In Memoriam: Larry Dale Keeling

FRANKFORT — Contrary to what many observers of state government have assumed for years, Kentucky isn’t the most fiscally foolish state in the nation. Hawaii, Illinois and Connecticut are in worse shape than the Bluegrass State, according to recent rankings by the financial magazine Barron’s.

Hooray! Hooray! Let’s celebrate our “not the worst, but almost” status with a blowout bash. We’ll float a loan to cover the costs. Because that’s what we do in Kentucky. We borrow and borrow and borrow. And even then, we can’t pay the bills. Which is how we came to be the fourth most fiscally foolish state.

Yes, I know Barron’s didn’t put it in those words. The magazine rated the fiscal “health” of the states. Viewed from that perspective, someone better rush a respirator to the Capitol Rotunda because this state is one sick fiscal puppy.

But the virus that laid it low was the fiscal foolishness our elected leaders have engaged in for at least a decade amassing huge debts, plugging holes in budgets with one-time sources of money, neglecting to pay the bill for public pensions and outrunning Usain Bolt whenever someone mentioned the dreaded “T” word.

Unfunded liability in state pension plans (now estimated to be more than $30 billion) and the state’s general obligation debt were the key factors in Barron’s ranking of Kentucky’s fiscal health. Not surprisingly, Barron’s rankings started fingers pointing in the Capitol. Bad news always prompts Republicans to blame Democrats and Democrats to blame Republicans. This time, they’re both right, because both sides are complicit in the fiscal foolishness in recent years.

Every budget passed since 2000 had to be approved by the Democratic-controlled House and the Republican-controlled Senate. Every debt incurred to feed both sides’ addiction to projects had the blessing of both chambers. And the bulk of the skimping on actuarially recommended state contributions to the public pension plans occurred after 2000.

Although the General Assembly’s failure to fully fund the pension plans on a pay-as-you-go basis is just one of several factors contributing to the $30 billion-plus unfunded liability, it is a significant one.

Now, a variety of groups covered by the plans are telling a legislative task force the answer to past fiscal foolishness is to be even more foolish by issuing as much as $4 billion in bonds and letting the pension plans covering state and local government workers invest the proceeds.

The assumption behind the issuance of pension bonds is that you can earn more from your investments than you pay out in interest on the bonds. But the reality often proves otherwise because you’re at the mercy of the markets, which means you’re gambling.