Mark Green: What are the Kentucky chamber members telling you is their No. 1 issue currently?
Ashli Watts: It’s the uncertainty: When is the pandemic going to end, when can life somewhat return to a new normal? Everyone’s grateful for the relief from the federal level, the loans that helped keep business afloat. At this point, vaccinations are being rolled out and people are cautiously optimistic. But what we’re hearing from businesses is uncertainty about what this next year is going to bring and uncertainty about our workforce. We had a tremendous number of people drop out of the workforce when the pandemic started last March. Kentucky is now 50th in workforce participation. With businesses up and running, there is concern the workforce will not be there to meet the needs.
Something we are watching is the number of women who have left the workforce versus their male counterparts. Coming out of the pandemic, we are about 20 years behind when it comes to women in the workforce. That’s how many women we have lost in our job force. We will be looking at solutions the next couple of years to make sure we are getting these women back in the workforce. It has been difficult to juggle virtual schooling and lack of child care. One industry that has been hardest hit is hospitality, which is very female focused. It’s a startling static that has hit Kentucky pretty hard that we will be working on the next year.
MG: We’re completing the most erratic business year in our lives. Is it possible to characterize the overall mood of Kentucky’s business sector?
AW: Cautiously optimistic is appropriate. What we’ve seen in the last year is the resiliency of the Kentucky business community. They’ve been able to retool all of their operations to make everything safe for their employees and their patrons. They’ve had to deal with shutdowns they weren’t given much notice about, with their workforce not being able to work because of child care and virtual schooling. With the vaccinations starting to roll out, businesses are cautiously optimistic. There have been a couple rounds of federal relief; there may be another in the next month or so. That relief has really kept many businesses afloat. All those things do leave businesses hopeful.
MG: What do chamber members say about their plans for capital investment and staffing? Will 2021 see a release of pent-up demand or maintenance of the status quo?
AW: Businesses may be more hesitant to spend extra capital right now when they don’t know what is next. Many small businesses received PPP (Paycheck Protection Program) loans that helped with salaries, rent, maintenance and overhead, but that uncertainty is still looming and I don’t know about capital investments. On the workforce side, one trend we will see is the need to upscale our workforce.
Kentucky was hit hard the past year when it comes to workforce. We were at the top of unemployment insurance numbers. We ranked near the top of having the most vulnerable jobs that went by the wayside last year. When you look into those numbers state by state, those with a more educated and trained workforce are better off. Their jobs are more stable. They can do their jobs from home instead of having to go to a location. Moving forward, hopefully Kentucky businesses will take note and our workforce will get that upscaling they need. It’s a different world post-pandemic: more technological, working more from home. There were great advances the past year that would have taken four, five, six years but were crammed into six or seven months. We need to work hard on upscaling our workforce, making sure they’re trained, have certificates they need and get the educational opportunities we have to have to compete.
MG: Where do businesses go to get that upscaling?
AW: It’s a partnership between the state government and the education and business community. We have a three-year-old chamber program called Talent Pipeline Management in which we partner with the Educational and Workforce Development Cabinet to make sure businesses are talking to the education community and we’re going to have that workforce for tomorrow. We need an expansion of that communication to make sure businesses are talking to the schools and KCTCS (Kentucky Community and Technical College System) and our public and private universities to make sure they know what jobs are going to be in demand.
MG: Are there specific actions businesses can take to make a difference in improving education?
AW: Our Pipeline Management program is a critical partnership we have with the Education and Workforce Development Cabinet, where businesses can help identify what the workforce needs are and what skills and education are needed. It’s one of the first times we’ve had a clear pipeline between education and the business community working together to make sure we are going to be able to fill those jobs of tomorrow.
We have our Leadership Institute for school principals, which provides executive-level training for school principals across the state at no cost to them; members of the business community step in and pick up the entire tab. They can sponsor the local principal from their hometown or home county. We have a great network of businesses that do this every year. We had to put the leaders institute on pause last year because much of it is in person, but we are going to do it again this summer if the world is somewhat back to normal.
We started a new initiative called Bus to Business right before the pandemic, and have continued it through the pandemic in an innovative way. It takes students and buses them to a business, giving them hands-on experience, meeting with business leaders, seeing a day in the life of a manufacturing facility or a hospital or whatever business it is. In the fall of 2019, thousands of children all over Kentucky went to a local business that provided lunch, gave a tour and answered questions about what skills you need in this line of work. It was a really positive day.
When everything hit last spring, we worked closely with the Department of Education to do a virtual Bus to Business. We interview business leaders from all across Kentucky. In some instances, students interview them. In this virtual option, students still get that experience of business leaders talking about what got them there, why they wanted to enter the field they are in. It’s been a big success; we have thousands of students going through it every couple of months. Hopefully we’ll go back to in-person so students can really get that out-of-the-classroom learning.
MG: Is Bus to Business pushed down into the lower grades to make younger kids start thinking about their career?
AW: We have three different tracks. In the elementary school track, the questions are more basic: Why did you want to be an engineer? Why did you want to be an attorney? Then we have a junior high/middle school track and a high school track that gets more into decisions like what kind of education courses you need to go in that career path.
It’s one of those essential skills we talk about: To have a well-rounded student, make sure they’re learning about various industries, various interests and various pathways. It’s important at a young age.
MG: One of the chamber’s priorities is teacher accountability. Does any state or district have a teacher accountability model that the chamber recommends?
AW: What we would like is a change in Kentucky so that tenure is not awarded on the sole basis of your time on the job, which right now is five years. It should be earned based on appropriate evaluations, be subject to periodic reviews like most everyone else in professional settings has to do. We want a system that more rewards performance to make sure that every Kentucky student is being adequately served. That’s what we all can agree on in the end.
MG: Does the chamber take a position about making public education free through either two or four years of public postsecondary education?
AW: We’ve been talking quite a bit about this with the state budget process going on. We look to what other states are doing, including our neighbor to the south, whose Tennessee Promise does that (funds public community college for state residents). We want to make sure postsecondary education is as accessible and as affordable as possible. We very much support utilizing the state’s Work Ready scholarship program (that can pay for up to 60 credit hours) to help make it more affordable. We recently wrote a letter to support expanding Work Ready in connection with KCTCS and the Council of Postsecondary Education. We’re looking at the Tennessee model and how Kentucky can model itself after that.
We also don’t want to see any federal money left behind. We’ve worked closely on making sure all students fill out the FAFSA (Free Application for Federal Student Aid); that’s really important. Until they fill out the FAFSA, some students think they can never go to college, two-year or four-year. Once they fill it out, they realize the opportunities that are there with federal dollars.
We’re very supportive of outcome-based funding (for Kentucky public universities) and other measures to make sure education is affordable. We want to make sure baccalaureate attainment is moving up; we have fallen behind in that area, especially when you look at other states and what they’ve invested. Coming out of a pandemic world, we know we are going to have to scale up our workforce, make sure our workforce is educated, make sure those jobs are still going to be here post-pandemic. Work Ready is the tangible one that has been working here in Kentucky the past couple of years.
MG: The Kentucky Wired broadband network is now complete. Has there been much recognition in the business community regarding the opportunities Kentucky Wired creates?
AW: The pandemic heightened many of our inequities and one of those is Kentucky’s limited broadband access. Moving forward you cannot have anyone working or going to school without sufficient broadband access. That’s an important issue for the entire state. We worked with the administration the past couple of months to figure out exactly where there is lack of access, where is there not quite adequate broadband. Both sides of the aisle agree we need to invest in our infrastructure, including broadband, and make sure it’s a priority moving forward.
Now that we’re in a new world where people can telework, people are able to live anywhere they like while working remotely. Some Eastern Kentucky business leaders think this could be a great opportunity. Eastern Kentucky is beautiful and its cost of living is pretty low; with broadband access, people could come live in Eastern Kentucky and work wherever they need to. Broadband is much like roads and bridge infrastructure: It is an infrastructure that will open new opportunities for that region. Hopefully it fills the needs and the people in Eastern Kentucky have the access they’ve so desperately needed for many years.
It really is the new lifeblood of being able to connect not only to work but school. It is front-of-mind for all businesses, especially when it comes to attracting workforce. Moving forward, to attract a workforce that is skilled, trained and educated, you’re going to have to provide flexibility and to do that you’re going to have to have broadband internet access for them to work remotely.
MG: Kentucky has had trouble in recent years with infrastructure funding due in part to the shift away from gasoline to electric vehicles. Does the chamber believe there needs to be an increase in infrastructure revenue and does the chamber advocate changes to the road fund revenue model?
AW: Producing that infrastructure investment has been the top legislature priority for the chamber for the last three or four years. We need to increase our gas tax. All of our surrounding states except Missouri have done so. Many of the Southern states we compete with did. We don’t have enough money in our road fund to even maintain our current infrastructure system, much less improve or build anything new. And over the last year, we have not driven as much as usual. Our road fund is funded through the gasoline tax, and if people are driving less there’s not as much money going into it. We are making a really big push this legislative session for an increase in the gas tax.
Looking at what other states have done, we know our model needs to be updated. One thing we’ve done in the last couple of the versions of the bill is include a higher tax when you register hybrid or electric vehicles. They’re using the roads; they need to pay their fair share of usage and don’t with the current model.
There is talk about moving to a vehicle-miles-traveled (VMT) model. That would mean putting some sort of sensor on your car and paying a fee based on how many miles you travel. No state has done that. On one hand, that seems fair. However, a VMT model probably would not work because Kentucky is a thoroughfare state. A lot of goods and products go through Kentucky since we are in a great position logistically, and are home to UPS, Amazon and DHL. We want to be able to capture revenue from all of those trucks that use our roads.
Other states like South Carolina recently raised their gas tax and did a big infrastructure package and the registration fee was part of theirs. Right now we think we can do the registration fee on hybrid and electric vehicles, then study this issue the next couple of years, making sure that we do have the proper funding now.
One thing we have talked about, though, on the gas tax side is indexing it so maybe it would be an 8-cent increase the first year then after a year another 2 cents and then an additional 2 cents after that. Legislators are looking at indexing so they don’t have to take this vote every couple of years. We want to make sure whatever model we have is sustainable.
MG: What are the most urgent infrastructure projects the chamber would like to see the state do?
AW: Because infrastructure literally affects everyone, you see a broad coalition surrounding this funding issue with mayors and county judges and school boards. Everyone is going to have their project they think is essential. We can’t not talk about the Brent Spence Bridge in Northern Kentucky, which was closed for a couple of months at the end of 2020: 3% of our nation’s GDP (gross domestic product) travels over that bridge. When it’s closed, companies have to reroute their goods, which is extra money on the company, extra usage on other roads, time lost. We have to address that bridge. It’s talked about not only on the state level but on a federal level because it is such a major hub of transportation for the whole eastern United States.
We very much favor a federal infrastructure package. The federal gas tax has not been raised in a long time. We are hopeful this summer there could be a large infrastructure package moving through Congress.
MG: The chamber advocates further shifts in the Kentucky tax code, away from income-based and toward consumption-based. What are the pros and cons for the business community?
AW: From a business community standpoint, we don’t want to tax productivity, which is essentially what an income tax does. There are strong pros. It’s good for business retention and it’s good for the bottom line. We have made steps the past couple of years to move toward a more consumption-based tax system. Some point to Tennessee as a model for taxing consumption and not productivity. People who live on the border of Kentucky and Tennessee realize they can move to Tennessee and not have to pay income tax, so they live across the border and work in Kentucky. We want to move toward that consumption-based tax system.
The con is that we cannot do this overnight. Kansas tried that and it did not work. This will have to be a more phased-in approach since we are very heavily reliant in Kentucky on income taxes. We can’t just eliminate that and go to all sales tax. If we slowly lower the income tax, like the legislature did a couple years ago, and then increasingly raise the sales tax to balance it out, that is what will work. The pros outweigh the cons; however, we know that it’s going to take time at a gradual pace to get there.
MG: Would it be realistic to aim to get here by the end of this decade?
AW: Maybe. Everyone has stayed out of tax reform lately. We’ve had numerous studies and not much has ever come out of them. But look at North Carolina, for example. They took a hard look and realized you cannot only increase revenue but you can increase your competitiveness. As we look at tax reform, it’s important to point out the business community does think we need more revenue. We can get there by increasing our competitiveness and shifting our tax code. Our economy looks much different than it did years ago when our tax code was created. We’re a more service-based economy now. We need to have a plan and take our time doing it. Talk to business leaders. Talk to other states and look at what they’ve done, what has worked, what hasn’t. Hopefully we can get there maybe in the next decade.
MG: What is the chamber’s position regarding legalizing various forms of marijuana sales and gambling?
AW: The chamber has very much favored expanding gaming dating back probably a decade. Right now we’re focused on making sure our signature industries stay here. Last year, we had record-high unemployment and lost jobs across the board, and we need to make sure we don’t lose jobs in our signature industry that are avoidable. Our primary focus now is not an expansion of gaming; we want to keep jobs and keep people employed in Kentucky.
But we’re in favor of expanding that. Indiana and Ohio have expanded gaming; Kentucky citizens go there frequently, spend their money and those states get that revenue. We’d love to keep some of that revenue in Kentucky. The longer we do not, with other states popping up with expanded gaming, the less revenue we’ll be able to bring in eventually. We know it’s a popular issue and Kentuckians are for it. It’s a competitiveness issue for us. Unfortunately, we have not been able to get the legislature across the line.
The past couple of years, medical marijuana has had traction in the legislature and bipartisan support. We’ve moved from a hard ‘no’ to where as long as businesses are protected, we support it (passively). We poll our membership frequently and various councils discuss this issue. On medical marijuana, as long as businesses are protected in the bill then we are not opposed to it. In the last two years, bills passed through committee and on to the House floor that did have protection for businesses: If someone did show up under the influence of marijuana, the business would not be held liable. That is from Ohio legislation that we found has bipartisan support. The Kentucky sponsor put that language in the past two years and with that in the bill we do not have a position. Like with many issues, you see a shift in opinion the past couple of years and it’s the same with the business community.
MG: The pandemic has sped up the implementation of trends that were already happening. What has been the meaning of that for chamber operations and member participation?
AW: We made tremendous progress last year with technology. Everyone had to adapt quickly, but I am grateful for it because we’ve been able to connect with members. We’ve had over 50 webinars the last six or seven months that were free to anyone, not just members, where we’ve had experts, the governor, the commissioner of Public Health. It’s a good way of communicating with our existing audience and with a new audience, as well as making sure we’re helping all businesses get the answers they need.
There are about 80 local chambers in Kentucky. We encouraged local chambers to send webinar invites to their members even if they aren’t members of the Kentucky Chamber. We’ve had more small businesses participate than ever before, talking about how to get loans or liability around COVID-19 or whatever. Small businesses need that help and we’ve been pleased we’ve had so much participation from across Kentucky.
Now that we’ve moved to a virtual platform, our participation rate has more than doubled because it’s easier to hop on a Zoom than to drive to Frankfort, especially from Paducah or Pikeville. It’s a whole new game for us. We’ve never had virtual webinars or virtual conferences. Moving forward, there are still going to be in-person events because people want that interaction, but I don’t think we can ever go back to only in-person events. We’re ready to get back in person and have that camaraderie again, but we’ve learned a lot by being innovative with technology and expanded our reach tremendously.
MG: Referencing post-pandemic: Once we get there, is the business sector likely to discover some silver linings as a result of the crisis management they’ve gone through?
AW: Absolutely! Innovation—the resiliency and the ability this year to pivot and figure out a new solution when any kind of curve ball was thrown at a business—is one of the key words when I think about this past year. When we see the other side of this, having that spirit of innovation will serve all businesses really well. It is a great benefit knowing now that people may be able to work from home. There may be more workforce flexibility. Before this, most people typically went to a job, worked 9-to-5 hours and went home.
We have often referred to work-life balance. Now I call it work-life integration. Most businesses have seen that they are able to let their staff work from home. The outcomes have been pretty good. It’s going to attract workforce moving forward. Giving workers more flexibility is a good thing; it’s good for women in the workforce as we’re balancing virtual schooling and more. And we have made great technological advances that will help. We’ll be able to still connect with people, be able to save time, save resources, and have another option besides in-person only. Sometimes from the hardest times come the biggest lessons and the biggest opportunities. We’ve learned so much this past year.
MG: What are the chamber’s current expectations about resuming in-person events?
AW: We’re thinking spring or early summer. We have an in-person Chamber Day planned for late April. We will see how the world looks at that time and put safety as our utmost priority. Thank goodness for technology, I always say. As we’ve gone through this last year, we’ve still been able to connect and give our members the resources and information they needed. Most people before March of last year probably had never used Zoom or Teams Meet, and now most of us are on them all day everyday. We’ve still been able to have good programming, meetings and discussions and keep those relationships going, but we are very much looking forward to returning to in-person events.
MG: Will the annual Louisville economic conference happen?
AW: We pushed that back a little bit to buy some time. Plus, we think in summer everyone is going to be traveling after having not done so for a year. We are going to have it in September this year.
MG: Do you have a personal opinion on how 2021 will go?
AW: There has been federal relief and stimulus that hopefully does give that surge to the economy that we so desperately need. Experts say most of the population will be able to be vaccinated by early summer, so the second half of the year should really pick up. Anecdotal stories from the tourism industry are that there’s quite a bit of interest in business travel picking up in summer and later on in the year, people planning vacations and conventions coming back online. The quicker we can get people vaccinated, the sooner we can get back on track. I am optimistic.