Pension reform has been a declining theme in the state of the state address given by governors each year, but this could actually be a good sign, according to one report.
An analysis of the speeches compiled by Loop Capital Markets indicates that pension reform was a theme in only 16% of the 49 speeches given by governors so far this year, compared to 26% in 2012, and 32% in 2011.
“As more and more states address the structural deficiencies within their systems, we would assume that each year there will be fewer governors that address the need for pension reform in their state of the state address,” according to the report, authored by managing director Chris Mier and vice president Ann Kibler. “Unlike many of the other initiatives that governors propose in their annual addresses, the track record for actual implementation of proposed pension reform is encouraging.”
Last year, seven out of the nine governors that proposed pension reform measures in their state of the state addresses followed through on the reforms they outlined.
This year, eight governors proposed pension reforms, including Pat Quinn of Illinois and Tom Corbett of Pennsylvania. Both Quinn and Corbett had compelling reasons to propose reforms as the growing unfunded pension liabilities in both states were primarily responsible for their respective credit downgrades in the last year.
While there was less talk of pension reform, there were more proposals for bond issuances compared to last year. In this year’s state of the state addresses, nine governors proposed bond issuances. Last year there were only five.
Governor Neil Abercrombie of Hawaii and Governor Nathan Deal of Georgia were the only two governors to propose bond issuances both years. Other states whose governor proposed bonding included Kentucky, Maine, and Ohio, among others.
The reasons for proposing bond issuances were diverse, including funding for a mental health facility in Idaho and for water quality improvement in Virginia.
“In short, the reasons for bond issuance were disparate, but the commonality is that all nine governors wanted to take advantage of the low interest rate environment to fund various programs and much needed infrastructure improvements that had been put aside since the recession,” according to Mier and Kibler.
The two most prevalent themes this year were job creation and education reform. Job creation was a theme in 84% of speeches this year, compared with 95% last year, and 86% the year before. Mentioned in 92% of the speeches, education was the most dominant theme this year, not changing much from last year’s 91%. In 2011, education was a common theme in 74% of the speeches.
Governors proposed creating job growth by improving their respective states’ business climate, as well as continuing to fund workforce training programs. Holding the line on taxes, as well as cutting taxes, seemed to be a key driver that governors felt would improve their state’s business climate, according to the report.
Among education reforms, governors focused on early learning initiatives and literacy, in contrast to last year’s addresses that focused more on increasing student achievement in the areas of science, technology, engineering, and math.
“Volatile tax revenue collection coupled with the housing market’s tepid recovery, underfunded pensions, ignored infrastructure needs, soaring healthcare costs, prolonged levels of high unemployment, and decreased federal assistance as a result of sequestration are major issues that most governors this year pledged to address, but it remains to be seen if they will follow through,” Mier and Kibler wrote.
