironton-Russell Bridge is 90 years old and will be demolished after the new bridge is completed in fall 2015.
·        The Eggners Ferry Bridge, which carries U.S. 68/KY 80 across Kentucky Lake, opened to traffic 2½ days earlier than expected after emergency repairs.  The bridge was severed Jan. 26, when a cargo ship, the Delta Mariner, struck the bridge and tore away a 322-foot span.  The bridge was repaired before Memorial Day weekend, saving the summer tourism season in the Lakes Region of Western Kentucky.
·        A new U.S. 60 Tennessee River Bridge between Paducah and Ledbetter may open more than a year ahead of schedule, thanks to an aggressive construction timetable.   The Ledbetter bridge is scheduled to open by Oct. 31, 2013 – instead of an original target of July 2014.

5.  FOREIGN TRADE TRIPS LEAD TO DIRECT INVESTMENT

Gov. Beshear takes his message of Kentucky's business-friendly climate and strong workforce directly to job-creators across the globe, and 2012 offered outstanding results.  Kentucky is home to approximately 420 foreign-owned companies from 30 nations, employing more than 77,000 people, and the Governor continues to pursue more.  Nearly 35 percent of all capital investment and almost 20 percent of all jobs announced in 2012 were a result of foreign-owned enterprises.

·        Germany – after the Governor's trip in July, two German-owned automotive suppliers announced plans to invest and hire in Kentucky. Webasto Sunroof Systems announced plans to invest $10 million and add 65 jobs in Lexington, and iwis, which manufactures timing drive systems for engines, will establish its first U.S. manufacturing operation in Murray. The iwis project will create 75 new, full-time jobs and entail a more than $12.5 million investment in the Commonwealth.
·        France – after the Governor's visit to global cosmetics and hair care manufacturer L'Oreal in Paris this summer, the company announced plans to invest more than $42 million and add more than 200 new jobs in Florence.
·        Japan and Taiwan – Shortly after returning from a successful economic development trip to Asia, Gov. Beshear joined Taica North America Corp. officials to announce the company's plans to locate a manufacturing facility in Winchester. The Japanese investment will create 30 new full-time jobs over the next several years and entail a more than $8 million investment by the company. Kentucky has the second-highest per capita rate of direct investment from Japan in the country – trailing only Hawaii.
·        India – Gov. Beshear traveled to India in September, his third trip to the world's second most-populated nation.  India-based Flex Films announced $180 million in investment and 250 new jobs in Elizabethtown after his first trip.

Other countries are also making direct investments in the state.  China-owned Birtley announced in September it will invest $10 million and create 30 to 50 new, full-time jobs in Lexington.  The announcement marks the first Chinese-owned manufacturer in Kentucky.

6.  KENTUCKY LEAPS 20 SPOTS IN NATIONAL EDUCATION RANKING

Kentucky's ranking in an annual grading of all states on key education indicators jumped 20 spots in 2012, placing the state 14th in the nation for its work on academic standards, the teaching profession and many other variables related to public education.

The annual ranking by national publication Education Week is found in a special issue, "Quality Counts." The report tracks key education indicators and grades states on their policy efforts and outcomes. Last year, Kentucky ranked 34th in the nation in this annual report.

Much of the impetus for Kentucky's high ranking can be traced to 2009's Senate Bill 1, which set Kentucky on a course to become a leader nationwide in school accountability, teacher training, college/career readiness and stronger academic standards.  Kentucky was also the first state to adopt tough Common Core content standards, which set minimum standards for math and language skills.

7.  BUDGET CUTS BALANCE BOOKS, PRIORITIZE EDUCATION

Gov. Beshear balanced Kentucky's budget for the 11th time since taking office, and has now cut a total of $1.6 billion from state expenditures.  While reductions have been significant in many parts of state government, significant cuts to our priorities of education, critical public safety programs and job creation efforts have been prevented.

Governor Beshear shrank state government to its smallest size in a generation, and continues to find ways to improve government efficiency with fewer taxpayer dollars.

8.  COMMISSION OFFERS FAIRER, SIMPLER, MORE MODERN TAX CODE

Kentucky's tax system cushioned some of the impact when the nation's economy ran off the tracks in 2008.  But as the state recovers from the recession, Gov. Beshear has begun an effort to make our tax code more fair to taxpayers and our state more attractive to new and existing business. 

Early in 2012, the Governor appointed a broad, bipartisan commission to make sure our state doesn't face another economic crater by failing to update its tax code.  A study of our tax system earlier this summer revealed that without significant changes, Kentucky will face a $1 billion shortfall by 2020. 

The Governor's Blue Ribbon Commission on Tax Reform just submitted its report to the Governor, which includes dozens of recommendations that could create $659 million in additional revenue.  Gov. Beshear will study the report before he meets with legislators to build a consensus on moving forward on changes to our tax code. 

9.  OVERHAUL OF CAREER AND TECHNICAL EDUCATION

In a move to help produce the skilled workforce businesses require today and in the future, Gov. Beshear signed an executive order in August to overhaul the state's career and technical education (CTE) system.

The order unites the state's two CTE systems under the guidance of Kentucky's Department of Education. The goal is to create a unified, more relevant and efficient system to educate and prepare students for the world of work in a real-life setting.

Today's employers require a workforce that is skilled, adaptable and equipped to compete in the global marketplace. Students need an education system that provides job-training and learning opportunities that will put them on a career pathway. Transforming and elevating CTE is essential to this process.

10.  UNEMPLOYMENT INSURANCE DEAL SAVES BUSINESSES $600 MILLION

Gov. Beshear signed House Bill 495, a measure that provides the resources to pay interest owed on the state's federal Unemployment Insurance (UI) loan and that will save Kentucky employers $600 million in federal tax penalties.

The bill is the result of collaborative work by Kentucky employer groups. Since January 2009, Kentucky borrowed more than $960 million from the federal government to continue paying UI benefits to eligible Kentuckians, much like other states had to do. If HB 495 had not been enacted and Kentucky could not make the interest payment due Sept. 30, 2012, employers would lose all of the federal tax credit, and the UI tax payable by employers would rise.

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Follow Governor Beshear on Twitter @Govstevebeshear, read the Governor's personal notes on his blog at http://.governor.ky.gov/blog, and view the Governor's weekly YouTube commentary at http://www.youtube.com/governorbeshear.

Commission on Tax Reform - FINAL MEETING SUMMARY

Staff Report by Rachel Phelps

The Governor's Blue Ribbon Commission on Tax Reform met for the final time Thursday.  As you know, the Commission has been meeting since late Spring working to make recommendations on changing the state's tax code.  At the end of the day long meeting and with all changes scored, the Commission recommended a package that increases state revenue by nearly $700 million, with over half coming in changes to the individual income tax.

The Commission staff is now putting together the actual report and plans to have a draft copy to all Commission members by December 11th. The final report will be sent to Governor Beshear on December 17th. The Governor will review the report and then make the decision on what he will submit to the General Assembly. He has said he will discuss with leadership in the General Assembly before reaching any final decision.  Governor Beshear could also end up adding to the recommendations or removing some from the package.  He did say yesterday that it would be difficult to address during a short session and that a special session on this and pension reform might be necessary.

As with any tax proposal, the actual language to accomplish the intent will be very important and none of that has been drafted to date to our knowledge.  What is listed in the "scorecard" are the recommendations and those will have to be converted to the language in a bill for the General Assembly to consider.

The scorecard is the best document to date that lists what is actually contained in the recommendations.  The only detail missing is the individual income tax.  They are recommending a progressive rate option with the top rate being reduced from 6% to 5.8% and the second highest rate from 5.8% to 5.5%.  Deductions will be capped and retirement income will be taxed for the first time beginning above 30K.  Also, please be aware that the numbers on the score card are not exact and some were changed or tweaked during the meeting yesterday.  The "Throwback" was taken off the table altogether yesterday and the cigarette tax will be roughly 100M and the OTP tax 10.4M after you take out the inventory tax (after the first year) which is included in the numbers on the sheet.

For your convenience here is a snapshot of the changes to the corporate income tax.  We do advise that you review the attached score card as well though. Additionally, take note of applying the sales tax to some services - although the Commission did not set the services that would be taxed, they only used broad categories which had been recommended by the consultants.  The detail of what exact services will be taxed, under this plan, would be included in the bill language, if and when it is introduced.

Corporate Taxes
Single Factor Apportionment - (110 million)
Destination Sourcing - (10 million)
Angel investor Tax Credit - (3 million)
Income tax credits in lieu of barrel tax - (12.6 million)
Decouple QPAI - 4 million
Lower the small business standard on the LLET - 13 million
Eliminate corporate income tax loopholes - 10 million

We will send you the final report when we receive it.  Please don't hesitate to contact us with any questions or concerns you may have.

Senate Chairs

TheSenate Republicans released a list of their 2013-14 Senate Committee Chairmen, and they are as follows:
Agriculture, Hornback
A&R, Leeper -  Sen. Givens will Vice-Chair A&R
Banking & Insurance, Buford
Econ Development, Kerr
Education, Wilson
Health & Welfare, Denton
Judiciary, Westerfield
L&O, Schickel
Natural Resources, Carpenter
State & Local Government, Bowen
Transportation, Harris
Veterans, Higdon. with Sen. Leeper.


Statutory Committees:
Administrative Regulation Review Subcommittee, Bowen
Capital Planning Advisory Board, Humphries
Capital Projects and Bond Oversight, Girdler
Education Assessment & Accountability Review, Wilson
Government Contract Review, Gregory
Medicaid Oversight & Advisory, Givens
Program Review & Investigations, McDaniel
Tobacco Settlement Agreement Fund Oversight, Hornback


This article has more details.

Thanks

Happy Thanksgiving

From your friends at Government Strategies

Tax Reform Commission Update

Tax Reform Commission Meeting

The Governor's Blue Ribbon Tax Commission met today and continued its work of culling the 95 recommended changes in the tax code, that have been proposed by comments at public meetings, individual Commission members, the Department of Revenue, and consultants hired by the Commission.  Here is a list of these 95 recommendations/proposals.

The bulk of the Commission's work today centered around the individual income tax and corporate taxes. There was a brief discussion regarding sales tax on services at the end of the meeting. 

Individual Income Tax

Greg Harkenrider gave a presentation on Income Tax Options to the Commission. A copy of his presentation along with a white paper on retirement income is attached. This included a long discussion on income tax deductions, calculations, and rates. The presentation was brought to try to inform members about how removing deductions and modifying retirement income calculations may impact the decisions the Commission may make on the various options.

The presentation gave the Commission 5 options/scenarios on income tax, which are presented in the attached slides. After much debate, they opted to work off of Option 2, which was originally scored at an increase of $310 million. However, they did not accept Option 2 as proposed, but with these changes:

1. Refundable Earned Income Tax Credit – 15% of Federal EITC has a net decrease on revenue of $105 million as originally scored in Option 2.

2. Retirement Income – Include Federal Taxed Social Security & Reduce Retirement Income Threshold from $41,110 to $15,000. Broadens the base significantly, Harkenrider thought maybe $200 million but it would need to be scored.

3. Itemized Deductions – Disallow 75% of Federal Itemized Deductions. Broadens the base significantly, originally scored in Option 2 at an increase of $595 million, though Greg thought it maybe less.

4. Income Tax Rates – Flat tax or tweak bracketed/graduated approach we have currently. No consensus on this issue, which to a certain extent drives the other three recommendations above because the rates will drive the potential revenue. Group opted to have Harkenrider score some options on a flat tax and some possible rates and tweaking the current tax brackets and rates. They will review those options at the next meeting.

Corporate Income Tax

No presentation on these. The group just worked through the list voting to approve or remove items from consideration as they went.

#20 – Replace corporate income tax with gross receipts taken off the table

#17 – Single Sales Factor & #23 Destination Sourcing – Both Approved 

#74 – Single Sales Factor as option for Local Government on Occupational Tax - Approved (This was actually listed in the local taxation recommendations)

#12 – Management Fees rolled back into the base – Approved

#21 – Combined Reporting – Voted down

#13 – Secondary Market for Tax Credits – Voted down

#14 – R&D Tax Credit – Broaden from construction to human capital and research – Greg to review and bring back at next meeting

#16 – Eliminate Capital Gains on early stage companies – Voted Down

#18 – Lower LLET Threshold - Approved

#19 – Angel Investor Tax Credit – Approved

#22 – Tax incentives for Coal Industry – Removed from consideration

#24 – Domestic Production, Decouple with Federal Tax break Feds 9% KY is 6% - Approved

#25 – Throwback Rule – Approved

#26 – Removed from Consideration

#27 – Repeal of LLET on businesses with Net Losses – Voted Down

#28 – LLET Business to Business Exemption – Voted down

Sales Tax

After five and a half hours of work on the first two topics, Lt. Governor Abramson wanted to push on into the sales tax. Instead of delving into the various recommendations he opted to start with recommendation #31 – Broadening the Sales Tax. He was trying to lead the group into a two step process – First step is to decide to broaden sales tax to services or not? Secondly was to approve broad concepts of services the commission would agree to rather than picking and choosing individual services, this would give the Governor and the General Assembly the flexibility needed to make a deal.

After some discussion, the Commission approved to expand the sales tax to services. 

Unfortunately, step two was not as simple as it seemed. The Commission generally agreed with the Lt. Governor's goal but setting the parameters were more difficult than they expected. Here are a few of the concepts discussed:

- Services taxed In 10 or more states

- Services primarily used by high income users

- Services that were for Household Consumption, so not business to business

After a wide ranging discussion the meeting ended abruptly with no consensus on, which services to tax or other recommendations on the sales tax. 

The next meeting was supposed to be on November 16, but that was problematic for several Commission members and they are now looking at November 19, though no confirmation has been given.

2012 Election Recap

Kentucky voters went to the polls on Tuesday to elect their representatives at all levels of government. Going into election day the big headlines at the state level were all tied to whether Republicans could capitalize on President Obama's lack of popularity in Kentucky, as Romney won Kentucky with 60% of the vote: 1. Could the House GOP gain a net of 10 seats to garner control of the State House, 2. Could Congressman Chandler (D-Versailles) hold onto the 6th Congressional District from a strong challenge from Andy Barr in a re-match from 2010, and would the GOP broaden their majority in the State Senate. Certainly Republicans fared well in Kentucky, but it wasn't a complete sweep, here is a quick run down on those story lines. 

1. House GOP gains a net of 4 seats - Obviously not the 10 seats they were hoping to pick up in order to gain control of the State House. Going into tonight the state House balance of power was 59-41, after tonight's results Democrats now have a 55-45 majority with the GOP picking up 4 seats. Here are the main seats in play on Tuesday night:

- 3 Incumbents Lose: Heading into this election many were speculating on whether there would be rampant anti-incumbent sentiment. Its too early to draw any solid conclusions from Tuesday's results, but the facts are that 3 State House incumbents lost: 2 Democrats and 1 Republican. Here is a rundown:

49th - Rep. Linda Belcher was defeated by Russell Webber - GOP Pickup

38th - Rep. Mike Nemes was defeated by Denny Butler - Democrat Pickup

91st - Rep. Teddy Edmonds was defeated by Gary Herald - GOP Pickup

*As of this report in the 7th district Rep. John Arnold appears to have won by 5 votes. This will likely be subject to a recanvass and/or recount.

- 6 Open Seats:  3 Currently Held by Rs (Farmer-88th, Napier-36th, Housman-3rd) & 3 Currently Held by Ds (Nesler-2nd, Henley-5th, Cherry-4th)

Here are the results: 

88th - Benvenutti (R) beat Thomas (D) - GOP Holds

36th - Shell (R) beat Montgomery (D) - GOP Holds

3rd - Watkins (D) beats Crockett (R) - Democrat Pickup

2nd - Heath (R) defeats Whitaker (D) - GOP Pickup 

4th - Bechler (R) defeats Giannini (D) - GOP Pickup

5th - Imes (R) defeats Kemp (D) - GOP Pickup

2. Barr takes down Incumbent Chandler - In a heated rematch that was settled by less than 700 votes in 2010, the biggest surprise in Kentucky may have been the win by Andy Barr, defeating incumbent Ben Chandler for the 6th district Congressional district by a margin of roughly four percent.  This was a tough battle that saw approximately $4M spent on television advertising.  While after redistricting it was assumed Congressman Chandler would have the edge, it appears that Barr received most of his votes from the districts that were assumed to be Chandler leaning, perhaps due to the President Obama being on the ballot.  Coal was a huge issue in this race and it appears that although strongly democratic, coal issues may have swayed the race leading to a win by now Congressman Andy Barr. This article covers the race.

3. GOP Gains 1 in State Senate - Heading into Election Day the Senate GOP looked to widen its 22-15-1 majority by targeting a couple of incumbents, while the Senate Democrats looked to make gains in open seats. The end result was a GOP gain of 1. Here is a rundown on the races of interest:

- Anti-Incumbent Sentiment - We saw several incumbents lose in the State House and the anti-incumbent bug bit in the Senate as well. Sen. Joey Pendleton was beat by GOP Challenger Whitney Westerfield by 200 votes. 

- GOP Holds onto Open Seats - Three Open Seats all currently held by Rs (Westwood-23rd, Winters-1st, Jensen-21st) will remain in GOP hands after Tuesday.

23rd - Chris McDaniel (R) defeated James Noll (D)

1st - Stan Humphries (R) defeated Carroll Hubbard (D)

21st - Former Senator Albert Robinson defeated Amie Hacker (D)

A full run down of the election returns is attached as of 11:30 p.m. and 98% precincts reporting. We will have more analysis in the days ahead.

KY Spirit - Managed Care Update

There was a lot of activity on the Medicaid Managed Care front on Wednesday. Here are the highlights:

- The day started with KY Spirit, the MCO that is a subsidiary of Centene, notified the state that they would be terminating their managed care contract with the state effective July 5, 2013 via this press release. The assertion in this press release is that the state "provided erroneous information related to medical cost experience and non-standard program policies during the RFP process." Due to these errors KY Spirit has filed a formal complaint for damages from the state. The closing of their Lexington offices will cost the state 200 jobs as well.

- The initial reaction from the state was this joint press release from the Governor and CHFS Secretary Audrey Haynes. The release says two important things: 1. The state considers this a breach of contract and will enforce the contract provisions, and 2. The state will work to transition the lives managed by KY Spirit will be moved to the other existing statewide MCO's Wellcare and Coventry. So the state basically is putting KY Spirit on notice that they will be counter-suing for breach of contract.

- This afternoon at the Interim Joint Health & Welfare Committee, members were treated to an impromptu briefing from Secretary Haynes in regards to the KY Spirit situation. Secretary Haynes gave a very detailed account of the situation and came across as very transparent to the committee. Here are the highlights:

1. This dispute is about money. Secretary Haynes had been in discussions with KY Spirit over the past two weeks over a change in their capitation rate. The facts are that their initial rate was roughly $70 on average per member per month less than the other two MCO's in year 1. Further, KY Spirit had only asked for a 1% increase for year two when the contract was signed, when the other two MCO's have contractual increases of 3-5% respectively. This has widened the gap in capitation payments between KY Spirit and the other two MCO's to nearly $90-100 pm/pm. So in essence, KY Spirit bid too low though Secretary Haynes acknowledged that their losses were real and that they were struggling to make money.

2. Secretary Haynes confirmed what the press release from the Cabinet hints at, the state will try and recover damages from KY Spirit for breach of contract. She mentioned that it would trigger the contract provisions requiring loss of KY Spirit's performance bond and a 10% provision for liquidated damages. Secretary Haynes went as far to say that any extra funds this costs the state, the state will try to recoup from KY Spirit.

3. Secretary Haynes took the gloves off a little in her remarks on two occasions: 1. Pointing out that the increase in Centene's stock price in one day was enough to cover the costs they were losing in the state. 2. She also said that Centene was announcing earnings soon and that they may "take their foot off the gas" once that passes.

Legislators on the Health & Welfare Committee had several concerns from the loss of jobs to the transitioning of patients and continuity of care. However, the biggest concern was expressed over the potential cost this could mean to the state. As KY Spirit's lives are moved to one of the other two MCO's the state will incur costs for those lives at a higher capitation rate, as stated above almost $100 per member per month more. Based on some quick math in the committee members calculated the potential cost at $168 million. Secretary Haynes said that it was early in the process, but the state's intent is that any extra costs to the state will be paid by Centene.

One thing is for sure, more litigation is likely to follow.

September Receipts - General Fund Up, Road Fund Down

The Budget Director released the September Tax Receipts today, and you can download a copy of her release and attachments HERE. The highlights are:

- General Fund receipts were up 5.3% in September 2012 over September 2011. This brings 1st quarter revenues up 2.1%. The official revenue estimate, which the budget is based on, calls for 2.4% revenue growth for this fiscal year, so revenues need to grow at least 2.5% for the remaining 3 quarters to achieve that growth.

- Road Fund revenues on the other hand were down in September 2012, 3.9% less than September 2011. This is new territory for the Road Fund revenues, which have posted their second consecutive monthly decline after 25 months of increasing revenues. To meet the forecasted estimate for this fiscal year of a 3.9% increase, revenues need to increase 4.7% the remainder of the fiscal year.

NCSL Paper on Sequestration

NCSL recently published THIS paper on sequestration and the impact on the states. Examples of what states can expect in terms of reduced funding:

- $1 billion plus for Title One education programs.
- Nearly $1 billion in special education (IDEA) funding, moving the federal government even further
from its decades-old promise to provide up to 40 percent of special education costs.
- Eight of 11 block grants are reduced, including four health, two human services and two community
development block grants.
- Programs with unfunded or underfunded mandates—including Real ID, No Child Left Behind Act,
homeland and border security programs, Individuals with Disabilities Education Act, and the state
criminal alien assistance program—would be further underfunded or remain unfunded.
- $200 million or so in Clean Water and Safe Drinking Water Revolving Fund infrastructure loan
support would be lost.
- Head Start would experience an approximate $600 million reduction.
- Unemployment Insurance administrative support would decline by more than $200 million.

Tax Amnesty Program Annouced; Begins Oct. 1

Commonwealth of Kentucky

Finance and Administration Cabinet

Steven L. Beshear, Govenor

Lori H. Flanery, Secretary

CONTACT:   

Pamela Trautner, 502-564-4240; 502-545-1440

pamela.trautner@ky.gov

FOR IMMEDIATE RELEASE

Kentucky Announces Tax Amnesty Program

Delinquent taxpayers can avoid fees, penalties and prosecution;

needed revenue generated for the Commonwealth

Frankfort, Ky. (Sept. 20, 2012) – Kentucky is launching a Tax Amnesty program allowing people or businesses who owe back taxes to the Commonwealth of Kentucky to pay with no fees or penalties.  The threat of prosecution will be waived, and only half the interest owed will be due. 

"This program will generate much-needed revenue for vital services in Kentucky at a time when dollars are hard to come by," said Finance and Administration Cabinet Secretary Lori H. Flanery.  "At the same time, we are making sure that delinquent taxpayers pay their fair share." 

The 61-day program kicks off October 1, 2012.   Delinquent taxpayers will soon receive mailed notifications stating the known amount of back taxes.  They have until the end of November 2012 to apply for amnesty and pay their overdue taxes.

However, if taxpayers fail to take advantage of the amnesty program, penalties get more severe and the interest escalates.  An additional 2 percent interest will be charged on unpaid amnesty-eligible taxes.  Taxpayers taking advantage of amnesty must remain current over the next three years or face reinstated penalties, fees and interest. 

The General Assembly authorized the amnesty program in the 2012 legislative session.  Kentucky conducted a similar tax amnesty program in 2002.  More than 23,000 taxpayers participated, netting more than $40 million in back taxes.

"We're making it as easy as possible for people to determine if they owe back taxes and to create multiple ways to pay," said Tom Miller, Commissioner, Kentucky Department of Revenue.  "They can mail in the payment or use a credit card.  They can pay at any of our 10 offices around the state, or they can pay online using a website we have created just for Tax Amnesty."

The website – amnesty.ky.gov provides news and information about the program, online payment options and a way to search for all persons and businesses on the delinquent tax roll. Anyone with questions can also call the Tax Amnesty toll-free hotline at 855-KYTAXES (855-598-2937). 

The amnesty program applies to taxes owed only to the Kentucky Department of Revenue for eligible tax periods ending after December 1, 2001 and prior to October 1, 2011.  While most on the delinquent taxes roll reside in Kentucky, the list includes people in all 50 states plus several other countries. 

"This is a great opportunity for delinquent taxpayers to reestablish themselves as compliant," according to Mack Gillim, Executive Director, Office of Processing and Enforcement with the Kentucky Department of Revenue.  "It's not only a fresh start for them, but it also helps those who comply every day with all the tax laws by creating an equitable distribution of the tax burden.  We're all in this together." 

While the current database shows nearly 170,000 individuals and businesses qualifying for tax amnesty, others may also owe back taxes.  The list of delinquent debtors includes those businesses and individuals who have a tax lien on file, but does not include those who may owe taxes and have not filed.  The state is continuously gathering taxpayer information to discover non-filers and under-reporters.

To spread the word about Tax Amnesty, an advertising and public relations campaign will take place across the Commonwealth.  Governor Beshear will hold a news conference in Frankfort revealing more details on the kickoff day, October 1, 2012.  Ads will appear in newspapers and magazines and on websites.  TV and radio commercials will generate awareness and Department of Revenue officials will make presentations to numerous groups and public events.

"It's safe to say that if you owe taxes, you will hear about the amnesty program," said Secretary Flanery. 

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Governor's Blue Ribbon Commission on Tax Reform Meeting Summary

By Rachel Phelps

As you know the Governor's Tax Reform Commission met today to receive the independent report from their consultants.  Their report is to be used as a tool in the Commission issuing a final report but is not to be taken as a final recommendation by any means.  There are still several meetings left in the coming weeks before the Commission will issue a report and any recommendations.  We have been at the meeting all afternoon and they just released the report to the public so aside from our notes, we haven't had the opportunity to digest the report and that is true for the Commission members, as well.  The consultants were very strong in their statements that they are presenting options and not recommendations.

As you can see from the article and from the executive summary, a lot is put on the table - just about every option is covered in some way.  For that reason, we would caution getting too excited or exercised over any one piece of it until the Task Force and all other interests have an opportunity to absorb.  It is one thing to write it and another to consider it as a recommendation, and still another to try and pass it through the General Assembly. 

We would point out a couple of options that may be of interest--a gross receipts tax to replace the corporate income tax and the LLET.  It is shown as revenue neutral, stating it could be set at 1/3 of 1% to generate the same as the corporate income taxes.  The report lists the local option sales tax as an option to consider.  In addition some services are also listed that could be brought under the sales tax.  The report suggests as an option moving to a single sales factor.  In response to questions from the Commission the consultants noted they did not include some revenue raisers, like the cigarette tax, because it increases a set rate but does not broaden the base.  They also did not address issues related to the road fund.

Download the Executive Summary from the report which includes the options and the scoring on those options HERE.

August Tax Receipts

The Office of the State Budget Director Mary Lassiter released the August 2012 monthly tax receipts today. You can download a copy of her press release and charts HERE. The highlights are as follows:

- General Fund receipts were up 2.5% compared to August 2011. This basically cancels out the decline from July 2012 receipts leaving revenues flat through the first two months of this Fiscal Year. To meet the revenue projections for this Fiscal Year per the state budget, tax receipts need to grow 2.8% over the next 10 months.

- The more surprising news is that Road Fund revenues were down 2.9% in August 2012 compared to August 2011. This is the first month of declining Road Fund revenues in 25 months stretching back to June 2010. The main reason for the decline was that motor vehicle usage tax was down 13.5%. In order to meet Fiscal Year 2013 projections of a 3.9% increase, Road Fund revenues need to grow 3.9% over the remaining 10 months.

2013 Legislative Calendar

The Legislative Research Commission released the 2013 Regular Session calendar today. A copy of the press release and a link to a copy of the calendar is below. Here are the highlights:

- The 2013 session will be an odd-year "short" 30-day session compared to the 60 day even-year sessions. These short sessions begin with a 4-day organizational session, where the House and Senate will elect new leadership, determine committee chairs, and assign members to committees. That is currently scheduled to take place January 8-11.

- The General Assembly will then recess until February 5 when they will reconvene and begin the work of considering bills and resolutions until March 11, when they are scheduled to break for the Governor to consider any vetoes. The schedule released today has them returning after the veto recess on March 25 & 26 for the final two days of the session to override any vetoes and finalizing their work. They have some flexibility in the calendar as they don't have to complete their work until March 30 per the constitution.

- Two dates we always circle are the last day for introduction of new bills, which is scheduled for February 15 in the Senate and Feb. 19 in the House.

News Release

September 6, 2012

Calendar set for General Assembly's 2013 session

FRANKFORT – The 2013 Regular Session of the Kentucky General Assembly is scheduled to begin on Jan. 8 and will last 30 legislative days.

As usual during an odd-numbered year, in which sessions are half as long as in even-numbered years, the session will have two parts. The first four days of the session – Jan. 8 to Jan. 11 – will focus on organizational work, such as electing legislative leaders, adopting rules of procedure and organizing committees. The introduction and consideration of legislation can also begin during this time.

The second part of the session begins on Feb. 5, with final adjournment scheduled for March 26.

Legislators will not meet in session on Feb. 18 in observance of Presidents' Day.

The veto recess – the period of time when lawmakers commonly return to their home districts to see which bills, if any, the governor vetoes – begins on March 12. Lawmakers will return to the Capitol on March 25 and 26 for the final two days of the session.

The 2013 session calendar can be viewed online at http://www.lrc.ky.gov/sch_vist/13RS_calendar.pdf

--END--

Governor's Task Force on the Study of Kentucky's Alcoholic Beverage Control Laws to hold inaugural meeting

See press release below. Probably will have plenty to talk about including today's ruling by a Federal Judge striking down a law prohibiting the sale of wine in grocery stores.

Commonwealth of Kentucky

Public Protection Cabinet

Steve Beshear, Governor

Robert D. Vance, Secretary

Meeting Advisory                                                                                                                                                          Contact: Dick Brown   

                                                                                                                                                                 (502) 564-5525

Governor's Task Force on the Study of Kentucky's Alcoholic Beverage Control

Laws to hold inaugural meeting

            (FRANKFORT, Ky.) – Aug. 14, 2012 – The Governor's Task Force on the Study of Alcoholic Beverage Control Laws in Kentucky will hold its first meeting Thursday Aug. 16, 2012, at 1 p.m. EDT in Room 110 of the Kentucky State Capitol.

            Gov. Steve Beshear has appointed Public Protection Cabinet Secretary Bob Vance to chair the 22-member group which includes representatives of both the Kentucky Senate and House of Representatives as well as various industry groups.

            The Task Force members and their affiliations are:

§  Robert D. Vance, chair, Public Protection Cabinet

§  Larry R. Bond, Governor's Office

§  Sen. Tom Buford, Kentucky State Senate

§  Sen. Jimmy Higdon, Kentucky State Senate

§  Rep. Dennis Keene, Kentucky House of Representatives

§  Rep. Larry Clark, Kentucky House of Representatives

§  Tony Dehner, Commissioner Dept. of Alcoholic Beverage Control (ABC)

§  Danny Reed, Distilled Spirits Administrator, ABC

§  Stephanie Stumbo, Malt Beverage Administrator, ABC

§  Frank Harris, Mothers Against Drunk Driving

§  Roger Leasor, Kentucky Liquor Retail Coalition

§  Gay Dwyer, Kentucky Restaurant Association

§  Daniel R. Meyer, Wine and Spirits Wholesalers of Kentucky, Inc.

§  Eric Gregory, Kentucky Distillers' Association

§  Lowell Land, Kentucky Vineyard Society

§  John Harris, Kentucky Beer Wholesalers' Association

§  Jennifer Doering, Kentucky Malt Beverage Council

§  Adam Watson, Licensed Microbrewers

§  Sheriff Jerry "Peanuts" Gaines of Warren County, Kentucky Association of Counties

§  Mayor Tom Bozarth of Midway, Kentucky League of Cities

§  James "Jitter" Allen, Licensed Large Brewers

§  Neil Wellinghurst, Kentucky Retail Federation

The Governor's Executive Order, as well as names and affiliations of each representative, can be found online at http://abc.ky.gov/Pages/taskforce.aspx.  Questions about the Task Force can be emailed to abctaskforce@ky.gov.

###

New Health Policy Newsletter from Government Strategies

As a client of Government Strategies, you are aware of our KY Political News emails that we send out daily Monday-Friday. These emails give us an opportunity to provide you a flavor of the issues and politics that are impacting the general legislative and regulatory environment in Frankfort. This has been well received by our client base and we have been looking for ways to further improve on the service.

Its in that spirit that we are launching our new email the Kentucky Health Policy Newsletter. We are focusing this email on news articles specific to health policy, yet generally related to health insurance, health care, Medicaid, and other relevant topics. This will be delivered on a similar schedule to the KY Political News emails, daily Monday-Friday if content is available.

This is a new venture to delve in on a specific issue area, so we want your feedback. Also, we have provided this to a limited subset of clients that have specific interest in health policy issues. If there are others in your organization you want us to add to the list let us know.  

Thanks

Subcommittee on Energy - Alternative Fuels

The Subcommittee on Energy met today in Frankfort and heard two presentation regarding alternative transportation fuels. 

The first was made by two UK researchers who have a federal grant to utilize biomass to create butinol through on farm processing. Legislators were generally very skeptical of whether the combination of our small farms and the economic analysis would make this viable for Kentucky farmers. A copy of the presentation can be downloaded HERE.

The second presentation was made by Melissa Howell, Executive Director of the Kentucky Clean Fuels Coalition. Her presentation was an update of the various projects from ethanol to natural gas refilling stations and various others. The committee only had one specific question, which was the position of the Clean Fuels Coalition on how to fund the Transportation Budget, which relies heavily on motor fuels tax, as more electric vehicles hit the road. Ms. Howell basically said that they were a non-profit that pushed for clean fuels and didn't take a position on those type of issues. A copy of the presentation can be downloaded HERE.

Econ Development Committee - Incentives Study

The Interim Joint Committee on Economic Development met today and were provided a presentation regarding a study of the state's Economic Development incentives. The study was authorized by HJR 5 in 2011 and provided for an outside consultant to be hired by the Legislative Research Commission to study these incentive programs, compare them to peer states, and make recommendations to improve these incentive programs. The study and presentation was handled by Anderson Economic Group the outside consultant. A copy of the full study is available for download HERE and our notes are below. 

Kentucky's programs fared pretty well in the study's comparison to its 13 peer states. Further, the state's business tax and labor cost were also found to be very competitive compared to peer states. Businesses that received Kentucky incentives reported creating 55,173 jobs between 2001 and 2010. This resulted in 33,000 "maintained" jobs per year. The cost to Kentucky of incentive programs were $140 million in 2010 and averaged $3,330 per job per year between 2001 and 2010. The incentive programs in general were found to be effective when compared to an alternative policy of broad-based tax decreases to try and achieve the same goals. The state has seen an increase in knowledge based jobs, particularly due to growth in advanced manufacturing. 

Speaker Pro-Tem Larry Clark, who sponsored HJR 5 that created the study, commented that he thought the report showed Kentucky's Economic Development incentives are better than most legislators thought. 

The report was critical in two areas: Hi-Tech jobs and Cabinet for Economic Development transparency. 

Kentucky has seen strong growth in knowledge based industries: hi tech, advanced manufacturing, and other technology based businesses. However, the report showed that there was still significant brain drain as total employment in knowledge based industries in Kentucky is only 25% of the employment in peer states. Kentucky is getting Hi-Tech/STEM graduates and Kentucky is spending more on research at universities than peer states, but not getting those jobs. Need better working partnership between research universities, Economic Development cabinet and the private sector. 

The other critical area was a lack of transparency and accountability of information coming from the Cabinet for Economic Development. 

That being said it is clear by the very limited recommendations offered by the consultants that there appears to be few changes the General Assembly could take on that would drastically increase the incentives effectiveness. The consultants recommendations were targeted at improving incentive reporting and ways to encourage growth in knowledge-based industries. The recommendations in short were:

- Require more reporting and annual reports be provided on certain programs by the Cabinet, including one comprehensive Annual Report. 

- Put more emphasis on bridging the gap between Economic Development, research universities, and the private sector.

- Consider increasing or expanding the tax credit for R&D expenditures.

A copy of the report is available for download HERE. 

Labor & Industry Committee - Unemployment Insurance Update

The Interim Joint Committee on Labor & Industry met this morning and heard a presentation from Secretary Joe Meyer on Unemployment Insurance. Our notes are below and a copy of the Unemployment Insurance Annual Report is available for download HERE. 

HB 495 

- Bill passed in 2012 Session allowed for method to borrow money to payback interest on Unemployment Insurance dollars borrowed from the Federal Government. Initially thought the money would come from a financing arrangement with KEMI, but instead the state borrowed $76 million from JP Morgan Chase at 1.95%. The Maturity/Pay Off of the loan is in 2018. Didn't use KEMI because JP Morgan was half the finance cost.

- $47.7 million already drawn to payback Commonwealth from the last years interest payment and the remaining $26.3 million is available to make Sept. 23 interest payment for this year.

Overall Unemployment Insurance Status Update 

- $948 million borrowed from Federal Government for Unemployment Insurance benefits as of 1/1/2012. The state borrowed and repaid $37 million earlier this year for cash flow reasons.

- Extra FUTA tax has reduced debt to $918 million as of current date. It is estimated that the debt should be down to $915 million by end of 2012 and below $800 million by the end of 2013. 

- House Bill 5 Reforms related to process and tax changes are fully implemented except for changing the procedures on how employers are notified of new claims, however this should be fully implemented in the next 2 weeks. 

- Appeals and Employer Protests - Secretary Meyer said that there is a perception that the appeals and protest process is tilted against business. However, his testimony was that the numbers don't show that. Of the roughly 83,000 employer protests in 2011, benefits were denied 66% of the time. Of the roughly 22,000 appeals, employers and claimants received similar treatment as each had a favorable decision rate of 31% if they brought the appeal. 

- 8.2% unemployment insurance rate for this month, same as last month. Claims have been cut in half compared to last year. Positive trend from 2009-2012 in terms on initial claims and benefits paid out. 

A copy of the Annual Unemployment Insurance Report is available for download HERE.