Mark Green: Congratulations on the record investment and job creation, announced in 2021, which topped $11.2 billion in investment and 19,000 jobs. What special efforts by the state were involved in landing these projects as opposed to Kentucky getting wins for being in the right place at the right time with the right metrics?
Gov. Andy Beshear: It starts with a direct relationship between the governor, cabinet secretary and other critical folks in the executive branch with these companies. It creates a trust between the CEOs and CFOs and the state that their projects can be completed on time. Speed-to-market is now the most important deciding factor that the companies are looking at on where to locate. It also gives them comfort that when they invest a $100 million, $200 million or billions of dollars that there will be a long-term relationship because they are going to be in our state for decades to come.
In just about every major project there’s also a special effort or contribution by individual Kentuckians or groups. For the Ford/SK project there was the Korean American Society of Kentucky, the head of which happens to live in Elizabethtown, that welcomed the executives from SK. That enabled us to provide them with the comfort that not only their executives but their workers would be welcome. It was a really important relationship that helped us to land that project.
When we look at (the $500 million) Pratt Paper (project) in Henderson, that started with a good friend of Kentucky, Lonnie Ali, Muhammad Ali’s widow, who is close friends with Anthony Pratt, who invited him to come in. We met personally and that project was underway pretty much the next day. So, we have so many Kentuckians out there who are fighting for more and better opportunity for Kentuckians.
When you talk about the Ford (BlueOvalSK battery plant) project, we also need to give credit to the General Assembly. When we did need to move and we needed additional legislation, partisanship didn’t get in the way. That sent a pretty strong message.
MG: You mention the General Assembly. How do we apportion credit for this record year? Obviously, your administration deserves a lot of credit, but what about past administrations and local economic development efforts and even Kentuckians themselves?
AB: There is plenty of credit to go around, and a project never happens with just one relationship. First, a company has to get secure and comfortable with the state itself, building that level of trust that they can get their project done on time. They need a similar relationship with the locality that they’re moving to. Sometimes that is a county judge-executive. Sometimes it’s the school system and teachers that they will meet because they’re bringing their families to an area. Sometimes it’s other things that could bring them there.
When we look at Horse Soldier Bourbon locating in Somerset, there were two parts that got them there amongst many others. The first is that’s where (the Special Forces members who are company principals) had trained prior to 9/11, and the second was the surrounding beauty of the area made its impact on them. With $11.2 billion dollars, I’m okay if all 4.5 million Kentuckians claim credit because it is going to build a better Kentucky for all of us.
MG: Is the BlueOvalSK Battery Park project on track? There were approvals needed by the boards of Ford and SK to create the joint partnership entity.
AB: The project is on track. I meet weekly with our principals (in the administration), including Energy and Environment (Cabinet) to make sure permitting is moving ahead, (Cabinet for) Economic Development on their progress as well as the Public Protection Cabinet. When we look at building and construction there has been substantial progress.
A lot of this early work is about site design and overall permitting and I talk regularly with some of the top executives at Ford so that we can make sure nothing gets lost in the bureaucracy, so that we have direct communication.
Getting this project completed and completed on time is critical not just for Ford and SK Innovation but for the commonwealth. We want this plant to be a winner, not just because it’s going to employ 5,000 Kentuckians but because we want to even grow from what they’re starting with.
I do believe there are approvals in Washington D.C. that are still going on, but that is not stopping progress on the project whatsoever. I believe the corporations have now sent their approvals to Washington, which is required.
MG: You have spoken about establishing Kentucky as an agritech hub, and there’s been some progress. Where does the state stand in that effort, and is the vision for an agritech hub to be a specific physical place or a reputational thing that accrues to the whole state?
AB: I am proud to announce that we have arrived when it comes to agritech. AppHarvest has now announced five separate facilities as well as container farm projects in school systems all over Kentucky. Fresh Harvest continues to grow in Lincoln County. AppleAtcha (Agritech KY) is going to employ 2,000 individuals in Martin County growing apples on abandoned coal mines. EnviroFlight, with their blackfly larvae in Maysville, is prospering. We are seen nationally right now as a center for agriculture technology across the country and have had significant conversations with the federal government in this administration on that.
We need to take the next step to ensure that we don’t just provide the labor that’s involved in growing the food for tomorrow. We also want the intellectual capital and ideas created here in Kentucky. That’s why my budget provides $75 million for the design and construction of an agritech R&D facility, which would work directly with our existing companies as well as through our partnerships with the Dutch government, their leading companies and their universities, virtually.
Every Kentucky university is on board for the project. It’s an opportunity to be transformational, to ensure that that next, most resilient seed is made right here in Kentucky, that the next procedure, the next way that we increase our yields is discovered right here in Kentucky. That means our farmers will benefit first, but it will also be a draw—whether that’s for Dutch companies to have a home for their research in the United States, or whether that’s to continue to allow our companies to grow, attract capital and ultimately expand.
MG: Economic investment, like last year’s record, is usually talked about in terms of the dollars invested and in jobs created, which are very significant. But development also grows public revenues. Do we know the expected impact from last year’s projects on Kentucky’s public revenue?
AB: Our economy is on fire, not just because of a record $11.2 billion in new investment last year, but also the largest surplus in the General Fund in state history. That’s because every source of public revenue is up. Corporate income tax, meaning our companies are making more money than ever before, and individual withholdings—that’s about how families are doing. What we see is significant growth now.
The $11.2 billion in new investment and 18,000 new jobs at the second-highest average hourly wage in our history is going to create immediate growth in revenue. But it won’t create 100% of that in the immediate term, first, because of some of the incentives and second, because these enormous projects are going to have significant costs that will allow them to defer some tax payments for a period of time. But in the long run, a multibillion-dollar facility is going to be in our state. For 50 years it’s going to produce an enormous amount of tax revenue.
MG: It has been suggested that the business and technology links created through AppHarvest, which has Dutch connections, and BlueOvalSK, which has South Korean connections, could lead to additional deals from other Dutch and South Korean interests here. Is that something the administration is actively pursuing?
AB: Both of those projects are game changers and I believe they’re also state changers. We are already receiving numerous calls from South Korean companies, especially in the battery supply-chain business. We do not have a mature battery supply chain in the United States so this is seen as an opportunity both for those South Korean companies that work with SK Innovation and others to attract more foreign direct investment. We will see a number of those projects and it’s really exciting.
We have certainly seen a lot of interest from the Dutch companies and we’ve seen even more interest from their universities. I believe the next step into securing more investment directly from those companies is the construction of this R&D facility. In many ways that would give them a home base to be in Kentucky, to operate in Kentucky. And if their intellectual capital is created in part in Kentucky, that’s where their operations will be too.
MG: How should the state’s economic development community be approaching capitalizing on the momentum we got last year from all those projects and maybe set another new record?
AB: We must invest. We are being chosen by more world-class companies than ever before. (It is) Ford’s largest project in its history and they chose us. Amazon operationalized the largest project in their history in Northern Kentucky; they chose us. Pratt’s largest project in their history, and they chose us. Novelis’ first new (aluminum) manufacturing facility since the ’80s and they chose us—and they just announced they’re going to double its size.
If we want to continue winning these world-class companies, we have to have a world-class workforce and that starts with a world-class public education system. That’s why my budget invests nearly $2 billion above and beyond our last biennium budget into public education and expands it to pre-kindergarten. That not only helps our workforce in the long term by creating a more educated workforce, it allows more parents to get back in the workforce right now.
We have to have more connection between employers and the individuals we train for the type of work that they need. Far too often, we’ve graduated people in fields that are in high demand but expected the employers and the employees to find each other. So, our budget provides grants to better connect those groups as well as expand our Everybody Counts initiative, which attempts to ensure that in any school system, every graduating senior is either enrolled in higher education or has accepted a job before they graduate.
The final piece is investing in our (economic development) sites themselves. The Glendale site (that BlueOvalSK chose) had decades of investment by the General Assembly and others. The good news is Kentucky is so hot right now that the interest we’re seeing will probably fill up every large and medium site we have that is build-ready. My budget has $150 million in a fund that will help bring the next generation of sites up to the Glendale level so that we can land our next Ford, our next Toyota, and there’s not 30 years in between this great announcement we had (last September) and the next one.
MG: The General Assembly looks to be moving towards further tax reform this year to continue a shift from income tax towards sales tax, which the business community supports. What is your preferred tax structure?
AB: There are three important points here. First, we are winning right now at a level like never before, coming off our best year for economic development. That means companies like our tax structure enough to invest more in us than they ever have in other states. I just caution the General Assembly from changing our offense at a time when we’re virtually undefeated and we are on a roll. It would be really disappointing if they make changes without thinking them through, that knock us off a historic roll that could create decades of prosperity.
The second piece is the General Assembly hasn’t made public anything they’re looking at. It’s really easy to say, yes, I’m for comprehensive tax reform. It sounds nice, but what does it mean? Is it raising sales tax on families at a time of high inflation? Does it mean adding sales tax to groceries and medicine? Does it mean giving tax breaks to those that are already doing really well and making it harder for those struggling to get by? I think any major change in a tax structure deserves a lot of public debate. I also note that it’s only been four years since we had a major change in our tax structure, when the income tax was flattened both for individuals and for corporations.
And then the third point: We ought to be very careful in thinking about anything that would raise sales taxes at a time where we are experiencing inflation. If things already cost more when people are struggling to keep up, then we shouldn’t be making it even more expensive—in my opinion ever, but certainly not until we see this subside.
MG: It’s always a key friction point in politics, but how do you view the approach to keeping taxation low while adequately funding our public services: safety, education, regulation? Are we doing OK now? Do we need to make changes?
AB: We’re coming off the best year for economic development in our history with the record $11.2 billion in private investment, a record 18,000 new jobs created at the second highest hourly wage ever, while at the same time having a record budget surplus, the largest rainy-day fund in our history and one of the lowest borrowing rates we have had in decades. We have it right. We’ve never had a year as good in terms of economic development and public revenue than we just had.
We’ve just got to have the courage to invest these dollars now and to do that wisely. Our budget makes historic investments in education, health care, workforce development and public safety while spending three quarters of a billion dollars to pay down our pension liabilities on top of fully funding the (retirement) systems. It adds to the largest rainy-day fund in our history. It lowers the amount of debt, by ratio, that the General Assembly passed in the last budget. We are in a place and time where we don’t have to choose. We can make state-changing investments that generate prosperity for years to come to give every family a true chance, that help us leapfrog not three but 30 other states, while having the most fiscally responsible budget in decades.
MG: The federal government is helping pay cleanup costs from the Dec. 10 tornadoes, but rebuilding the destruction is going to be much more expensive. Is there a government strategy yet to provide or incentivize financial support for the billions needed to rebuild?
AB: We’re working very closely with those communities every day. I have at least three meetings every week on both the cleanup and the rebuilding. It’s about coordinating with multiple counties that were hit at different degrees of severity. It also requires working with the federal government, whose systems aren’t necessarily set up for a disaster that wipes out an entire town, and finding new flexibility to assist. The federal government is going to be paying 75%, in the very least, of most of these costs. But I’ve asked the General Assembly to have the state cover the county costs while we are at one of the best places we have been fiscally in a long time. For the counties carrying these costs, it would either bankrupt them or restrict their funds so much that they couldn’t make the proper investments to prepare for a better and a brighter future.
We’re also working with the private sector to ensure we’re going to have job opportunities and announcements in these areas (that were hit) because we don’t want people to move away from these communities while we are rebuilding. We continue to work with nonprofits from all over the country on the efforts. We do need to remember it’s going to be about a two-year process from the disaster itself through the cleanup, into the rebuilding and ultimately to completion. COVID-19 has just been a dominating influence over our administration so far. It’s gobbling up so much time. At some point we’re going to get past this though.
MG: What kind of long-term impacts from this pandemic should Kentuckians be prepared to deal with?
AB: The first thing we’re going to need to be prepared to deal with is grief. We’re approaching 13,000 Kentuckians we have lost to this virus; that’s more than like World War I, World War II and pick any other put together. It is an astounding, difficult amount of human life lost in a very short period of time. Most of us are putting our heads down, doing what we need to do to get through it. But processing that grief is going to be a long and a difficult process. We need to be prepared to be there for each other.
There are going to be some medium-term impacts on our workforce. Our baby boomers are now retiring. COVID has certainly sped it up. I do believe on the other side of it we’re going to see some economic benefits here in Kentucky certainly. The pandemic has pushed people at a level that we’ve never seen before towards outdoor tourism, something Kentucky has been developing for the last several decades.
I also think there is a lot of pent-up desire to do so many things we have had to put off. Maybe we were putting them off before the pandemic for jobs and other reasons. But I think people are going to want to travel. I think people are going to want to get out. I think people are going to want to have experiences. Things like the Kentucky Bourbon Trail, while they might be packed now, ought to be ready for significant additional attendance.
People are rethinking where they need to live, to work. We relocated a company from Los Angeles—not to Louisville but to Somerset, Ky. We’re seeing more and more of those opportunities where people are leaving the coast and settling here.
MG: The pandemic exposed global supply chains’ vulnerability and is leading to reshoring production back to the United States. What will this mean for Kentucky? Is the state targeting certain categories of reshoring companies? And how hard is the competition to land them?
AB: Certainly, the state was hit during the pandemic by challenges with the global supply chain, first from a health perspective. Going through a period where we didn’t have enough PPE (personal protective equipment) for our health care professionals, much less our people, was challenging and we never want to see it again. We’ve already announced several PPE manufacturers that are investing in and/or returning to Kentucky. One makes medical gloves. Another produces PPE for firefighters and is returning to a facility in Beattyville that they left over 10 years ago.
We’re seeing it in the manufacturing sector. GE (Appliances) is restoring a refrigerator line, something that they said couldn’t be done anymore in the United States. Look at agriculture: Many of the agritech companies are competing with places like Mexico, doing it without pesticides, with shorter drives (from farm to market), with the assurances that they can make delivery. There is much more to be done, too—even in some areas that would be very challenging, like rare earth metals, where very little is done in the United States; most is done in China. Ongoing conversations need to be had with the federal government because many of these critical supply chains have national security interests as well.
MG: You make a point of linking health practices to business climate. What has been the response from the business community? Are they validating this connection?
AB: Absolutely. I remember being in Whitley County for the expansion of Firestone, adding hundreds of jobs to work in the EV (electric vehicle) sector, and every single person in that facility was wearing a mask, not because of any government directive but because the county had gone into the red (category for its COVID rate). What businesses— whether they are manufacturing or service oriented—are finding is that good health practices protect their workforce. Much of what I do related to the executive branch is more as a CEO or a COO managing our operation. When we reinstituted our mask policy it was to protect people’s health, but also to protect our workforce. We couldn’t have our drivers’ license offices, which are providing REAL IDs, shutting down. We couldn’t stop bridge inspections and so many critical things we do in the state government. Since we reinstated that policy, we haven’t had one breakout that has threatened the entirety, or even a large portion, of one of our operating units.
I believe businesses now see that if they want to be productive, they’ve got to keep their workers healthy and that means taking the right precautions against COVID-19. You also look at Goldman Sachs and Fitch and other large rating agencies that are out there; when they talk about why our economy is doing well, they say we found the right balance, which was always our goal—setting the best COVID policies we could but also keeping our economy open and setting different policies in a way that maximize the ability to keep our economy open. Those are things like encouraging—or when I could, requiring—the schools to follow the best procedures. That ensures that kids can be in-person and parents can go to work.
MG: Does the state need or would you support some form of incentive for affordable housing construction, which would support the workforce expansion that we need if we’re going to achieve economic growth goals and expectations?
AB: That’s something we’d certainly look at. Right now what we see in the housing market is that supply chain issues, which are beginning to resolve themselves, have delayed the amount of new construction that’s needed in Kentucky and so many other places. Thus, it’s the lack of housing in general that has driven up prices and created, validly, concerns about affordable housing. I think the first thing that will drive down the price of housing and create the new dwellings that are needed for all the new workers that are going to move here is simply more housing. I know our builders out there are salivating, ready to do it, and as the supply chain issues resolve themselves—which I believe is happening faster in construction than in many other industries—we will see more new construction and we will see prices slowly go down.
MG: The private sector and the marketplace are working this out on their own?
AB: The private sector and the marketplace will be, and are always, significant players in addressing any challenge that we face. I’m a governor that recognizes that, comes from the private sector, practicing law with many of these companies, but also knowing that there are ways like incentives that you mentioned where sometimes we can speed up the progress that’s needed or address some especially temporary challenges that some of our companies may face.
MG: Is there any other topic you would like to address?
AB: It’s a really exciting time in Kentucky. I know that the pandemic, natural disasters, even the national news, can get us down during any day or any week, but the challenges of our present are not keeping us from building an incredibly bright future.
Our time is here. Our future is now, in a way like never before in our lifetime. Kentucky is no longer a flyover state. We are the destination. Now is the time to invest, to turn two great years of economic progress into 20 years of prosperity for our families. I believe we can do it and I’m going to spend every day I’m governor on making it happen.