Under funded Pension System. From frankfurt, kentucky, this is an hour. [ applause ] i guess yall are expecting me to Say Something about now. Please do have a seat. Grateful for the opportunity to be here with you tonight. I want to start as is often the case by thanking those of you that are gathered in this room, for starters. It hasnt been easy today weatherwise for a number of you to make your way here. Yet you have done it. Thank you for doing that. Thank you for making your way here. For those of you for whom it is your job i thank you and come back to that in a moment. I want to thank those of you watching this, as well, on some form of video stream thank you for taking the time to check in with us here in kentucky and find out what is happening as we talk about not only the state of the commonwealth but the state of the budget. They are one in the same intertwined in a time like this. I want to thank a couple of groups in particular. You always run the risk when you start thanking groups. When we come through the weather we have had in recent days, mindful of a couple of groups who i truly think are worthy of our thanks throughout the commonwealth and frankly in the first group throughout the country. I want to send a special gratitude to the men and women who mine the coal that produces the electricity and the heat that keeps so much of america warm at times like this. Truly grateful to you. [ cheers and applause ] while there are fewer of you working now than in years past your job is no less critical, no less important and certainly at times like this no less necessary than it is or has ever been. I want to thank the men and women also who have been plowing the roads that have made it possible for us to get here from every corner of the commonwealth. [ applause ] i stopped into one of our state garages last night and it was fairly slim. There were a couple of people there managing schedules. The vast majority of folks were out on the road. Im grateful to you for the job you have been doing. I want to thank a group that so often we dont tend to think of except from time to time even though in reality they make everything work and that is all the state employees, every single one of them, the tens of thousands of you who come to work every day on so many fronts to do so many things to make the commonwealth work. I want to thank you very much for all that you do and for the 2,000 of you [ applause ] and for the more than 2,000 of you who responded to the email that went out asking for your input, asking for your thoughts on things that we have been doing well but things that we could do better. While i often in the past have read some of those notes im not going to do that this time. I am going to read a few names. These are just some of the 2,000 names who wrote thoughtful, informative, thought provoking responses to us. Jeff white, kristin alexander, christina mason, thelma blair, damon preston. These are some of those that we thought about weaving into the conversation. In the days, weeks and months ahead i will take some of your emails and respond to them probably oneonone directly in the form of video response. I want to thank each of you who took the time to weigh in. I want to thank the cabinet secretaries. It is nearly unprecedented that you would have a cabinet that two plus years in that is the same group that was here. I dont know where they are all sitting. Right up here. I want to thank you for the work that you have done. How about a round of applause for our cabinet secretaries. [ applause ] thank you. The fact that they still all sit together and like each other, spend time another inside and outside of work trully grateful to each and everyone of you for what you do to lead the commonwealth forward. I want to thank our Lieutenant Governor who has been my right arm. I thank you for the job you do to represent kentucky so well day in and day out in so Many Organizations and throughout our schools. Thank you to our Lieutenant Governor. Appreciate it. Thank you. [ applause ] i want to thank the person without whom it wouldnt be possible for me to do this. I want to thank my wife, the first lady of kentucky and our children who have put up with tremendous sacrifice in order to allow me the opportunity to serve along side those of you in this legislature. Thank you to my wife, the first lady. Thank you. [ applause ] i want to thank another group that often perhaps doesnt get thanked enough. We get excited about new companies coming. We get excited about new jobs being created as well a we should. There are any number of companies that have been here some for many years. I want to put up on the screen. Gary, i dont know where you went. I will ask you to do it because i didnt learn how to use the clicker that is up here. This is just a group of about 60 companies that employ at least 1,000 people in kentucky already. I want to thank these companies who employ so many of our fellow citizens. [ applause ] this doesnt even include some companies that like gm that employs hundreds down at the Bowling Green corvette plant and hundreds more in various dealerships. It doesnt include Companies Like a papa johns with 500 some at the headquarters. This is just those that have these many people located in one or two facilities. It doesnt include those with retail franchises. There are even other companies that arent on this list but many dozens who employ so many of our fellow kentuckiens. I want to say three things before we start. I will touch tonight on just looking briefly back at 2017. You can put that main screen back up. I want to look back briefly on 2017 but i really want to look forward to 2018. And the three things i want to say before we look either back or forward is this. First of all, i love kentucky. I genuinely, passionately, sincerely love kentucky. And i know that that is not an emotion that i alone share. Im grateful for the fact that so many in this room and so many watching feel the same way and so much of what we have done and what we are doing and what we intend to do Going Forward is driven by that fact. I want to say secondly especially to those of you in this room, those of you legislatures in particular but then also to the people of kentucky, i want you to know that i pray for you. I pray earnestly for you. I pray individually for you. I pray for you as a group. I pray for the people of kentucky. I pray for the commonwealth that we will be blessed, that we will be preserved from so much that has potential to harm us. Im a person who believes in the power of prayer and i want each and everyone of you to know that i pray for you. I also want you to know, thirdly, that im excited for the future of kentucky. Im really excited. One of the greatest compliments i got was recently speaking to a reporter who said you always seem enthusiastic about things. Im enthusiastic because i believe in the upside possibility. The future of kentucky is bright indeed. I love kentucky. I pray for you and im excited about the future of the commonwealth. I want you to bear those things in mind as we take a brief look back at 2017. The reason im excited, the reason that i trully believe in the future is because i believe in the American Dream. The American Dream is a real thing, it truly is. I lived it and experienced it. So, too, have many of you. I want that opportunity for my children, for yours and for the children yet to come in the commonwealth of kentucky. The American Dream doesnt come in a box or in some form of ogovernment program. It comes as the result of opportunities that People Like Us make and the People Like Us influence the outcome of what peoples futures look like. We look back at 2017 we have had a couple of challenges. We have been left with a whole lot of things we need to clean up. Literally and figuratively. Some physical things to clean up. Others more figurative things of a policy nature, things of a financial nature. One of the things we have talked about in the briefings we have shared is that the real budget focus this year is getting our financial house in order. This is something that we have talked about for quite sometime. Looking back at 2017 i want to show you something here. This is a slide. Those in blue are the top 50 job announcements in 2017 in the counties that they are going to. Some of them will pull from people from other surrounding counties. That is where the jobs themselves will be located. The ones in orange are in the top 100. The ones that are gray are counties that have companies in the top 50 and top 100. I share this with you because i want you to understand that when people talk about Economic Development they talk about jobs. Everybody wants them in their neighborhood. So often when there is an announcement made people say it is only happening here but not there. This is just this past year. It covers a Pretty Amazing amount of kentucky. It covers the northern most, southern most, eastern most counties of the commonwealth of kentucky. The Job Opportunities are coming. These are seeds were just putting into the ground. We are putting these seeds into the ground now but they will bear fruit for many, many years to come. I wanted to put that up there for you as a reminder of that which we have, in fact, done. I want to show you this next slide, as well. This is a before and after of our own state capitol, the very building that we sit in right now. Take a look at the difference. So many of us have seen this building, worked in this building, spent time in and around this building over the last years and in some case decades. Do you realize this building had never been cleaned since it was built . We are going to clean up kentucky. We are going to do it in any number of different ways. This is the embodiment of what we are talking about. The only part yet to be cleaned is the dome. It still has a lot of discoloration that the entire building used to have. When we talk about the future of kentucky, the potential of kentucky, i want you to recognize the fact that we have it in our power to make this possible by picking up trash after ourselves, by Opening Doors for one another literally and figuratively, by taking care of one another by beautifying bluegrass and taking care of our own communities, by looking for things that need to be cleaned, should be cleaned and cleaning them we change the perspective for how we view ourselves and how others view us, changes our mind sets and attitudes and gives people hope and encouragement. This is what we are trying to do. The policies that you have put into place, you in the legislature, those of you who have passed legislation last year, the policies you put into place have led to the kind of record breaking investments that we have had. Previously the best year we ever had in kentucky 5. 1 billion of capital invested in our state in a single year. This past year 9. 2 billion directly the result of policies that you put into place last year, things like right to work, things like repeal and prevailing wage. Things like other things we have done to make it clear that we are putting our house in order. These are the types of things that have attracted people to our state. 17,000 plus jobs were created last year, the most since 2000. Things are changing but these are seeds that are just now going into the ground. I want to take a look at the next slide. I want to speak briefly. This is how many of you are in elected office in these two chambers. I want to speak to each of you. I also want to speak to those of you that are watching before we Start Talking about 2018. What happens in 2018 is going to be driven by 138 men and women. 138 out of 4. 5 million people. Thats tha will make the laws, will make the rules, spend the money, make decisions that effect every single bit of every single life in the commonwealth of kentucky. Three out of every 100,000. I want to speak to those of you who have this responsibility yourselves. I know for a fact some of you are not going to be running again. Some of you are retiring. Some of you are going to be pursuing other things. Thats going to leave open opportunities. And i want to speak directly to those of you who are not in this chamber. Those of you perhaps here in the chamber but perhaps at home and you thought about serving at some point in time. I want to encourage you to step up and throw your hat in the ring. The greatness of kentucky and the greatness of the political process and america as a whole is the fact that men and women who understand how wealth is created and understand how to budget and spend their own money more easily and more thoughtfully. Those are the men and women that we need to run. 138 is all we need. So many are already here. So many will be back and im grateful for that fact. But for those that are not going to be coming back, for those where there is improvement to be made i would truly ask if you are out there to think about throwing your hat in the ring because those that come here every day to serve the commonwealth led by these men behind me are speaker david osborn and president of the senate robert. They need 136 other people at the ors with them. I want to challenge you to throw your hat in the ring. For those of you who are not sure if you are going to do it again thank you for serving. Thank you for your willingness to be public servants. It is at times a thankless task. We need that to do the job. I want to read you a quote that was written we are in an interesting time right now where the weather causes us to kind of hunker down inside. On a similarly cold december night in 1776 there was a man not even 40 years old who hunkered down inside a house, took a pen out and set it to paper and wrote the words the first line of which you all know. The next lines you may not. Not even 40 years old this man wrote these are the times that try mens souls. The summer soldier and the sunshine patriot will in this crisis shrink from the service of their country but he that stands by it now deserves the love and thanks of man and woman. These too are the times that try our souls here in the commonwealth. We may not be at war as our nation was when those words were written. But the battles, the devisiveness continue. We find ourselves under assault. We find ourselves divided on issues of morality, on issues of spirituality, on issues of politics, on issues of ideology, on economic issues. These, too, are the times that try mens souls. Again, it is the 138th. It will be here through this session. And the 138 that will follow them into the next session and next generation and next century. There will always be 138 kentuckiens that whenever the times are tight will step up and stand in the gap. I want to take a look at what were talking about in 2018 as we look forward. So long we have had issues that have been ignored. I want to put a graphic up here that will be perhaps a little bit of amusement to some but speaks to the truth of what we are going to discuss. This is the truth about our challenges. We have in the commonwealth lined up for many, many years, some intentionally and some not realizing they were in the line being told a whole lot of comforting lies especially about Financial Issues when in reality nobody wants the unpleasant truths. The unpleasant truths are plenty and they need to be discussed. And i want to briefly take you through some of the things that we need to talk about as we look forward. One of the things i want to make clear is this. You can leave that up on the screen. One thing i want to make clear to you is that we are going to fund our Pension System 100 of the obligation that is owed. That is going to happen in this budget that i will be presenting that will be released publically after this. [ applause ] ill come back to that in a moment. We will fund our pension. We will fix our foster care and adoption system. We have 8,500 children in foster care, 2,400 plus eligible to be adopted. Those numbers are only growing. We are going to fix that. You will see those efforts reflected in this budget. We will fight this Opioid Crisis. [ applause ] there is only five more. Ill pace you guys. Were going to fight this Opioid Crisis. Seven things i want to make sure you understand among the others that will be reflected in this budget. This Opioid Crisis is exploding. Its not Getting Better and we are going to spend the money, the resources and the attention necessary to address this problem in kentucky like its never been addressed before. [ applause ] were going to invest in education and Workforce Development like we never have before. We are going to continue to invest as we have done in the last two years, the first two years of this administration by investing more money per pupil than has ever been invested in the history of kentucky. That number is not going to be changed. The amount being spent in the classroom is still there in the budget. Well come to specifically where there will be changes as we move forward. Education in the classroom, education with Workforce Development, these areas will continue to be a priority as we move forward. [ applause ] were going to reform entitleme entitlements. Kentucky will lead on this front. We did have our 1115 waiver approved in medicaid. Change the expectation and the opportunity and the incentive for people to do for themselves is going to change. We are going to see the impact of that as we move forward. Thats going to be implemented starting in july and the opportunity to connect people to the dignity and the opportunity associated with doing for themselves is going to start happening. I want to thank those who have worked tirelessly to get us ready and for kentucky to be chosen as the first in the nation for this to be a model for the rest of america is high compliment to the tremendous work that has gone into making that possible. [ applause ] one of the primary roles of government is Public Safety. We are going to invest in Public Safety to a degree we have not. We are going to continue to keep the funding at 4,000, the highest it has ever been. We are going to continue invest in our Law Enforcement. We will buy new automobiles so that these Law Enforcement offic officers, state police are not driving around in cars with 200,000 miles on them. You see so many accidents and problems that we have have come from that. We will get them modern weapons so they are able to protect us. That is one of the roles of government and we are going to invest in our Law Enforcement officers in 2018. [ applause ] were also going to at the same time as part of that focus on our prisons and prison reform. I want to make one commitment to you. Certainly in no budget i will ever put forward or put my stamp of approval on we will not invest another dollar in building another prison. We are not spending more money building prisons to warehouse people. We will cut down on recidivism and find ways to pour into people who are in prison so that we rehabilitate and dont have them resitivate back into the system over and over again. We can do this as part of the way in which we focus on protecting and serving our people. The final thing i will say is this. Tax reform is coming. It is coming whether it comes as a part of this session time will tell. Depends on the band width and opportunity. We will in 2018 address tax reform. It is not simply going to be as some would have it to be just raising taxes. Its not a simple function of raising a tax here and there and that is tax reform. It needs to be comprehensive and focussed on making us competitive. It needs to be focussed on making sure that we compete with states around us all over this country as well as those that border us to make businesses want to come here. These are the things we are going to be focussed on in 2018. As i said a moment ago the focus of this budget is to get our financial house in order. I want to speak to a few of the specifics of that. A few of the specifics that i want to speak to are things that relate to things that were calling for. I talked about funding the pension like we have never funded it before. In this budget that is being presented for you all to consider there is for state employees currently over 1 billion being funded. Its going to be put into our state retirement system, 1. 1 billion. This is fully funding not only the arc as it has been called, but fully funding what is actually owed by doing the audit that we did we have an understanding of how much obligation we truly have. I think so often some in this room and those watching dont necessarily understand you hear we are 13 funded. What does that mean . What 13 funded means that if you are a state worker and the krs is 13 funded which it is and you are expecting to retire at some point, if there are 100 of you 13 of you will get what you think you will get. 87 of you wont. 87 out of 100 will not get the retirement they think they are going to get. For those of you in other plans maybe teachers that after a strong year in the markets people are appropriately feeling good and happy that were more funded than we were and still only 56 funded. What does that mean . It means that 56 out of every 100 teachers that retire will get what they think they will get and 44 of you wont. Its not as simple as that. It could mean everybody gets 44 less than you think you are going to get. The money is not there. Whether krs or ktrs plan we are funding these like we never have. Never in the history of kentucky the whole idea of an arc was put into place in 2006 because 20 years ago we were fully funded. 15 years ago we were still fully funded for most plans starting about 15 years ago that began to change. About 12 years ago there was the realization that something needed to be done so this contribution was put in place and it was suggested to the legislature that certain amounts be contributed. Never once since then, never once in the history of kentucky has the arc been if ulfullul funded. This year they will be funded for the first time in the history of the commonwealth of kentucky. [ applause ] for the teachers Retirement Plan that means nearly 2. 3 billion in this is being put into the ktrs Pension System. 2. 3 billion. 14. 5 of the general fund goes to retirement. It is difficult at a time like this when you are putting this kind of money into the retirement system to be able to protect all of education. Lets talk about what this looks like as we move forward. We are going to continue in this budget to fund seek classroom dollars at 3,981 per pupil. Its the same as it was and the year before. Its the highest it has ever been in the history of kentucky. Never have we put so much into that. It would be fantastic if we could put still more. The reality is we dont have enough money to meet the obligations that this state has. The 3,981 is not going to be touched because we have to take care of making sure that we dont rob our students. So where is the money going to come from