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March 8, 2012

House Passes Budget Quickly with Eight Percent Spending Increase

Yesterday, the Kentucky House passed a budget for FYs 2013-2014.

While most of the legislative discussion centers on cuts, the General Fund budget totals $19.5 million which represents an 8% increase over FY 2011-2012.

Even if you compare it only to FY 2012, it represents a 5% increase in spending.

The details of the budget are sparse, but it was revealed that the budget maintained a debt ratio of 6.7%, which is the highest in Kentucky's history and sure to worry the commonwealth's already concerned creditors.

There are no doubt other details that will disappoint taxpayers, but the weight of the debt alone is enough to sink this proposal. A cynic might propose that the legislature is deliberately financing the budget with record debt because they intend to approve the tax increases that will be proposed by the Governor's tax reform commission...

It is a KEY VOTE, and all the more reason to pass SB 1.

December 6, 2011

What Farm Receipts Say About the Health of the Horse Industry in Kentucky

In 2011, Kentucky's farm receipts are expected to top $5 billion for the first time, thanks to Kentucky's health agriculture economy as well as high prices for corn. Looking at Kentucky's top crops by receipts, the landscape continues to change.

2011 farmcash estimates (in millions)
Poultry $990-$1,000
Corn $970-$980
Cattle $750-$760
Horses $740-$750
Soybeans $645-$655
Tobacco $310-$320
Dairy $250-$265
Wheat $210-$220
Hogs $110-$120
Hay $125-135

Where tobacco once ruled the economy, Kentucky farmers have adapted and succeeded.

This year's farm economy is a far different one from a decade ago, when tobacco and horses far outweighed all others, said Scott Smith, UK agriculture dean.

He said that he does not expect one crop to be that dominant again, thanks in part to the diversification fostered by the Governor's Office of Agricultural Policy and the state Department of Agriculture's emphasis on a wider variety of crops in the post-tobacco landscape.

"The buyout worked," Smith said. "We've basically succeeded in diversifying. We thought there was some magic (crop) -- hemp, aquaculture -- but no one crop will dominate from now on."

Horses rank only as the fourth largest "crop", lower than recent second-place finishes, but the lowered ranking is due to the success of other crops and not a decline of the equine economy in Kentucky.

Beef cattle and horses, both stronger this year, will be close behind poultry and corn at 14 percent each, followed by soybeans at 12 percent, other farm commodities such as fruits and vegetables at 11 percent, tobacco at 8 percent, and dairy at 5 percent.

Horse Farms in Kentucky are buoyant, and Kentucky's agriculture economy is able to succeed and adapt regardless.

August 18, 2011

The Outlook for Small Businesses is Bad, and Bad for the Economy

The NFIB reports:

For the fifth consecutive month, NFIB's monthly Small-Business Optimism Index fell, dropping 0.9 points in July--a larger decline than in each of the previous three months--and bringing the Index down to a disappointing 89.9.

While the national unemployment rate dipped marginally, for the nation's small businesses, the employment story is not a positive one. Twelve percent (seasonally adjusted) reported unfilled job openings, down 3 points. Over the next three months, 10 percent plan to increase employment (down 1 point), and 11 percent plan to reduce their workforce (up 4 points), yielding a seasonally adjusted 2 percent of owners planning to create new jobs, 1 point lower than June, leaving the prospect for job creation bleak.

Small businesses, the engines of economic recovery, are not recovering. The NFIB's economist puts it this way:

"At the two year anniversary of the expansion, the Index is only 3.4 points higher than it was in July 2009. And considering the confidence-draining performance of policy makers, there is little hope that Washington will stop hemorrhaging money and put spending back on a sustainable course. Perhaps we might begin referring to the 'Small-Business Pessimism Index' from now on."

May 20, 2011

Employment Trends and Rates

Unemployment in Kentucky inched downwards this month:

Kentucky's unemployment rate fell to 10 percent in April, down from 10.2 percent a month earlier.

The state added 3,800 jobs in the month, as "Kentucky's economy continued to show signs of improvement in April 2011 led by strength in the manufacturing sector," said Justine Detzel, chief labor market analyst for the state Office of Employment and Training.

The state's unemployment rate in April continued to outpace the national rate of 9 percent, which increased from 8.8 percent in March. Since February 2009, Kentucky's jobless rate has been below 10 percent just once, in July 2010.

For the month, Kentucky's job gains came in eight of the 11 major industries.

Leading the gains was the manufacturing sector, which added 2,500 jobs. Since April 2010, employment in the manufacturing sector has climbed by 5,700 positions.

Kentucky's trend reflects the national trend. Three-quarters of states saw decreases in unemployment in April.

The unemployment rate fell last month in more than three-quarters of nation's states, evidence that companies are feeling more confident in the U.S. economy.

The Labor Department says the unemployment rate dropped in 39 states in April. That's an improvement from March when 34 states had reported decreases. The rate rose in three states and the District of Columbia. It was unchanged in eight states.

Employers added workers in 42 states. Only eight states and the District of Columbia lost jobs last month.

Nationally, businesses have added more than 250,000 jobs per month, on average, in the past three months. It's the fastest hiring spree in five years. The unemployment rate has dropped nearly a full percentage point since November. Still, it remains very high at 9 percent.

250,000 jobs per month is 100,000 jobs above the 150,000 level necessary to keep up with population growth and keep unemployment from increasing.

May 3, 2011

State Budget Surplus Good News for Kentucky Economy

At the end of every fiscal year in June, the state always runs a small surplus. No matter the economic circumstances or budget cuts, because the state is constitutionally required to balance the budget, the state will end up with a few million more at the end of the year. This year is shaping up to have a little more than normal.

The state is projecting a $64 million surplus for the fiscal year that ends June 30, according to a report released Monday by the state budget office.

The state's revenues -- taxes and fees -- are growing faster than the original estimate that the state uses to craft its two-year budget. .But state officials were cautious Monday, saying that any surplus money will first go to pay for emergencies, such as the clean up costs associated with last week's storms that ravaged much of Western Kentucky.

In 2010, the legislature also deemed that any excess funds not used for emergencies would go into the state's rainy day fund, which has been depleted as the state's revenues took a nose dive over the past three years.

An additional $31 million surplus is from coal severance funds, which are coal taxes specifically designated to return to coal counties, but are often inefficiently used by local governments rather than invested in education and infrastructure.

The slightly more economically important news is that the road fund will also run a surplus.

The state's road fund -- which is funded through a host of other gasoline-related taxes and fees and is separate from the state's general fund -- is also expected to have a surplus of $48.9 million.

The fact that Kentuckians are consuming more gas and purchasing more cars than expected are certainly positive economic indicators.

March 23, 2011

Legislature, Governor Probably Shouldn't Count on Revenue Improvements

As the legislature debates plugging a $166 million shortfall in the Medicaid budget, it seems many legislators are just hoping that revenues improve and that the hole they're digging in next year's budget would just go away.

Yesterday's housing news is one more piece of evidence that a recovering economy isn't quickly coming to the rescue of legislators trying to avoid setting budgetary priorities.

Purchases of new U.S. homes unexpectedly declined in February to the slowest pace on record and prices dropped to the lowest level since December 2003, adding to evidence the industry is floundering.

Sales decreased 16.9 percent to a 250,000 annual pace, figures from the Commerce Department showed today in Washington. Economists surveyed by Bloomberg News projected a gain to a 290,000 rate, according to the median estimate. The median price fell 8.9 percent from the same month in 2010.

Builders are struggling to compete with existing homes as foreclosures add to the overhang of unsold properties and drive down values. The figures underscore the Federal Reserve's view that the housing market "continues to be depressed" even as the rest of the economy improves.

February 4, 2011

US Labor Force Still Shrinking

The US labor force participation rate is at it's lowest point since the early '80's.

August 21, 2009

Ky. jobless rate hits 11 percent - Courier-Journal

December 11, 2008

The Governor's Budget Proposal

This is a reposting of the first article of email update sent out earlier today.  If you don't receive them, you may want to sign up.

Here's the Governor's proposal:

  • $147.1 million in spending cuts
  • $81.5 million from a 70-cent cigarette tax increase this fiscal year, which ends June 30, 2009.
  • $8 million by furloughing state workers three days, during which they won't get paid.
  • $40.6 million in money transfers from various "restricted" funds throughout state government.
  • $178.9 million by tapping the state's "rainy day fund."

Spending Cuts

The $147 million in spending cuts plus the $8 million from the three-day furlough of state workers is considerably less than the original proposal of 4% across-the-board cuts.  A 4% cut would have netted $373 million in less spending.  The Governor's new proposal does not affect the P-12 education SEEK funding formula, Medicaid or corrections, and only asks for a 2% cut from the rest of the education budget.  These exemptions mean that he only looking for savings in about half the state's budget, which is why he achieves less than half of the original savings projection. 

Tax Increase

The Governor proposed a $0.70 cigarette tax increase, which stands no chance of passing the legislature.  Earlier the Courier-Journal reported that 20+ state senators were uninterested in raising the tax, a sentiment repeated this week by Senate President David Williams:

"If he is truly empathetic with Kentuckians' financial situation, perhaps a more appropriate response would be to join me in holding the line on taxes."

While we're listing good quotes, this one from Senator Damon Thayer is good too:

"I just ran a campaign where I got 61.7 percent of the vote, and I told my constituents that I'm not for raising taxes."

Even if a tax increase had the votes in the Senate, even the House won't palate one that would put Kentucky's rate higher than our neighbors.  A lower increase might pass, but not this rate, and the Governor knows it. 

UPDATE: State Rep. Jimmie Lee seconds our opinion:

“I don’t think realistically you could pass a 70-cent tax increase,” said Rep. Jimmie Lee, D-Elizabethtown, noting that he would vote for it.

“Those legislators that live close to a border state may find 25 cents more palatable because it would keep Kentucky cigarette taxes lower than most states,” Lee said. “I think he has a lot of selling to do.”

This legislative opposition is likely why just days ago he didn't know if it was time for a tax increase.  From PageOne KY:

His answer to the question about a cigarette tax was so typical Beshear-ian.

"We may get there (to the point we need it), and if we get to that point, it's an option to look at."

Seriously. After spending 45 minutes bemoaning the state's economy, he's wondering if we're going to get to the point of desperation in which we'll need money from a cigarette tax. This from a man who campaigned on a soapbox about leadership. We don't know about you, but waiting to see if we're going to need it, a point at which it will be too late to do it, isn't the kind of leadership we need.

The Rainy-Day Fund

Governor Beshear proposes spending money that's already spent.  As we have pointed out, the "Rainy Day Fund" is scheduled to be practically bankrupted in FY 2010, with $191 million of the $226 million scheduled to be spent next year.  The Governor would spend next year's money this year, planning to replace it with cigarette tax money.

Overall, he probably won't get his tax increase, but it is a fairly bold proposal to furlough state workers for three days.  A tax increase would have to pass the legislature, and Beshear thinks a furlough would as well, although there are provisions already in state law that allow for it.  

He probably won't get the full $456 million he's proposed, but he probably won't need it...

November 26, 2008

$373 Million in Cuts

Governor Beshear has told agencies to plan for 4% budget cuts, suggesting that he's either expecting to raise taxes, or not expecting the $456 million shortfall to materialize.  4% of FY 2009 appropriated spending is only $373 million.

October 31, 2008

Governor Announces Administration Exploring Cuts, Taxes

Governor Steve Beshear announced that he is expecting a $294 million budget shortfall and is going to gauge public reaction before making a specific proposal to address it in December.  Cuts and taxes are on the table.

Waiting until December is strange, and suggests broad tax changes are not on the menu.  Waiting until December puts the timing of his proposal right up against the holidays and the 2009 regular session.  In the short 2009 session, a supermajority is required for any legislation affecting state revenues, making any tax changes difficult.  By waiting until December and the holidays, legislators will be difficult to convince that a special session is necessary before they are already scheduled to return in January, and they certainly won't want to consider any substantial tax changes while the rest of Kentucky is shopping for Christmas.

While there is always the January interim period where a special session could possibly be called during a regular session, it seems more likely that the Governor will be left by the legislature to address the situation making spending cuts on his own.  Let's hope he makes them prudently rather than picking programs sure to fire up the interest groups in support of a tax increasing agenda.

October 9, 2008

Strapped

"Frankfort chronically faces a cash crunch, but during a Wednesday night televised debate, candidates in a Northern Kentucky state senate district distanced themselves from raising taxes."

Begins an article covering a debate in Northern Kentucky.

State's revenue drops, governor tries to reassure KY

Reads the headline over at polwatchers.

The media is so sure there's a revenue problem, that it's hard to even fathom that the reality is that state revenue is increasing.  David Adams at BIPPS explains:

Revenues for the first quarter of the 2009-10 fiscal year were $17,798,488 higher than they were a year ago. Even if you include the $15 million drop in the Road Fund, increased revenues point yet again to the need to get spending under control rather than hitting taxpayers any harder.

We aren't strapped for cash, we're strapped for truth!

October 7, 2008

Business Tax Climate

We're #34 according to the Tax Foundation's 2009 State Business Tax Climate Index.  Kentucky receives low marks across the board with the exception of sales tax.  Kentucky is indexed at a particularly high unemployment insurance rate.

October 6, 2008

Financial Troubles

David Adams has a good find over at KyProgress:

The Lexington Herald Leader and the Louisville Courier Journal were too busy this weekend to print it, but bond rating agency Fitch had this to say about Kentucky:

"The Negative Outlook reflects plans to continue to deplete fund balances and virtually drain the budget reserve trust in the current biennium. Further, Fitch remains concerned about the weakened pension funding levels and the commonwealth's rising debt position as an additional $1.65 billion in debt has been authorized for the biennium."

I'd like to bullet out these notes with specifics:

  • "virtually drain the budget reserve trust in the current biennium"

The biennial budget spends $191 million of the Budget Reserve Trust Fund, dropping it from $215 million to only $24 million.

  • "weakened pension funding levels"

After no action on pensions during the 2008 Regular Session, the General Assembly passed a bill in Extraordinary Session committed to actually funding pension system deficits in future budgets (just not right now).

  • "the commonwealth's rising debt position "

Appropriation supported debt service as a percentage of total revenue is projected by the budget office to average 6.1% in this biennium, a higher level than any in history and a 17% increase over FY 07-08.

January 29, 2007

Projected state budget surplus is trimmed - by John Stamper, Lexington Herald-Leader

January 23, 2007

UK study: Tax breaks create fewer jobs than state claims - by John Stamper, Lexington Herald-Leader

Tax breaks don't create as many jobs as state claims, UK study finds - by John Stamper, Lexington Herald-Leader

November 21, 2006

Ky. minimum wage fight likely - editorial, The Enquirer

November 19, 2006

A brisk rise in American Wages - By Mark Trumbull, The Christian Science Monitor

November 5, 2006

Fletcher expects $278.9 million surplus - by Jack Brammer, Lexington Herald-Leader

November 4, 2006

Unemployment lowest in 5 years - By Jeannine Aversa, Associated Press
03/29/12 : RS12 HB 499 - KEY VOTE - Insurance Premium Tax Hike

03/29/12 : Lip Service to Kentucky's Debt Problem

03/19/12 : RS12 HB 202 - KEY VOTE - A Health Care Mandate Without Precedent

03/15/12 : RS12 SB 10 - KEY VOTE - A Constitutional Amendment to Guarantee Legislative Oversight of Regulations

03/15/12 : RS12 SB 4 - KEY VOTE - Improving Regulatory Accountability

03/12/12 : Clarifying Redistricting, Maybe

03/08/12 : House Passes Budget Quickly with Eight Percent Spending Increase

Lexington Herald Leader 5/10:

"Thayer, 44, responds by calling Hostetler "a little desperate." Thayer touts his conservative support from U.S. Sen. Rand Paul, R-Ky., the National Rifle Association, the pro-business Kentucky Club for Growth (which ranks him best among 38 state senators) and the anti-abortion Kentucky Right to Life."


Last weekend, the Kentucky Club for Growth's strong anti-tax stance was recognized in the Courier Journal.

But other political experts say they aren't convinced outside groups will want to get involved, especially with public polling showing Beshear with a double-digit lead and Williams' record of occasionally supporting tax increases failing to excite conservative groups such Club for Growth or the tea party-related FreedomWorks.

"They're adamant about the 'no tax' thing," said Jennifer Duffy, a senior editor with the non-partisan Cook Political Report.

We are adamant about the 'no tax' thing, and we will continue to be the taxpayer's advocate in Frankfort.


Drees: Raise gas tax to fund bridge - Pat Crowley, NKY.com

Ky. House nears tax vote - Pat Crowley, NKy.com


Donor records might have similarities - Lexington Herald-Leader

Club for Growth launches in Oregon

The Kentucky Club for Growth is proud to announce its 2007 scorecard rating members of the Kentucky General Assembly on fiscal issues.

How did your legislators do?


House Passes Budget Quickly with Eight Percent Spending Increase
Yesterday, the Kentucky House passed a budget for FYs 2013-2014. While most of the legislative discussion centers on cuts, the General Fund budget totals $19.5 million which represents an 8% increase over FY 2011-2012. Even if you compare it only...

What Farm Receipts Say About the Health of the Horse Industry in Kentucky
In 2011, Kentucky's farm receipts are expected to top $5 billion for the first time, thanks to Kentucky's health agriculture economy as well as high prices for corn. Looking at Kentucky's top crops by receipts, the landscape continues to change....

The Outlook for Small Businesses is Bad, and Bad for the Economy
The NFIB reports: For the fifth consecutive month, NFIB's monthly Small-Business Optimism Index fell, dropping 0.9 points in July--a larger decline than in each of the previous three months--and bringing the Index down to a disappointing 89.9. While the national...

Employment Trends and Rates
Unemployment in Kentucky inched downwards this month: Kentucky's unemployment rate fell to 10 percent in April, down from 10.2 percent a month earlier. The state added 3,800 jobs in the month, as "Kentucky's economy continued to show signs of improvement...

State Budget Surplus Good News for Kentucky Economy
At the end of every fiscal year in June, the state always runs a small surplus. No matter the economic circumstances or budget cuts, because the state is constitutionally required to balance the budget, the state will end up with...

Legislature, Governor Probably Shouldn't Count on Revenue Improvements
As the legislature debates plugging a $166 million shortfall in the Medicaid budget, it seems many legislators are just hoping that revenues improve and that the hole they're digging in next year's budget would just go away. Yesterday's housing news...

US Labor Force Still Shrinking
The US labor force participation rate is at it's lowest point since the early '80's....

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The KY Club for Growth seeks principled candidates who are committed to the following:

* Free market principles
* Lowering taxes
* Reducing spending
* Decreasing the size of government
* Judicial reform
* Protecting property rights
* Expanding school choice
* Reducing needless regulation

We will hold endorsed candidates accountable for these principles by monitoring each candidate on a vote-by-vote basis. As a Club member, you will receive candidate monitoring updates and scorecards on a regular basis. Join us today.