Gov. Steve Beshear


WATERS: Virus of secrecy infects Kentucky Wired program

U.S. Rep. Hal Rogers and Jared Arnett, executive director of Shaping Our Appalachian Region (SOAR), watch Gov. Steve Beshear deliver remarks about the importance of high-speed Internet at the KentuckyWired kickoff event in Hazard, Ky., on Aug. 31. Eastern Kentucky residents will be among the first in the state to benefit from the KentuckyWired initiative. ​

U.S. Rep. Hal Rogers and Jared Arnett, executive director of Shaping Our Appalachian Region (SOAR), watch Gov. Steve Beshear deliver remarks about the importance of high-speed Internet at the KentuckyWired kickoff event in Hazard, Ky., on Aug. 31. Eastern Kentucky residents will be among the first in the state to benefit from the KentuckyWired initiative. ​

If Gov. Steve Beshear’s administration wants taxpayers to trust it to build Kentucky Wired – a $350 million, 3,000-mile high-speed Internet network – then bureaucrats in charge of the project should at least be technologically capable of scanning and posting a copy of the commonwealth’s contract with Macquarie Capital, its Australian partner.

Could it be the administration doesn’t want taxpayers to know the details because Macquarie has a poor track record when it comes to government-owned high-speed Internet projects in other states?

Instead of just releasing the documents, a Finance Cabinet official responded to a simple request to see the contract by claiming his office was having technical difficulties posting the documents online but claimed they would be available in another week or so.

It’s supposedly been months since a deal was reached, yet we still haven’t seen the contract.

With a project this big and with all Kentucky taxpayers on the hook, an open-records request should not even be required. The details should have been revealed even before it was signed.

Perhaps the claim about “technical difficulties” is just a smokescreen for politicians in Frankfort, including legislators – who slipped a $30 million Kentucky Wired-expenditure into the 2014 budget and who would rather not have us privy to its details.

If Kentucky Wired is as good as Beshear’s public-relations machine claims and even the gubernatorial candidates naively believe, wouldn’t they want taxpayers to know as much as possible – as soon as possible – about its greatness?

“Here in Kentucky, you’re about to be given a gift,” Brian Mefford, CEO of Connected Nation Exchange, piped up with all of the sunshiny-ness he could muster during a recent broadband conference. “And the only think you had to do to get that gift is to be a taxpayer.”

He’s right: this project surely will be a gift that keeps on taking … from taxpayers.

There are other question marks about the project, including how Frankfort’s genius bureaucrats and politicians concluded they could build an entire statewide network for $350 million when it cost $500 million to construct a gigabit network in one city – Chattanooga, Tennessee.

Also, realizing that there usually are cost overruns even on projects that government knows how to build reasonably well – such as roads, bridges and schools – what’s the contingency plan for such excesses related to the Kentucky Wired initiative?

What happens if the project runs out of money before completion? Will taxpayers be forced to ante up and make up the difference?

Considering that, conservatively, 85 percent of Kentuckians already have access to high-speed Internet service, where will Kentucky Wired find its customer base?

Will state government quit doing business with private companies who currently serve city colleges and universities? What would such an approach do to the rates of private Internet providers?

What if the network can’t get enough subscribers to properly fund it?

Will all Kentuckians be forced to pay higher utility fees, like Macquarie Capital tried to tack on to the bills of Utah residents – even those who already had their own service and didn’t want to subscribe to the 11-city government network?

Who will build this Internet highway? Originally, rural Kentucky contractors were promised that this would be a true public-private partnership – with them involved in constructing the fiber-optic lines for the network.

We now hear rumblings that a Canadian company is going to be brought in to build out the network instead of employing those who live, work and contract in – and know – rural Kentucky.

Making taxpayers wait to see the details until after Frankfort already committed to funding this deal is like forcing a home owner or car buyer to make the deal before finding out the terms of the loan.

It would be like saying “we’re giving you a gift,” only to find out later it was a genuine dud.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at Read previously published columns at

Is shutdown of the Kentucky state health exchange feasible?

LOUISVILLE, Ky. — Introducing his Blueprint for a Better Kentucky on Monday, gubernatorial candidate Matt Bevin identified healthcare as one of his focus areas for improvement.

As Governor, I would close the KYNECT state exchange and facilitate the transition of enrollees into the federal healthcare exchange. Closing KYNECT would begin to free Kentucky from this financially ill-advised program and leave Obamacare management in the hands of the federal government.

While the plan as stated sounds simple enough, some may wonder whether a state can legally close their healthcare exchange, and return enrollment to federal responsibility? What impact would it have on those who have enrolled? What would such a transition cost? Would any federal money used to develop the exchange need to be returned?

Can a governor close the exchange?

Kentucky Governor Steve Beshear (D) issued Executive Order 587, which established the Kentucky Health Benefit Exchange on July 17, 2012. This was renamed KYNECT in May 2013. The state legislature did not pass a bill concerning the creation of the exchange. The constitutionality of the executive order was challenged in Kentucky Court, in David Adams, et al. v. Commonwealth of Kentucky and opinions rendered upheld the authority of the governor to create the exchange. The decision cited that the General Assembly deferred this power to the Governor in absence of affirmative legislation, and that the governor was not violating the state constitution’s separation of powers provisions, as he was taking action upon a federal mandate.

The ruling upholding the executive power to create the exchange can still be overruled in Kentucky Supreme Court. If the Kentucky Supreme Court finds that Beshear’s actions were an unconstitutional exercise of his executive authority, then the state exchange could only be saved with legislative action. If the court finds the powers were appropriately wielded, it also opens the door to utilization of an executive order to remove the exchange. By precedent, the governor would still be adhering to the federal mandate in utilizing the federal exchange, as 37 states presently operate.

Has a state exchange ever been closed?

With healthcare exchanges being relatively new, a state that has developed an exchange diverting control to the federal exchange has only happened once; with Oregon. Thirty-six of our 50 states opted not to set up exchanges at all, and have been completely dependent on the federal exchange from the program’s onset.

Oregon Governor John Kitzhaber, signed SB 99 into law on June 17, 2011. Unlike Kentucky’s exchange, the Oregon exchange WAS created within the state legislature.

The decision to move Oregon from a state exchange to the federal exchange, was rendered by the appointed board that managed Cover Oregon. The state has acted upon this decision sending Oregon healthcare through the federal website. Legislation soon followed in the form of SB1, which recently passed the senate, and  and is now being considered in the house.

What impact does it have on those who used the state exchange to enroll?

The Cover Oregon exchange website now defers new enrollment with a link to the federal exchange. Those who obtained their insurance through Cover Oregon for FY2014, were required to re-enroll for FY2015 via the federal exchange.

What will transitioning from a state exchange to a federal exchange cost?

Oregon believes the switch to use of the federal exchange will cost $5 Million.

The portion of the exchange used to enroll people in the Medicaid-funded Oregon Health Plan will be sent to the Oregon Health Authority. The cost is estimated at $35 million to complete. Officials estimate that 90 percent of that cost will come from federal sources, with the remaining 10 percent ($3.5M) from the state’s general fund.

State health exchanges are developed in strict adherence to federal meaningful use guidelines. This means the data gathered and formatted by the exchanges is designed to be universal and portable.

The exchanges were built with federal grants… does the state have to return such grant money?

A total of $253.6 Million dollars in grants was received for development of KYNECT; Oregon’s failed “Cover Oregon” exchange received $303 Million.

In an interview with KATU news correspondent Chelsea Kopta, Oregon CIO Alex Pettit stated that Oregon would not be returning any of the grant money used to establish the Cover Oregon exchange.

Where does the money come from to cover the expense of the switch?

The reported cost to develop KYNECT was $60 Million, leaving $193.6 Million in grants received for the development, unaccounted for in the process.

Kentucky received more than $11 Million in 2014 grants just to promote KYNECT with 622 employees.  It is unclear what amount of these funds have been spent.

Oregon CIO Alex Pettit confirmed that of their developmental grant funds, $57 Million remains unspent. (and would not be returned)

Why opt out of the state exchange program?

The estimated annual operation costs for KYNECT is a $39 Million burden on the Kentucky taxpayer. With no loss of service or functionality, utilizing the federal exchange will not only cost the state nothing, but will save them the annual administrative costs that are associated with the duplicitous service already being offered by the Federal Government.

Heading into the 2016 election cycle, the Obamacare model faces an uncertain future nationally, and likely will mean major changes to the exchanges. Utilizing the Federal exchange shifts any associated burden from the State to the Federal government.

Healthcare matters are sure to be a prominent discussion point in the Kentucky Republican primary gubernatorial election. In addition to the removal of Kentucky’s healthcare exchange, Bevin has also announced plans to modify the existing Certificate of Need Program, and Scope of Practice laws, while vowing to do everything within his power to roll back Beshear’s unsustainable expansion of Medicaid in Kentucky.

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