Low Wages at Bottom Demonstrate Need for Policies that Boost Earnings

Following meaningful wage growth in 2015, real wages dropped slightly for Kentucky workers in 2016 and are still below where they were back in 2001. With wages low for a broad swath of the workforce, the state needs policies that would lift earnings in order to boost local economies and ensure more families can make ends meet.

Workers at the 30th percentile of hourly wages in Kentucky (meaning 30 percent of workers make less and 70 percent make more) earned only $12.01 an hour in 2016, according to Current Population Survey data. That’s a drop from $12.46 in 2015. Workers at the 20th percentile made $10.19 an hour in 2016 and workers at the 10th percentile only $8.75 an hour.

Source: Economic Policy Institute analysis of Current Population Survey data.

As the graph above shows, real (inflation-adjusted) wages had been declining ever since 2001 until a sharp increase occurred in 2015 as the labor market tightened in the economic recovery. Wages then fell slightly in 2016. For all 3 points identified, real wages are lower than they were 15 years earlier.

These wage levels are also far below what families need to pay living expenses. A family of 3 in rural Kentucky with one earner needs about $24 an hour in full-time, year-round work to meet a basic family budget.

Key policies that would lift wages for workers at the bottom include an increase in the minimum wage. Kentucky’s minimum is still stuck at $7.25 an hour (and for tipped workers, only $2.13 an hour) even though 29 states and D.C. have raised theirs, with many set to rise to between $10 and $15 an hour. An expanded Earned Income Tax Credit (EITC) would also increase take-home pay, and Kentucky is one of the states without one. And while the federal overtime rule change is held up in court, Kentucky could proceed in making sure more workers get paid time and a half for weekly hours over 40.

Wage growth would also accelerate if the U. S. economy were back to full employment, which it hasn’t reached since the late 1990s and early 2000s. We could get there through expanded investment in needs like infrastructure and targeted job creation in distressed communities. Also important are policies that protect workers’ rights to bargain for wages, but the state’s recently-passed Right to Work law will weaken their ability to do so and is associated with lower wages.

Kentucky Should Reject Dangerous Call to Reopen Constitution

The Kentucky General Assembly may consider resolutions (versions introduced as HJR 54, HCR 13 and SCR 143) that are part of a well-funded national effort calling for a new convention to rewrite the rules of American government — an idea that could create chaos and jeopardize the U.S. Constitution.

Since the founding of the country, the constitution has been amended 27 times. Each time, Congress passed amendments and then the states ratified them. But Article V of the constitution allows a second method: states can call for a new convention like the one that created the original constitution. If 34 states issue such a call, Congress must form one.

Proponents now claim 29 of the necessary 34 states have live applications calling for a constitutional convention, with Wyoming joining the list very recently. Thirteen of those states have passed resolutions just since 2010, and several are debating the issue this year. Organizers could reach the threshold of 34 states in 2017, especially if Kentucky joins the list. That’s why we’re one of the states they are targeting.

A convention could lead to extreme, wide-reaching and unpredictable changes to the U.S. Constitution and Bill of Rights.

A constitutional convention cannot be controlled

Although some proponents claim the agenda of a constitutional convention could be controlled, experts say conventioneers would have the power to alter anything and everything about the United States government — just as they did in the original 1787 constitutional convention when they threw out the Articles of Confederation and started over.

A convention would likely open up the Constitution to whatever amendments its delegates chose to put forward, regardless of whether the convention is originally called to address a particular issue. Delegates to the 1787 convention ignored their state legislatures’ instructions. There are no safeguards to prevent a runaway convention that could lead to harmful changes to our founding document, as the Constitution itself puts no authority above a convention — including the courts.

As former Chief Justice Warren Burger said:

“[T]here is no way to effectively limit or muzzle the actions of a Constitutional Convention. The Convention could make its own rules and set its own agenda.  Congress might try to limit the convention to one amendment or one issue, but there is no way to assure that the Convention would obey.”

The late Supreme Court Justice Antonin Scalia agreed, stating “I certainly would not want a constitutional convention. Whoa! Who knows what would come of it?”

Powerful interests are likely to be first in line to wield influence on who gets selected as delegates to a convention and what agenda gets considered. That’s why one of the big proponents of an Article V convention is the American Legislative Exchange Council (ALEC), the powerful corporate lobby group. There are no laws limiting dollars spent to influence delegates to a convention.

We also can’t depend on the state ratification process for amendments to protect the Constitution from radical changes (Article V says amendments coming out of a convention shall be approved by three-fourths of the states). A convention could create a different method of ratification, such as a national referendum. The convention that crafted the U.S. Constitution ignored the ratification procedures under which it was established and created entirely new procedures.

Protecting U.S. Constitution requires rejecting proposal

Especially with a country so divided, and with power and influence concentrated among special interests, now is not the time to reopen the U.S. constitution for potentially wide-ranging revision. The risks for the nation are very high.

Updated March 3, 2017 with the addition of Wyoming to states that have passed a resolution.

Would Charter School Proposal Negatively Impact Funding of Kentucky’s Existing Public Schools?

One of the key questions about how charter school legislation would change education in Kentucky is how it would affect funding for traditional public schools. Looking at what has occurred in other states and how HB 103 proposes to fund charters, there are reasons for concern.

It might sound like adopting public charter schools would mean no harm to resources — traditional public schools would lose students to charter schools but would no longer bear the costs of educating them. But that’s not the case. As noted in a recent Economic Policy Institute (EPI) report, research shows charter schools often have negative fiscal impacts on traditional public school districts in large part because it is not possible for them to reduce costs on a student-by-student basis. This is of particular concern in our state as Kentucky schools — especially poorer school districts — are already struggling financially. A recent report ranked Kentucky third worst in the country when it comes to per-student cuts to state formula funding for K-12 between 2008 and 2017.

Research has shown:

These negative impacts occur through a number of channels.

  • Districts aren’t able to reduce their costs on a student-by-student basis. Schools’ costs range from fixed costs (districtwide and school overhead costs that are not reduced by the transfer of individual pupils) to step costs (that include classroom level costs, which are also not reduced by the transfer of individual pupils) to variable costs, which can be reduced on a student-by-student basis but make up a relatively small share of school district budgets.
  • Operating essentially two systems of public schools (traditional and charter) under separate governance arrangements can create extra costs or inefficient expenditures. As noted in the EPI report, “while inducing fiscal stress on host districts, charter expansion may also be increasing total overhead costs.” For instance, studies show that charter schools operating fiscally independently of local public school districts have particularly high administrative expenses. This higher spending is for administrative functions traditionally performed at district central offices as well as in school buildings. A study found that at charter schools in New Jersey not only were administrative expenses at charters nearly $1,000 per pupil higher than those of other schools in the district but local public school districts still had the responsibility  to provide some services to charter school students.
  • According to Moody’s Investor Services, the negative impacts of charters on traditional public schools are felt particularly hard in school districts that are already experiencing financial distress and in states where the approval processes for new charters are not very restrictive and where there are few limits on charter growth.

There are many examples of charter schools hurting funding for traditional public schools.

  • According to Moody’s a small but growing number of school districts experience severe financial stress due to charter school expansion. Among the cities highlighted in the report were Cleveland, Detroit, Kansas City, St. Louis and Washington, D.C.
  • Academic research has shown charter school expansion produced harmful fiscal impacts for school districts in Albany and Buffalo, New York.
  • A consultant’s report concluded that charters in Nashville are causing the transfer of state and local per-student funds to charter schools without reducing the traditional schools’ operational costs, increasing direct and indirect costs, and worsening overdue maintenance issues at school buildings.

Some concerns about funding in HB 103 specifically are:

  • HB 103 makes no mention of the fiscal impact of charters on traditional public schools in Kentucky, unlike a Senate charter school bill, which actually makes charter school approval contingent upon its minimal adverse effects on the school district in which it is located. Some states require that an analysis be conducted on the impact the new charter would have on traditional public schools.
  • Unlike school districts charter schools would not be able to levy their own taxes, but HB 103 would divert a proportionate share of tax revenue generated by local districts that those districts choose to levy to fund district programs, projects and expenses. This diversion of what are called Tier I and Tier II funds from the districts that raise them (and in the case of Tier II funds, the voters who approve them) may hinder the ability of the school district to meet its obligations or to continue projects or programs funded with those revenues.
  • School boards, elected by and accountable to taxpayers, would lose control over how funds they raise from taxes they levy are used when those dollars flow to charter schools. In large districts where many charter schools could be authorized, the loss of fiscal control could be significant.
  • HB 103 describes the creation of a public charter school facility revolving loan program as “composed of federal funds obtained by the state for public charter schools…and any other funds appropriated or transferred to the fund by the state,” but does not clarify where in the state budget such funds might come from or how they would be appropriated. Without a specified source and process for capital funding, concerns also arise about adequate and equitable facilities for charter school students as well as reduced resources for traditional schools.
  • Similarly, the bill fails to ensure adequate transportation funding for charter schools even as it diverts and dilutes already-inadequate transportation funding for public schools.

These questions and concerns about the fiscal impact of charter school legislation on traditional public schools in Kentucky need to be at the forefront of policy conversations about charters. Our public school system is already underfunded, and potential negative impacts of the proposed legislation on traditional public schools should be thoroughly understood.

Refugees, Immigrants Important to Kentucky and the Economy: An Overview of the Research

From the promise to build a wall paid for by tariffs on Mexican imports and uncertainty about what will happen to DACA (which allows undocumented immigrants whose parents brought them to the U.S. as children to apply for a renewable reprieve from deportation), to a 120-day ban on refugee admissions and an indefinite ban for Syrians, President Trump’s actions and intimations around immigration have sparked outrage and a national debate.

The conversation should take into account immigrants’ integral role in our economy and communities where they work, do business, pay taxes, buy homes and much more. Here’s a summary of past KCEP analysis of these issues.

Refugees, Including Targeted Groups, Make Important Contributions to Kentucky

Kentucky has resettled the 16th largest group of Syrian refugees in recent years, Louisville has the 14th largest Somali refugee population among metro areas and the state has resettled 4,000 refugees from Iraq, Iran, Somalia, Sudan and Syria since 2011 – countries which, in addition to Libya and Yemen, are on President Trump’s travel ban. Counting refugees from all countries (as all refugees are under the 120-day ban), Kentucky resettles more than twice the national annual average.

These large refugee communities tend to do very well once resettled. The Center for American Progress (CAP) utilizes census data on Syrian immigrants and four groups of refugees (including targeted Somalians) to describe their level of integration and economic participation:

  • 11 percent of Syrian immigrants in the U.S. labor force own businesses, compared to 3 percent of native-born residents and their average business earnings are 41 percent higher.
  • For men, refugee employment rates are similar to those of native-born residents.
  • Refugees who have been in the U.S. 10 years or more earn median wages on par with U.S.-born earners.
  • 9 out of 10 Syrian immigrants and the vast majority of refugees become naturalized.
  • The majority of refugees own homes and become English proficient.

Refugees, distinct from other immigrants, flee their countries of origin and are granted entry in the U.S. due to persecution related to race, religion, nationality, social and political identity.

Undocumented Immigrants in Kentucky Pay $37 million in State and Local Taxes, Would Increase with Legal Status

Refugees and immigrants with legal status pay taxes just like everyone else in Kentucky, chipping in for the investments that benefit us all. However, a misguided notion about immigrants who lack legal status is that they do not pay into these same systems.

Research from the Institute on Taxation and Economic Policy (ITEP) shows otherwise. Undocumented immigrants living in Kentucky pay $37 million in state and local taxes every year, at an effective tax rate that’s higher than what the wealthiest 1 percent of Kentuckians pay: 7.1 percent compared to 6 percent of family income. They make these contributions through property taxes, sales taxes and income and payroll taxes.

Improving the legal standing of Kentucky’s estimated 49,000 undocumented immigrants, instead of worsening it, would also improve their ability to comply with tax laws, resulting in additional revenue for our state and local investments. The table below shows how taxes would increase under a pathway to citizenship, as well as what would have happened under President Obama’s expansion of deferred action for young people (DACA) to their parents (DAPA) which has been blocked by a federal district court in Texas.

Source: ITEP

Protecting, Improving Legal Status of Undocumented Immigrants Would Benefit Kentucky

What’s good for our foreign-born neighbors is good for native-born Kentuckians. For instance, creating a driving certificate for undocumented immigrants would make them eligible for car insurance, improve road safety, disentangle immigration and traffic enforcement and improve families’ ability to get to work, take their kids to school and contribute in their local economies.

By supporting higher wages, increased economic demand, more tax revenue and a level playing field for businesses that do and do not employ undocumented immigrants, a pathway to citizenship would provide the most complete opportunities for deeper integration into and stimulus of the economy. But in the absence of such comprehensive reform, preserving President Obama’s deferred action status for childhood arrivals to the U.S. is critical:

  • The work permits made available to childhood arrivals open a wider range of economic opportunities to them and increase the return on investments in their own education and training (leading to a more productive workforce). In some states like Kentucky, DACA students are eligible for in-state tuition.
  • Work permits put immigrants in a stronger position to contest wage theft, leading to more bargaining power for all low-wage workers.
  • DACA also helps ensure that more immigrants who drive are licensed and insured.

New Americans in Kentucky Are Diverse and Contribute to Our Economy

Public dialogue tends to cast immigrants as a separate, homogenous group but in fact the data show  foreign-born people who have made Kentucky their home are diverse and well-integrated.

  • More than one in three are naturalized, and the rest are legal residents – such as refugees and those with work visas – and undocumented immigrants.
  • Immigrants are well-represented across our workforce, with almost half in white collar occupations.
  • Immigrants are more likely than native-born Kentuckians to be small business owners: 1 in 33 Kentuckians are immigrants, but immigrants make up 1 in 20 small business owners here. Their share in the labor force and economic output also slightly exceed their share of the population.
  • Immigrants are overrepresented among those with less than a high school diploma and also those with a bachelor’s degree or higher.
  • About a 1/3 are Hispanic, a 1/4 white, a 1/4 Asian, and less than 10 percent black. Common countries of origin include Mexico, Germany, Cuba and Japan.
  • Of the 116 languages spoken by Kentucky school-children qualifying for “limited English proficiency” programming, Spanish, Arabic, Chinese, Bosnian and Japanese are the most common.

Refugees, other legal residents and undocumented, new Americans in Kentucky are part of our communities, working and supporting local businesses and raising families. Policy decisions should reflect this reality.