TUESDAY, JANUARY 20, 1998 - 7:00 p.m.

Speaker Richards, President Saunders and members of the General Assembly, Justice Stephens and members of the Judiciary, Governor Henry and other members of the Executive, my fellow Kentuckians.

During these next several weeks, we’ll debate as many as a thousand subjects, and pass hundreds of bills which will change the public policy of Kentucky. As important as many of these bills will be, none can compare in importance to the budget and the revenue base which supports it. I appreciate the opportunity to discuss our proposed budget with you, and the people of Kentucky.

This proposal outlines how I believe we should spend, over the next two years, 31 and a half billion dollars, almost as much as the annual budget of the United States just 57 years ago, more than the entire social security budget in 1970, and equal to this year’s entire federal education budget.

We’re the biggest business in the state, one of the largest enterprises in the nation. Bigger than Humana, Vencor and Lexmark combined. Anyway you look at it, we spend a lot of money.

Developing this budget proposal was an awesome responsibility. The task of improving it, and making it the official public policy of the commonwealth now rests with you.

Where we spend our money is, for the most part, a matter of judgement. That final judgement lays with the people, and they’ve sent you here to exercise that responsibility on their behalf. I fully understand that. But you have to have some place to start, and that’s what I present to you tonight, a starting point.

I know it’s not perfect, but I know it’ll be better after it’s gone through that magnificent creation of our founding fathers, the legislative process.

Before I get down to the specifics, let’s talk about what a budget is. In one sense of the word it’s an authorization for the various branches of government to spend our revenue on specific things or services. But more than that, it’s a promise by the government to deliver needed services to the people.

One of the most respected traits of human behavior is the commitment to keeping a promise. If an individual breaks a promise to us it’s hard to have faith in what that person says after that.

The same is true of government. When our government promises, through its budget, to deliver a service that we need and want and then doesn’t deliver, it breaks a promise too, and we feel betrayed. It doesn’t matter that the cause was a lower revenue estimate than expected, it’s still a promise broken.

It’s better to be conservative and not make the promise until you’re reasonably sure the money’s going to be there, than it is to betray the people and cause them to lose faith in their government. It’s my intention to keep every promise made in this proposal!!!!

Most of you’ve heard me say many times that the overall goal I’d like to achieve, during whatever time I have to occupy this office, is to put Kentucky on the path to attaining a standard of living and a quality of life comparable to the country as a whole. I know we can’t achieve that in one term or even two, but I do believe that if we have the vision to see into the next generation, the freedom of mind to imagine Kentucky, not as it is but as it could be, and the courage to do what it takes to get us there, then we could build that kind of Kentucky and it could be here within the lifetime of most of us in this chamber!!!

Shortly after taking office, we spent a considerable amount of time working with our cabinet to develop a specific plan to achieve our overall goal. The result of that effort, was the development of five specific strategies, all designed to move the commonwealth forward. We put those five strategies in this book and we all keep it close to us, so we can be sure that our actions are actually helping us achieve our goal. These five strategies are:

Enhance Economic Development. Improve the product of our educational system. Build self-sustaining families. Reduce crime and improve the financial condition of the state.

I can report to you tonight that this proposal supports all of these strategies.

The success of the first four of these objectives depends on achieving the fifth. One of our highest priorities has been to establish sound fiscal policies that would eliminate the constant cycle of optimistic budgets and recurring revenue shortfalls. In the fourteen years since 1980 we’ve had 10 revenue shortfalls. That’s no way to run a railroad.

To address this problem we’ve developed four fundamental principles of fiscal management. These are:

Dr. Ramsey, Merl Hackbart, and I are preparing a white paper on the details of this strategy for those who are interested in details.

Our policy of fiscal responsibility is one of the fundamental elements of our program to build a better Kentucky. Two years ago I submitted to you a continuation budget, so we could put the state on a sound financial footing. We’re now prepared to reap the benefits of that conservative fiscal policy. We can now start to move Kentucky forward.

This is a good budget. It emphasizes our children. It will make our communities safer. It invests in the future. It begins to make substantial progress on our shared vision of a better Kentucky.

And now let me get down to the specifics.

Over the past two weeks, I’ve already talked about 8 areas in this budget which’ll improve the lives of millions of Kentuckians. Let me review some of them.

This proposal continues our commitment to elementary and secondary education with a four percent increase, which will more than cover the cost of inflation. That’s more than enough money to give teachers a cost of living adjustment!!! And I call upon this body to guarantee it, because they deserve it !!!

This budget significantly increases funding for the distinguished educator program, provides 92 million dollars for new schools, and nearly 25 million more dollars for pupil transportation over the biennium. It increases our spending on pre-schools, family resource centers and professional development for teachers. It puts more money in school technology, and increases funding for the minority teacher recruitment program by 169%!!!!

In addition to the 4% increase, we’re adding 15 million extra dollars to begin a safe schools program, a program we can’t start quickly enough to suit me !!

Speaking of safety brings me to another subject, pay raises for firefighters and police officers, in both state and local government. One of the foundations of our efforts to maintain a safe and orderly society is to have honest, competent, well-trained police officers and firefighters. This budget provides an extraordinary pay raise for almost every qualified law enforcement officer and firefighter in Kentucky !!!

This, of course, brings up another subject, state employee raises. In 1982 you passed a law which said that all state employees will get a minimum 5% raise, and not one administration since then, has fully funded that mandate. Our first budget did and this proposal does, too! We’re not going to increase government services on the backs of state workers!!!

We’ve dedicated our administration to the children of Kentucky and we’ve asked you to dedicate this session to them.

In addition to funding elementary and secondary education and school safety, we’ve dedicated 13 million dollars to financing our share of the new state -federal partnership to provide children’s health insurance!!!

We increased the general fund contribution to the budget of the Cabinet for Families and Children by 13.7% over the biennium.

We’ve funded our new child protective initiative and we’ve increased funding for the department of juvenile justice, by 48% over the biennium!!!

That’s because one of the issues I’ve found which seriously concerns the people of Kentucky is the dramatic rise in juvenile crime. We’re meeting that threat with a dramatic increase in spending on programs to address the problem of juveniles who break our laws.

Over 4 years, new funding for juvenile treatment programs will go up $40 million, an increase of 144 percent from where it was just two years ago!!! We’re going to treat our kids right but we’re going to insist that they learn to live by the rules of our society!!!

We’ve increased funding to make our criminal justice program work better; we put in more money to help prevent domestic violence and child sexual abuse and we’ve funded a new office of early childhood development within my office to focus on ways to better serve our very young children.

We’re going to accelerate the investment of the coal severance tax money and increase reimbursements to counties for housing juveniles and state prisoners.

We’re going to increase the promotion of tourism, invest in our parks, and we’ve increased the Agriculture Department’s budget by 40 percent. We’re going to make sure that the Kentucky farmers get help marketing their products!!!

And we’re going to fulfill our commitment to postsecondary education. Not only are we living up to our promise to put 100 million new dollars into our colleges and universities, we’re going to do more, 18 million dollars more in fact. That extra money will be going directly to our students and their families through increased student financial aid. Our proposal fully funds our existing needs based scholarship programs for the first time in the history of the Commonwealth!!!

In the second year of the biennium, we’ve allocated an additional 10 million dollars for more scholarships. I strongly suggest that this money be used to begin a new financial aid program based on academic performance, sometimes called a merit based scholarship program. I’m confident that the program I’ve been discussing with members of the General Assembly, will greatly increase participation in postsecondary education in Kentucky and will help us keep our best and brightest students here in the Commonwealth. I’m convinced it’s something we can’t afford not to do. I predict to you that before this biennium is over, most of the southern states will have a substantial merit based student financial aid program. We’ve got a chance to stay ahead of the curve in this important initiative, we can’t afford to fall behind. I predict that a program similar to the one under discussion will be, ten years from now, the most important piece of legislation enacted in the last session of the Kentucky General Assembly in the twentieth century!!!

One of our most important responsibilities is to invest in infrastructure, and none of our infrastructure is more important than roads. I’ll be submitting the details of our road program to you in a couple of week’s but I do want you to know that we’ve responded to your requests to stop diverting road fund dollars to pay for general fund obligations. This budget begins to phase out that unsound practice!!!

And we’re trying to get more money from the federal government to help pay for our transportation needs. One of the ways they’re reducing the federal deficit in Washington is by diverting federal highway trust fund revenue to general fund uses. We’re trying to stop that practice in Washington, just as we intend to do in Frankfort. I’ve spent a lot of time in the nation’s capital as the lead governor on transportation issues. We haven’t won the battle, but I think we’re making headway.

Certainly our investment in roads is vital to our future, but we have other investment needs that we must attend to. This budget proposes that we invest $860-million new dollars in basic infrastructure through the sale of bonds. That includes $425-million dollars for postsecondary education, $62.5-million dollars for new elementary and secondary schools, and $76-million for our criminal justice system.

This is a substantial commitment to new infrastructure but let me remind you that our financial condition was so unstable when I took office that I recommended only 210-million dollars of new bonds in that first biennium, the lowest new indebtedness incurred by Kentucky in over 25 years. The total new debt incurred during my four years in office will be about average for an administration over the past two decades.

I’d like to point out one unique proposal in our budget, and that’s the program to jump start our efforts to establish endowed chairs and professorships at our universities through a bond issue. This 110 million dollar proposal will allow us to demonstrate to these schools that we’re serious about excellence and willing to fund it in a major way!!!

I know it’s an unusual approach and I expect you to question it and evaluate the soundness of the proposal, as I have. I’ve found it to be a good idea and I support it. I hope you do too.

I know you’ve all heard about our surplus expenditure program and I know you’re anxious to learn more about it. I’ll be releasing it before the week’s over and I hope you’ll agree that it’s the right way to spend the extra money that comes in when the economy does better than the economists expect.

Our new fiscal policy means that every budget proposal should contain a surplus expenditure program, but they’re not likely to be as large as this one, because we’ll seldom have an economy as strong as ours has been these past two years.

Our recommendation for the use of this surplus is to add to our budget reserve trust fund, make a major investment in our school and state government technology programs, and fund about 135 projects for all parts of the state. These projects will be geographically balanced and bipartisan.

I worked all last week listening to every legislator who wanted to support a project. We can’t fund them all but I’ve devoted this past weekend to deciding which ones to recommend and in which order. I’m not quite finished but as I said, I’ll finish the task this week.

My main priority is to make this program fair and productive for all Kentuckians. Let me assure you that there’s never been a major budget proposal that’s had as much legislative input as this one.

It will total $500 million dollars. If the economy continues as strong as it is right now, all these projects will be funded. If the economy turns down, we won’t be able to do all of it in this biennium but I’ll commit to you, that if any part of this program is left unfunded after July 1st of 1999, those unfunded projects will be among my top priorities, if I’m ever honored to have the responsibility to submit another budget to you.

Yes, there are a lot of important initiatives and ongoing programs in this proposal but it’s still not enough to allow us to catch up with the rest of the nation as quickly as I’d like, but it will allow us to gain ground.

We can gain ground, if we don’t make ill-advised tax cuts.

Let me remind you one more time that we’re in the process of cutting or eliminating six taxes which’ll save the people of Kentucky almost 300 million dollars a year when they’re fully implemented in two more years. We’ve cut the personal income tax, the inheritance tax, the provider tax on physicians, your automobile property tax and taxes on private pensions. And we’re paying back the intangibles tax improperly collected from Kentuckians. We’ve absorbed these cuts with growth revenue and frugal management of state government. The first legislative session of the next millenium when the governor and legislature that would have to absorb new tax cuts in the budget are in office would be the proper time to address revenue reduction measures.

For this session, let us take the responsible course for our children, and invest in them!!!

I’ll continue to talk to you and the people of Kentucky about this budget for the duration of the session. It’s going to be an exciting 10 weeks.

Two weeks ago I called for a bipartisan effort to make it productive. I want to report to the people that we’re making progress, in spite of serious and fundamental disagreements on important issues. I believe that most of the members of this General Assembly want to put personal and political differences aside. I’m trying to do that, and I’m willing to go that extra mile to make it work. We have a long way to go and it still may degenerate into the chaos some have predicted, but I pray that that doesn’t happen. I can only hope, for the sake of Kentucky, that this effort to work together for the common good can last.

We still have some long days ahead of us. The disagreements will be many. The frustrations and fatigue will cause flare ups that we’ll all have to apologize for, but our work must go on, too much is at stake. The future of Kentucky is at stake. The children of Kentucky are at stake. Let us not fail them!!!

Good night and God bless you!!!