Editor’s Note
An informal group of Kentucky Chamber organizations are working together in a highly collaborative manner to discuss and promote solutions to local, regional and statewide economic issues. Some of the active participants are: Greater Owensboro Chamber of Commerce, Kentucky Chamber of Commerce, Henderson-Henderson County Chamber of Commerce, Bowling Green Chamber of Commerce, Greater Louisville Inc., The Ashland Alliance, Commerce Lexington Inc. and the Northern Kentucky Chamber of Commerce.
At a recent two-hour meeting in Frankfort, The Lane Report’s Publisher Ed Lane and Editorial Director Mark Green spoke with five CEOs of representative chambers serving regional areas throughout the state to discuss important legislative and economic issues before Kentucky’s General Assembly.
The chambers represented and their CEOs participating at the meeting were:
• Joe Reagan, president & CEO, Greater Louisville Inc.
• Bob Quick, president & CEO, Commerce Lexington Inc.
• Steve Stevens, president, Northern Kentucky Chamber of Commerce Inc.
• George Warren, president, Henderson-Henderson County Chamber of Commerce Inc.
• Jody Wassmer, president, Greater Owensboro Chamber of Commerce
The comments of the CEOs were edited to provide concise, executive summaries of their perspectives relating to important issues facing all Kentuckians.
Education
TLR: Your chambers have taken important positions regarding education policy. Tell us about them.
Bucks for Brains (B4B)
Steve Stevens (Northern Kentucky): Bucks for Brains is a wise investment to improve the quality of educators and researchers at our universities. Gov. Beshear has proposed $60 million for the B4B budget. We support B4B because higher education receives $120 million for the $60 million invested. This is possible because the program requires a one-to-one match of state funds with gifts from donors.
Bob Quick (Central Kentucky): The B4B program has had a huge impact. The University of Kentucky has spent many years recruiting top-notch researchers. The threatened budget cuts sent real shock waves out as to how reliable the state of Kentucky may be for continued research funding. In the knowledge economy, education is at the top of good, solid economic development.
Joe Reagan (Louisville): Right now, the University of Louisville is the fastest growing research university in the United States based on NIH (National Institute of Health) funding. UofL has velocity on its side because of B4B. And what’s exciting now is the payoff to the taxpayers of the state.
In the February issue of The Lane Report, (UofL President) Dr. James Ramsey outlined a $2.5 billion plan to create an environment for commercialization in downtown Louisville. And the payoff to the citizens of the commonwealth comes in two forms: one is better health care – made possible by research that is happening at UofL and UK; and then commercialization, new start-up businesses that will create the products and drugs that will be the medical miracles of tomorrow.
TLR: How important is postsecondary education to economic development and the future of our state?
Jody Wassmer (Owensboro): Postsecondary education is crucial. Education is the economic engine to make sure Kentucky has an adequate supply of graduates to work for businesses and industries in the state. Kentucky must have skilled workers to compete in the global marketplace.
George Warren (Henderson): Many students think, oh, I’ll get a job even if I drop out. Students must understand the work ethic of a quality employee. Parents must teach their children the importance of being well educated.
TLR: What is the impact if state government cuts the postsecondary education budget by 12 percent?
Joe Reagan (Louisville): There is a lot of cognitive dissonance over cutting higher education at the same time Kentucky’s goal is to reposition the state’s economic development around the knowledge economy. During GLI’s intercity visit to Dublin, Ireland, a statement made by the head of the economic development agency in Ireland haunts me today: He said that even in their darkest hour, Ireland continued to invest in education. Kentucky may not have reached the point where its leaders understand that education has to be the first priority. In talking with UofL President James Ramsey and UK President Lee Todd and others, the universities are well positioned to move forward with adequate funding. If cutting state funding puts the UK and UofL business plans on hold, then it’s a disastrous policy move by state government.
Bob Quick (Central Kentucky): Cutting funding for postsecondary education would be devastating for the entire commonwealth. The University of Kentucky, as well as KCTCS, serve every county in the state. The University of Kentucky alone would take a $50 million cut over two years; with KCTCS we are talking a $35 million cut over two years. Seven hundred jobs would be lost at UK alone. I agree with Joe; education is the one pillar you can not give in on.
Early education for preschoolers
Steve Stevens (Northern Kentucky): Our chamber group supports assessing students at kindergarten enrollment to screen, as early as possible, for health, dental health, and social and emotional development. If interventions are needed, they can be made at an early age. This policy sets children on the right path to succeed as they go through their educational careers. Assessments and full-day kindergarten are very expensive. Credible research shows increased focus in the very earliest years of development really pays dividends and ultimately will enhance performance and the development of our children.
Jody Wassmer (Owensboro): Our community is currently paying for 100 percent of our kindergarten costs because we see the importance of it. One of the other things we started in Owensboro is Imagination Library, books are given to children from birth to five years old at no cost. For our community, it costs about $70,000, but that gives the children who participate in Imagination Library a better readiness for kindergarten. The Henderson Chamber is sponsoring this program.
STEM
Steve Stevens (Northern Kentucky): Regarding STEM (Science, Technology, Engineering and Mathematics education), our group supports the bill currently in the legislature that creates incentives for teachers to teach STEM. Incentives are also needed to encourage more high school juniors and seniors to take STEM courses at the AP level. Many job openings will come on line for students with these kinds of educational attainment.
In Kentucky, manufacturing is extremely important. The new economy needs these kinds of skills: math, science, engineering and technology. To remain competitive, Kentucky absolutely has to provide this type of training for its citizens.
School Governance
Steve Stevens (Northern Kentucky): School governance is another critical area. Currently superintendents don’t have the authority to hire their own principals because site-based decision councils across the commonwealth now do that. It doesn’t make sense to our group that school boards don’t allow their superintendents to pick the principals who run the schools.
In the business world, the CEO runs a company and is accountable to the board of directors, but that CEO is authorized to hire managers who are directly accountable to him/her. Superintendents need to have the ability to hire those people who will get the job done and address the issues.
Tax increases for education
Steve Stevens (Northern Kentucky): It is a serious reality check for legislative and policy leaders across the state to consider cutting by 12 percent funding for postsecondary education. The chamber group has informally decided that there are some new revenue streams the chambers would be willing to support. We have talked about increasing cigarette taxes and allowing limited gaming. Some of our chambers have differing positions, but the main goal is to get the issue on the ballot and to allow this discussion to take place. Then we can talk about the specifics; but first we have to be willing to talk about the revenue streams.
Jody Wassmer (Owensboro): Two good governmental investments are education and transportation – when a dollar is invested the community gets more than a dollar back. Education and road budgets, with the proposed budget cuts, are both in terrible condition right now.
Steve Stevens (Northern Kentucky): A financing mechanism used by 43 other states – but is not available to Kentucky’s state universities – allows colleges and universities to bond projects that produce a revenue stream that will adequately cover the debt service. Our chamber group thinks this idea makes particularly good sense, when we have the tight budget that the state has today. A pair of bills are currently under consideration by the General Assembly and would allow universities to issue bonds. Our group wholeheartedly endorses this legislation. Transportation
TLR: Let’s talk about transportation issues.
Joe Reagan (Greater Louisville): Transportation is one of those big issues. Certainly, for instance, the Ohio River Bridges Project (Kentucky/Indiana in Louisville) and the Brent Spence Bridge (Ohio/Northern Kentucky) are both equally important to Louisville. Kentuckians are starting to see the impact of infrastructure across the commonwealth. In the Ohio River Bridges Project, the mayor of Bowling Green serves in our coalition. Everybody up and down the I-65 corridor sees the importance of this project.
In this session, direct funding for the mega transportation infrastructure projects is absolutely necessary. GLI is adamant in its support of the public infrastructure authority introduced originally under SB7. This would be a funding authority to handle mega projects of regional and national significance that go well beyond the scope of Kentucky’s road fund. The infrastructure authority would be able to create new funding sources and have bonding authority when big projects (like bridges and highways) would utilize all of the state’s bonding capacity. There is remarkable bipartisan support for this concept. Toll roads/bridges
Joe Reagan (Greater Louisville): Every state is grappling with the same issue – paying for infrastructure. GLI has been overly cautious about looking at new revenue streams for infrastructure. The principle is to look at fees from the users of the infrastructure.
Electronic high-speed tolls always come out as seeming to be the best solution that’s available, but other options include car fees and a sales tax. If Kentucky had a local-option sales tax, communities would have more freedom to issue revenue bonds.
The bottom line is that electronic high-speed tolling seems to be the best solution. Forty percent of the new road construction in the United States is being funded by electronic high-speed tolling; 31 states are employing it right now as their way of completing major road projects. Kentucky’s certainly not on the cutting edge, but the state is at point where it can make a significant move to help local communities finance infrastructure.
Along with the direct funding from user fees comes all-important savings in inflation and the total development cost of the project. Inflation costs on the Ohio River Bridges Project are about $400 million a year. For every year we accelerate construction, the state saves $400 million in cost. That is real money!
Jody Wassmer (Owensboro): I don’t think there is any question about tolling. Tolling is an efficient, reliable way to pay for these projects. But what is even a better idea about tolling interstate projects – a lot of folks from outside of Kentucky will help pay for these bridges and roads. That’s a cost-efficient way of getting that done.
George Warren (Henderson): Tolling could also fund a major portion of the state’s transportation budget; the toll revenues could be shared with cities where toll roads are not practical. Larger metro areas would not be competing with smaller cities for road funds if alternate funding for mega projects is available.
Joe Reagan (Greater Louisville): The Ohio River Bridges Project in Louisville, over a 10-year period, would utilize 52 percent of the statewide transportation budget. It doesn’t take a mathematician to figure the impact a mega project would have on the transportation needs of other parts of the commonwealth. The Bridges Project must be built for the overall benefit of the state’s economy.
State Police funding
Joe Reagan (Greater Louisville): If Kentucky is going to have a road fund, the funds should go to road costs. Other expenditures, including vital expenditures for state police, should be paid out of the general fund in the governor’s budget.
Our chamber group is not suggesting any less money be allocated to the state police, but funding for state police doesn’t really belong in the road fund, which generates its revenue from a gasoline usage tax.
George Warren (Henderson): This policy strikes at the heart of what Gov. Beshear calls structural imbalance in the state budget. Robbing from Peter to pay Paul is not an appropriate way to use the road fund.
HEALTH CARE
TLR: Are medical malpractice reforms on the horizon?
Jody Wassmer (Owensboro): I’m not aware of a specific bill, but believe all the chambers have taken on the issue of medical malpractice reform. It’s important for a lot of reasons. When chambers do member surveys, the No. 1 issue by far is health care cost. Malpractice really needs to be a federal solution, but that’s not coming. The need for medical malpractice insurance for our physicians and health care providers in this state is very high. It’s particularly a problem in the border communities. Owensboro has lost some doctors to Evansville, because Indiana has a cap on medical malpractice claims.
The chamber group also agrees that more health care transparency is important. We need to move towards a state of “health-care consumers” not a state of “health-care users.” People need to understand before they go into a procedure what it will cost. In a free market economy, they may be able to get it done less expensively somewhere else. That option is not out there right now. In the 2006 budget bill, there was a temporary mechanism for health-care transparency. There is legislation that would make that a permanent part of statutes and allow people to have access to cost information. We support activities that make health care more affordable, transparent and accessible.
OTHER ISSUES
TLR: Let’s discuss your positions on taxes, government efficiency and regulation.
George Warren (Henderson): The chamber group – in general – endorses the voters of Kentucky having the opportunity to decide whether they would adopt expanded gambling. The chambers and their members may have their own version of what they would like the gambling bill to be, but the right to vote should certainly be there.
One of the critical reasons for that vote is the General Assembly, the governor and the chambers of commerce need to know what the people want. If increased revenues are going to be from expanded gambling, that will solve some of the state’s monetary needs. If voters are not in favor of casino gambling, then what are the other options available?
The cigarette tax … one of the benefits of this tax increase is that hopefully it will keep the younger people from smoking. Even a 30-cent increase would generate as much as $100 million. We also have to look at other funding opportunities for our deficiencies and budgeting from state government.
Pensions and government efficiency
George Warren (Henderson): State government needs to operate in an efficient manner. The chamber group is not encouraging any tax or fee increases until a thorough evaluation can be made of the efficiency of state government. At that point, some tax increases or cost increases may have to be considered. One major issue to look at is revision of the current pension plan, as well as the health-care plan, that is being provided to state employees. The private business sector doesn’t allow those types of costs to get out of line; neither should state government. First and foremost, the chamber group wants to make sure the issue is addressed. The right way to address pensions is to get everyone on the same side and restructure a benefit policy that is sustainable. What state and local governments have been doing in terms of shifting pension liability to the future is not something that a private company could do legally. The unions, the state and the private sector have to come up with a sustainable solution and meet this crisis head on.
Business taxes
George Warren (Henderson): Revisions to the Limited Liability Entity Tax prevents small business owners in particular from re-investing their profits back into their own business. If they’re not able to put money back into the capital needs of their business, equipment will get obsolete. If they are not able to hire additional people, the economy of the state will be in a less advantageous position.
TLR: What is the chamber group’s position on prevailing wages?
Steve Stevens (Northern Kentucky): Most of our departments of education around the state are building K-8 schools. A lot of new schools have been built in our communities during the last four to five years. Over the years, we’ve recognized that anywhere from 20 to 30 percent of the construction costs have been at a higher or inflated wage rate, so the total number of new school projects has been reduced.
The chamber group supports a five-year prevailing-wage moratorium on all capital education projects. We believe that the moratorium will show there is a significant cost saving on construction projects for educational needs.
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