Kentucky’s business and political leaders remain optimistic about the commonwealth’s economic prospects this year in spite of national-level problems that might include a recession. There are a variety of positive trends working in the state’s favor.
Bluegrass State residents’ per capita and personal income levels have risen consistently this decade. In 2006, the most recent year for which figures were available, per capita income jumped a healthy 4.8 percent over the previous year while overall personal income increased 5.5 percent.
Income
Income gains likely are a result of improving education levels. Studies and analyses consistently link higher educational attainment with higher income, and Kentuckians have been earning many more degrees and certificates from the state’s seven public universities and the 28 members of the Kentucky Community and Technical College System. Statistics from the Kentucky Council on Postsecondary Education show the number of degrees and certificates issued swelled from 21,813 in 1999-2000 to more than 40,000 in the 2005-06 school year.
A brewing state budget problem could cast clouds over ongoing progress in the education realm. If threatened cuts to education take place, the impact would be felt not this year but in the future in the form lower achievement.
Before the as yet unresolved budget concerns arose, the state was projecting a 5.7 percent increase in postsecondary education spending for 2008, rising to $4.49 billion. And that was following a 5.4 percent increase in postsecondary education spending in 2007.
As for now, commonwealth leaders who submitted their forecasts to The Lane Report generally expect a good year for Kentucky. National City Bank, which has the state’s biggest deposit market share, saw strong increases in deposits last year – a more than 8 percent increase – to top $5.3 billion. The top 10 banks in the state had a collective increase in deposits of more than 2 percent, topping $29 billion. That equates to cash being available to fund business growth.
Construction
The housing sector is expected to remain a soft spot nationally, but experts on the following pages say Kentucky has weathered what is a crisis on the countrywide level better than most areas. The decline in housing starts in 2007 was shaping up to be much smaller than the dropoff from 2005 to 2006. The Louisville area, however, has major developments in the works that will sustain that area of the state for years to come. UPS is in the midst of a second $1 billion expansion of its Worldport facility that is bringing another 5,000 jobs to that area. Additionally, downtown Louisville has more than $2 billion in building projects in the works that will generate construction jobs and bring more activity and residents to a revitalized downtown riverfront.
Here’s what business, government and professional leaders around the state are saying:
Arts
“The future of the arts in Kentucky is very bright for 2008. As the Kentucky Arts Council gathered input from communities in preparation for our 2009-2013 long-range plan, we identified many new opportunities to develop and strengthen partnerships for arts programming and services throughout the commonwealth. Kentucky will focus on Abraham Lincoln in 2008 as we start celebrating the Abraham Lincoln Bicentennial. The arts will be infused in many projects funded by the Arts Council, through partial funding from the Kentucky Abraham Lincoln Bicentennial Commission and the National Endowment for the Arts. In addition to the unveiling of three commissioned sculptures, there will be musicals, operas, multimedia productions, concerts, plays, murals, puppet shows and dance performances. We foresee the year with many opportunities for Kentuckians to be engaged in the arts and for Kentucky communities to benefit from the arts.”
BUSINESS SERVICES
“The primary macroeconomic drivers for our industry are corporate profits, office vacancy rates, white-collar employment and nonresidential construction. Kentucky and the surrounding region should continue to grow, although at a moderating rate. Major projects like the Fort Knox recruiting headquarters, Museum Plaza in downtown Louisville along with continued growth of Kentucky stars like KCTCS, Baptist Healthcare, Jewish Healthcare, the University of Kentucky and the University of Louisville will help make 2008 a good year for the Bluegrass State.”
“Northern Kentucky’s economic outlook for 2008 continues to be bright. Many employers have reported strong sales in 2007 and we see expansion and growth now reaching into the region south of our three most northern counties of Boone, Kenton and Campbell. Our belief is that our ability to attract new employers and assist our existing employers in expansion is based on our focus on regional cohesion and unity. We are fortunate that folks are willing to work together here and this allows our region and the rest of the commonwealth to prosper.”
“Windstream is sharpening its focus on business customers in 2008. In this global climate, our small and medium business customers throughout Kentucky need the flexibility to connect to anything and everything. Windstream is launching a solution called Virtual LAN Service or VLS that will allow them to do that. VLS virtually connects businesses via fiber or copper for high-speed data transmissions. VLS brings advanced networking solutions to rural areas – where Windstream is focused– enabling businesses even in remote locations to centralize their data applications.”
“Will the potential economic downturn for 2008 impact investments in technology and education spending? Early indicators reflect that information technology spending will actually increase again in 2008, in areas such as:
• Software as a Service (SaaS)
• Voice over Internet Protocol (VoIP)
• Open Source Solutions
• Virtualization Management
It’s all about spending to save time and money. Likewise, with organizations striving to be ‘lean and mean’ they must continue to invest in their workers’ skills in order to remain competitive.”
“2008 is a continuation of technology deployment throughout businesses, governments and organizations to increase productivity and meet customer expectations. The increased productivity mantra will intensify because of a shrinking skilled workforce resulting from retiring baby boomers. Kentucky’s challenge is to educate and train the workforce to become tech savvy and incorporate more telework solutions. Organizations will require greater scrutiny of technology deployments with a critical eye towards return on investment.”
CONSTRUCTION
“In the central Kentucky area, construction trends in the industrial sector will continue to grow steadily while the commercial and retail sectors may see some decline due to rising fuel prices and interest rate fluctuation. These markets will see an influx of residential contractors due to the declining housing market and will cause contracts for commercial and retail construction to become increasingly competitive.”
ECONOMIC DEVELOPMENT
“The dynamic energy of Greater Louisville’s regional economy continued to prosper in 2007 – with considerable investment and expansion of existing companies as well as significant relocations of new businesses and headquarter operations to Louisville. While still focusing on targeted industry sectors such as health enterprises, logistics and technology, our diverse economic base also enables us to attract and support innovative development on many fronts. GLI is working to ensure the competitiveness of our workforce and infrastructure in the global economic marketplace.”
“Although the U.S. economy is struggling, Kentucky has the opportunity to make progress in 2008. As companies look to squeeze costs from their supply chain, Kentucky’s central location provides a strategic advantage for growth in manufacturing and distribution. The concentration of automotive suppliers in the state continues to make the commonwealth attractive to a competitive auto industry. Building upon the foundation put in place by the legislature to encourage and grow Kentucky’s high-tech community will be key in supporting increased R&D and growing existing Kentucky businesses. Greater interaction between economic developers and educators will also be vital to developing the workforce to fuel the knowledge-based economy necessary to move Kentucky forward.”
“Northern Kentucky’s economy in 1Q-2008 gets a strong boost when Fidelity Investments adds 800 new employees in Covington in a new 350,000-s.f. campus facility, its first LEED-certified or high-performance ‘green’ building. Advanced manufacturing, data centers and headquarter operations will lead the way in 2008 in Northern Kentucky with Northern Kentucky University and Gateway Community & Technical College aligning their resources under Vision 2015 to support Northern Kentucky’s economic development goals.”
“Major investments in hospital construction are planned across the state. UPS is expanding in Louisville. The federal government is making huge investments in Fort Knox and new energy facilities are being considered for other parts of the state. There is certainly reason for optimism in 2008. But as the state becomes more dependent on global markets, we know we will have to row our state’s economic boat as hard as we can in 2008 and hope that the waves of the national and international economies are conducive to our overall direction.”
“Kentucky’s high-tech community is poised for significant growth in the next year as our state continues building on the foundation that has been put in place by the legislature. For example, the Cabinet’s unique program that matches federal SBIR-STTR (Small Business Innovation Research-Small Business Technology Transfer) awards to our high-tech small businesses is a tremendous success and has already provided almost $5 million to support Kentucky-based companies. These firms are creating new, high-paying jobs for Kentuckians statewide.”
“The growth of the University of Kentucky, especially the medical megaplex, will continue to be a major economic stimulant for central Kentucky. Sometime in the spring of this year, it will occur to us that there is no reason for a housing slump in Kentucky – except for too many people reading too much of the national press. With the proliferation of attractive start-up companies, primarily coming from UK and U of L research, I expect to see an increase in the availability and commitment of venture capital in Kentucky in the coming year.”
ENERGY
“The need for reliable energy supplies at economic prices is a dominant feature of our political and business landscape. Natural gas prices continue to be extremely volatile, although new liquefied natural gas (LNG) developments are poised to come on-line in 2008, marking a significant shift in supply. Persistent themes in global crude oil markets are likely to express themselves in continued price volatility and market uncertainty in 2008. In addition, electricity prices will begin to feel the effects of environmental regulations and compliance costs.”
HIGHER EDUCATION
“This is a wonderful time to be in Kentucky, and I believe 2008 will prove to be a banner year for entrepreneurs and companies looking to expand and grow. The University of Kentucky is poised to make great strides over the next 12 months. We will continue in our Top 20 quest by educating more Kentuckians, enhancing health care across the state, and commercializing our research to create new economic opportunities for our children and grandchildren.”
“2008 will again be a year of modest and unspectacular economic growth for the commonwealth of Kentucky. More of the same with employment growth of less than 1 percent as Kentucky continues to deal with issues that affect not only our state but the national economy. Slow employment growth will translate to modest income growth, hence general fund revenue growth, presenting tremendous budget challenges for Gov. Beshear and the General Assembly given this slow revenue growth and numerous expenditure challenges. Despite lack of significant funding increases, higher education in Kentucky, especially at the two major research universities, will continue to grow and flourish as we achieve the mandates given to us by the General Assembly. The University of Louisville will continue to play a leadership role in the development of the health and life science economy of our area and the logistics and distribution industry within our economy.”
“As Kentucky’s largest private college, Sullivan University and its sister institutions, Spencerian College and The Louisville Technical Institute, have an extremely positive outlook on the future. These three institutions, located on six Kentucky campuses and online will serve over 8,000 student-customers this year, providing education and training needed to keep the citizens of the commonwealth competitive in today’s demanding business environment. As we increase the scope of our education services, such as the recent acquisition of Dale Carnegie Training ® programs, the system will continue to innovate and lead us to help businesses keep their associates competitive. This summer Sullivan University will open a new College of Pharmacy in Louisville, the second in the history of the commonwealth, in order to help meet the demand for pharmacists and to support the growing health services industry in Kentucky.”
“Successful emerging businesses must be information based, technologically driven, and entrepreneurial. The South-central Kentucky Small Business Accelerator in the Center for Research and Development at WKU is designed to give the region’s entrepreneurs a competitive edge. That edge is primarily defined by the engagement of WKU faculty and students in the applied research endeavors of companies located in the Center. WKU’s mission in the Center is to create opportunities for commercialization and technology transfer. It is a magnet to attract new companies to Kentucky.”
INDUSTRY
“We have positioned ourselves to move forward to be part of the greenest generation. Whether assisting in the utilization of carbon dioxide emerging from coal gasification programs or the conversion of cellulose – not just into ethanol but into value added products – Alltech is embracing the 21st century technology. We believe that Kentucky is a superbrand and that Alltech can help create that superbrand. This of course influenced our decision to be the title sponsor of the Alltech FEI World Equestrian Games. This title sponsorship will enable us to showcase all that is great in Kentucky from our natural animal feed supplements to our biorefinery to our Kentucky Ale to our ice cream, Dippin’ Dots. The Alltech FEI World Equestrian Games exposure will lay the foundation for Kentucky to step onto the international stage in a big, big way, and Alltech is happy to be a part of it.”
INSURANCE SERVICES
“Like most of the country, Kentucky’s workers’ compensation insurance industry continues to experience very soft market conditions that will likely remain through 2008. It is a critical time for the insurance consumer to be cautious and consider important factors such as financial stability and customer service when making coverage decisions.”
LOCAL GOVERNMENT
“In Louisville, 2008 will be a year of great progress – and lots of construction. Our skyline will begin an exciting transformation with the construction of a new downtown arena and the 62-story Museum Plaza. Our downtown will become more of a 24/7 neighborhood with hundreds of new housing options and more entertainment and retail businesses. We’ll begin uniting urban and suburban neighborhoods, opening the first 23 miles of the 100-mile Louisville Loop, a walking and biking path that will encircle our city. Despite troublesome shifts in the national and state economy, we’ll work to keep Louisville moving and growing.”
“As concerns rise about the possibility of a national recession, Lexington can take comfort in the strength of its local economy. Although a national recession would certainly have an impact on Lexington, we are well positioned to withstand the effects, given our diversified economy and low unemployment rate. One encouraging sign is that we are weathering the national crisis in the housing sector better than most cities. Furthermore, there are positive indications that the city’s economic development partnership with the University of Kentucky and Commerce Lexington is beginning to attract attention, particularly in our growing horse, health care and high-tech sectors. Even in times of recession, Lexington’s high quality of life, highly educated workforce and business-friendly environment give our city a competitive advantage as we work to attract new companies and support the growth of existing businesses.”
MANUFACTURING
“The outlook for Kentucky’s No. 1 industry in 2008 is either pessimistic or optimistic, depending on what type of manufacturer you ask. Those who are adapting advanced manufacturing production methods are bullish on the future. Many are expanding or planning to expand operations. Those who are finding it difficult to change are facing many challenges in the face of competition from low-wage nations such as China, India and Mexico. KAM is working hard to help manufacturers cut costs and find more qualified workers to keep more of them in Kentucky and ensure the long-term economic prosperity for all Kentuckians.”
“I’m optimistic about the automotive industry and excited that Kentucky continues to be a prominent player in this global industry. Our Georgetown facility is Toyota’s only plant in the U.S. producing a hybrid (Camry), and we just announced a new ‘crossover’ vehicle that we will begin making next fall. Our impact to the state’s economy is very positive. Not only does Toyota directly employ about 10,000, but through our chain of 92 Kentucky-based suppliers, we have helped create more than 30,000 jobs.”
MEETINGS AND CONVENTIONS
“We are forecasting additional growth in hotel rate and occupancy for Louisville in 2008. Currently Louisville hosts five of the nation’s top 25 trade shows. Now with the recent relocation of the Pumper and Cleaner Expo from Nashville to Louisville, we are thrilled to be host to six of the top 25 trade shows in the United States. The group motor coach segment continues to grow for us and we are now starting to receive inquiries from China, which offers a great deal of opportunity on the horizon. And in September 2008 Louisville hosts the prestigious Ryder Cup. The one potential negative that could impact the family summer vacationer in 2008 is if gasoline prices begin to approach the $4 a gallon mark. Overall 2008 should be another solid year for Louisville.”
“We are embracing continued momentum in south central Kentucky’s tourism environment as several attractions in Bowling Green are planning noteworthy expansions during 2008 and 2009, encouraging a fresh and unique visitor experience. The National Corvette Museum will serve as a catalyst for area improvements as the existing 68,000-square-foot facility is revamped and an additional 47,000 square feet is added. We also have several substantial automotive and sporting events joining the current busy schedule.”
RESEARCH
“The UK College of Agriculture’s research is ranked in the top 10 nationally this year. Our research grows the Kentucky economy with technologies for protecting animal health and productivity as well as production of food and fuel. A new Equine Initiative builds on the substantial equine economic cluster in Kentucky; we are also improving animal health surveillance for horses as well as cattle and other food animals. The college also leads business development in the area of plant natural products and related technologies.”
TRANSPORTATION
“In 2008 the airline industry is expected to see moderate passenger growth. Airlines will be challenged by increasing fuel costs and will continue to place their focus on international travel due to higher yields and will reallocate domestic capacity to match passenger demand. With the 2010 World Equestrian Games quickly approaching, Blue Grass Airport is aggressively preparing to welcome the world to Kentucky. Plans are underway to relocate the airport’s general aviation runway, which will allow for the construction of additional public parking and hangar development. These projects, along with terminal improvements and a new, prominent airport entrance will provide visitors with a lasting impression of our region.”
“In 2008, we expect to see growth in terms of passenger and flight activity at Louisville International Airport. With the addition of three new cities (Raleigh, Boston and Denver) and one new airline (Frontier), the flight options to and from Louisville have never been better. Airline growth will continue to be influenced by the cost of fuel and the overall health of the U.S. economy; however, Louisville International Airport is well positioned to capitalize on new opportunities as they arise. The forecast for freight and express activity also is positive. Louisville International now ranks third in North America – and ninth in the world – in the total amount of cargo handled. With the UPS Worldport expansion and the completion of a number of key airport facility improvements, we expect to improve the airport’s position as one of the busiest cargo airports in the world.”
UTILITIES
“Central Kentucky is on the threshold of significant regional progress as Kentucky American Water works with the Bluegrass Water Supply Commission to provide a feasible, cost-efficient, long-term and environmentally responsible solution to the region’s water supply deficit. Kentucky American Water looks forward to approval from the Kentucky Public Service Commission early in 2008 and is ready to build, and complete by the summer of 2010, a new water treatment plant on the Kentucky River and a 30.6-mile underground water line to meet existing demand and future economic growth.”
“Kentucky’s energy needs are growing. In fact, demand among our 16 member cooperatives is growing at nearly twice the national rate. To meet that growth as affordably and as reliably as possible, EKPC is building a new generating unit and has plans for another, along with transmission facilities to accommodate them. These units will rank among the cleanest coal-fueled units in the nation. EKPC also is installing state-of-the-art emissions-control equipment on existing generating units in order to meet increasingly strict emissions standards. Altogether, our cooperative will spend more than $2 billion in the coming decade in order to continue providing power as affordably and reliably as we can.”
WORLD EQUESTRIAN GAMES
“Based on the continuing high level of demonstrated public interest in the 2010 World Equestrian Games, as well as the significantly above expected early results from our trade show and ticket deposit programs, it is clear that the 2010 Games will be all that we both expect and want them to be – the best games ever and the most spectacular event ever held in the state of Kentucky.”
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