Pulling Kentucky out of the River of Poverty and through economic storms

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A new 24/7 Wall St. report reveals that only four states are poorer than Kentucky.

Kentucky’s poverty rate of 19.4 percent in 2012 was much higher than the national rate, which is less than 16 percent; median income is under $42,000 a year – more than $9,000 below the national median. Other key indicators of the commonwealth’s continual swim upstream in the River of Poverty include a jobless rate of 8.4 percent in August – more than a full point above the national rate – and the fact that only two other states hand out food stamps to a greater percentage of residents.

Some say more government programs and mandates will solve the poverty problem. In a recent Bowling Green Daily News story, Cheryl Allen, CEO of Community Action of Southern Kentucky, told the Bowling Green Daily News that income disparity is “why we can’t improve the poverty statistics.” Allen criticized a recent proposal in Washington to cut food stamps by 5 percent, claiming that it would force the poor to “decide whether to cover housing or be homeless, put gas in their car or quit a job, feed their family or steal to get that food.”

But is the solution for government to implement the very policies that would harm those Allen purports to help?

Food stamps, minimum-wage increases – which she also expressed support for – and other government-induced programs repeatedly fail to create opportunities for prosperity that would actually close those income gaps Allen frets about.

There are better ways for Kentucky to address its challenges.

At a recent event previewing the 2014 session of the Kentucky General Assembly co-sponsored by the Bluegrass Institute, State Budget Solutions (SBS) and George Mason University’s Mercatus Center, SBS president Bob Williams urged lawmakers to do what his home state of Washington did a decade ago: priority-based budgeting. Williams said this approach moves away from focusing “almost entirely on inputs” – how much money do we need to sustain current programs and expenses – to the harder, but more effective, work that requires lawmakers to determine core functions and allows their agreed-upon priorities to determine spending decisions.

The ripple effect of such an approach would result in Kentucky legislative leaders moving away from the horse trading that now goes on behind closed doors at the end of drawn-out, drama-filled legislative budget sessions, and instead would use taxpayer dollars more carefully. It also provides a better way of determining which programs truly help the neediest among us.

It also will reduce the “stupid tax” forced upon taxpayers by politicians’ undisciplined spending decisions.

Williams offers this example: “Here we have a city in Detroit in bankruptcy, and what did the legislature do – the conservative legislature and the conservative governor of Michigan? They’re funding – with public dollars – a new hockey rink in Detroit.”

Every legislator in Kentucky would benefit from Williams’s experience with “reality-based budgeting,” as he calls it. Such an approach helped his home state of Washington eliminate a $2.8 billion deficit without raising taxes in 2003. Find more about how that happened at www.statebudgetsolutions.org.

There are other ideas, as well.

As a Bowling Green City Commissioner for two terms beginning in 2005, Western Kentucky economics professor Brian Strow, Ph.D., led the effort to implement a zero-based budgeting process that helped the city weather the coming economic storm.

Strow endorsed Williams’s approach for state government and described his own approach as a commissioner this way: “We made all special interest groups testify before the commission to justify spending on their behalf. It revealed areas that really were low priority were getting funded over areas – like alley repaving – that really needed it. By moving money toward the city’s basic needs, we were in a better position to handle the economic recession.”

Whether you call it priority-based, reality-based or zero-based, processes that limit the size, scope and cost of government are healthy for taxpayers – both in terms of costs and services.

History also proves they are the better ideas for pulling Kentucky out of the River of Poverty and through economic storms.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.