Kentucky Set to Surpass Its Record for Business Investments

The Effect of Trump’s Tax Plan on Kentucky: It Varies

Important Federal Investments in Kentucky’s Coal Communities at Risk

A panel at the East Kentucky Leadership Conference highlighted the importance of federal investments in addressing economic challenges in the state’s coal communities. With these funds at risk in the federal budget for 2018 and beyond, eastern Kentucky — and the broader Appalachian region — could be stalled in these important efforts.

At the conference a number of participants in projects funded by the federal POWER (Partnerships for Opportunity and Workforce and Economic Revitalization) Initiative highlighted how these funds — reportedly approximately $20 million in Kentucky — are being used to address economic challenges in the region. These single- and multi-state POWER projects range from efforts to promote entrepreneurship, to retraining dislocated coal miners, to developing tourism and local food economies.

For the last two years, the POWER Initiative has worked to develop new businesses and industries, create jobs, and train dislocated coal economy workers for in-demand occupations. The Initiative was designed to involve 12 federal offices in 10 agencies in providing federal economic and workforce funding and other resources to coal communities and workers.

Here are descriptions provided at the conference of several economic development projects provided grant funding through the Power Initiative that are working to address challenges in Kentucky:

Building Entrepreneurial Communities: The Foundation of an Economic Transition for AppalachiaThe Center for Rural Entrepreneurship in Chapel Hill, N.C. will build and strengthen the entrepreneurial ecosystem in an 18-county region covering southeastern Ohio, southern West Virginia, and southeastern Kentucky. Project activities include establishing a support system that can identify and develop new entrepreneurs; assisting new and expanding businesses with skill development; and connecting entrepreneurs with existing capacity-building resources in the region. The project will create 72 new businesses and 250 new jobs.

Central Appalachian Food Enterprise CorridorAppalachian Sustainable Development in Abingdon, Va. will develop a coordinated local foods distribution network throughout Central Appalachia, and will connect established and emerging producers in Ohio, West Virginia, Tennessee, southwest Virginia and eastern Kentucky to wholesale distribution markets. The ARC award will support planning, partner convening, and capacity building, as well as production and processing equipment, supplies and labor costs, and will be supported by funding from the Just Transition Fund.

Eastern Kentucky Coal County Transformation – The Big Sandy Community and Technical College in Prestonsburg will work with 3 eastern-Kentucky education institutions — Big Sandy, Hazard Community and Technical College, and Southeast Kentucky Community and Technical College — to launch a comprehensive, employer-driven workforce development program focused on building the digital economy and strengthening digital innovation and entrepreneurship across a 16-county region in eastern Kentucky. The consortium — in partnership with Shaping Our Appalachian Region (SOAR) and the Eastern Kentucky Concentrated Employment Program (EKCEP) — will establish educational programs that develop workforce skills in emerging regional career clusters such as cybersecurity, medical coding and advanced manufacturing. The program will specifically engage dislocated workers from the coal industry through targeted advertisements, and will provide adult basic education as needed to ensure that these individuals can participate in the training courses. . The project will serve 300 trainees.

Economic Transition for Eastern Kentucky (ETEK) InitiativeThe Mountain Association for Community Economic Development (MACED) will expand fast-track retraining and entrepreneurial technical assistance services targeted to dislocated coal workers; establish an intern program aimed at placing former coal workers in the energy efficiency sector; and increase access to capital through a $1,000,000 venture capital loan fund. The project will create 200 new jobs and 100 new enterprises, serve 500 existing businesses, and bring $12,000,000 in leveraged financing to a 54-county region in Eastern Kentucky.

Intergenerational Training CenterThe Hazard Community and Technical College (HCTC) in Hazard will be used to construct a 14,700 square foot facility at HCTC’s Lees College Campus in Jackson that will deliver job training and credentialing courses focused around four emerging regional career clusters: information technology, telemedicine and health sciences, mechatronics and eco-tourism/small business development. The project will leverage the capacity of the Eastern Kentucky Concentrated Employment Inc. (EKCEP) and the Kentucky Career Center to promote and market the program to out-of-school youth and displaced and underemployed workers impacted by the decline in the coal industry. The project will serve a 7-county area in southeastern Kentucky, and will train 295 dislocated workers and credential 228 students over the life of the award.

KY-WV Regional Drone Technology Workforce ProjectThe Maysville Community and Technical College (MCTC) will partner with Southern West Virginia Community and Technical College to deliver comprehensive training courses in small-air drone operation to a 7-county area in southern West Virginia and a 13-county area in northeastern Kentucky. Specific training activities will enable graduates to operate drones and drone sensors to provide in-demand commercial services — such as the close-up inspection of fixed structures like power lines, utility poles and cell phone towers. The project will serve 100 trainees over the 2-year life of the award, will leverage $14,000,000 in private investment, and will, in conjunction with a previous ARC POWER award, further strengthen the emerging drone industry cluster in the West Virginia-Kentucky-Virginia tri-state area.

Leveraging Innovation Gateways and Hubs Toward Sustainability (LIGHTS)Ohio University in Athens, Ohio will strengthen Southern Ohio’s entrepreneurial ecosystem by leveraging the capacity of four strategically located “Innovation Hubs” — which provide facilities, equipment and design/engineering expertise to entrepreneurs — and five regional “Gateway Centers” that link local entrepreneurs to a broad array of support services throughout the ecosystem. The project will build on the successful TechGROWTH Ohio model, create 360 new jobs, 50 new small businesses and bring $5,000,000 in leveraged private investment to the area.

TechHire Eastern Kentucky (TEKY) Initiative: Developing a Technology-Driven Workforce Eastern Kentucky Concentrated Employment Program will serve young adults aged 17-29 who are out of school, and older adults who are unemployed, laid-of, or underemployed by offering several avenues to industry-led accelerated technology training, paid work-based internships and employment opportunities in IT careers. This comprehensive workforce development initiative will train 200 new workers, create 160 jobs and serve to bolster existing and emerging sectors that rely on a skilled information technology workforce in 23 Eastern Kentucky counties. The initiative will provide the trained workers necessary for a private technology company to expand its operations into Eastern Kentucky.

A full list provided at the conference of POWER projects that either focus on or include Kentucky can be found here.

Unfortunately these important investments in eastern Kentucky, and other areas that have been impacted by the decline in the coal industry, are at risk in the federal budget. As described in a recent research brief, President Trump’s fiscal year 2018 budget blueprint — also known as the “skinny budget” — proposed cutting (see table below) at least $1.13 billion in funding for 7 federal programs and/or offices (in part or in entirety) that provide direct economic and workforce development assistance and other services to coal miners and their communities. In addition, while the budget blueprint does not explicitly eliminate the other five federal offices involved in the POWER Initiative, top-line funding levels specify additional cuts, and even more cuts are expected in the full budget proposal that will be released in late May.

Source: Center for American Progress.

As noted in the brief: “The budget’s rollback of the POWER Initiative programs would stunt economic revitalization where it is needed, and additional cuts to other assistance programs would compound the economic challenges facing coal communities and the families who call them home.”

Profitable Fortune 500 Companies in Kentucky Avoid Paying Millions in State Corporate Income Taxes

Despite strong profits for the nation’s biggest and most successful multistate corporations, a large share of Fortune 500 businesses — including some Kentucky-based companies — are paying taxes at a rate much lower than established tax rates, with some paying no taxes at all, according to a new report by the Institute on Taxation and Economic Policy (ITEP). As Kentucky considers a special session on tax reform later this year, ITEPs findings highlight a major problem with the state’s tax code: corporate tax breaks are a big reason we have too little revenue to meet basic investment needs in education, health and other budget areas.

The report describes holes in states’ corporate income taxes that result in an average effective tax rate for 240 Fortune 500 companies of just 2.9 percent, much lower than states’ statutory average top rate of 6.25 percent (Kentucky’s is 6 percent). Several “race to the bottom” strategies like proliferating costly tax incentives, allowing profits to be shifted out of state through various loopholes and accounting strategies, and states’ piggybacking on federal tax cuts are all reducing the effective tax rate at which these companies pay and eroding state revenues.

ITEP identifies two such corporations headquartered in Kentucky – Louisville-based Yum Brands and Humana. According to their analysis, Yum Brands’ effective tax rate over the last eight years (2008 – 2015) was just 1.7 percent of $3.3 billion in profits. In fact, YUM paid no state income taxes in 3 out of the 8 years studied despite $1.2 billion in profits over those 3 years. Similarly, with $15 billion in profits over the same span, Humana paid a total tax rate of just 3.2 percent.

Several other large companies that do business in Kentucky also paid little in corporate income taxes across all states in those years.

“The first step in any state’s corporate tax reform should be ensuring corporations are actually paying taxes,” said Meg Wiehe, director of state tax policy at ITEP.  “At a time when public services that ordinary people rely on face inadequate funding, we shouldn’t be having a conversation about lowering taxes on profitable corporations, which only means the rest of us have to pay more. We should be talking about how to strengthen the corporate income tax to allow corporations to pay their fair share.”

The report describes several steps Kentucky could take to ensure profitable corporations chip in. Requiring multistate corporations to report income from subsidiaries on state tax returns (combined reporting), a “throwback rule” on income that is not taxed elsewhere, decoupling from federal domestic production tax credit and rolling back the way Kentucky now double counts sales in calculating corporate income taxes are examples of reforms that would improve revenue. Adopting the “single sales factor” for calculating taxes and cutting corporate income tax rates, on the other hand, are examples of harmful choices other states have made that Kentucky should avoid.

“With a special session looming, it’s important Kentucky evaluate corporate tax breaks which are often just an artificial sweeter for businesses to take actions they would have taken anyway,” Kenny Colston, communications director for the Kentucky Center for Economic Policy, said. “Providing more tax breaks and cutting corporate income taxes doesn’t help lure more companies. Instead it leaves families and smaller businesses picking up large corporations’ slack and reduces what we have to invest in the public services that support thriving communities and economies in the commonwealth.”

For more information, contact Kenny Colston at kcolston@kypolicy.org or 502-938-1817.

The Many Harms of the American Health Care Act for Kentucky

The House of Representatives is moving toward a possible vote Friday on an amended version of the American Health Care Act (AHCA), their plan to repeal the Affordable Care Act (ACA). The bill contains the same harmful changes as before: it would dramatically reduce the number of Kentuckians with health coverage, make plans more expensive for those buying insurance through the marketplace and shift billions of dollars to the Kentucky state budget — all while providing large tax cuts to millionaires. And the amendments make the bill even worse, allowing states to remove protections for people with pre-existing conditions.

Here are some of KCEP’s resources on the impacts in Kentucky:

Kentucky is Making Major Progress Because of the Affordable Care Act

New Reports Highlight Kentucky’s Gains in Care and Health
Despite claims from some political leaders that Kentucky’s coverage gains were not met with access to care and better health, new reports and recent data show Kentuckians are getting needed preventive care and health indicators are already improving.

Kentucky’s ACA Health Insurance Marketplace Is Not Falling Apart
Far from collapsing, the health insurance exchanges set up by the ACA are a way many Kentuckians are now able to buy health insurance. It will be important for the 81,155 Kentuckians who depend on that coverage that those in Washington keep it stable rather than undermine it with administrative changes, repeal of the ACA or even reckless public statements that cause insurance companies to question their participation.

The AHCA Would Be a Disaster for Kentucky

Eastern Kentucky Would Be Hardest Hit Place in Country by Job Loss from ACA Repeal
Passing the American Health Care Act would eliminate jobs in Kentucky by taking billions of dollars out of doctors’ offices, hospitals and local economies. According to one report, Kentucky’s 5th district — represented in Congress by Hal Rogers — would lose more jobs than any congressional district in the country, at over 20,000 jobs by 2022.

Kentuckians’ Marketplace Health Care Costs Would Rise $1,804 Under AHCA
The plan would drive up the cost for people buying insurance through the marketplace by reducing tax credits for many people and raising out of pocket expenses — an average cost increase of $1,804 for Kentuckians and much more for older people.

House Health Repeal Would Shift $16 Billion to the Kentucky State Budget
By ending enhanced funding for the Medicaid expansion and placing a cap on traditional Medicaid funding that will squeeze the program in the future, the plan would shift $16 billion in costs to Kentucky’s state budget over a ten year period — inevitably leading to big cuts in enrollment and benefits.

Tiny Fraction of Wealthiest Kentuckians Gain from Tax Cuts in Health Repeal
The AHCA provides big tax cuts to millionaires, and Kentucky has less than half the US average of wealthy people who would even receive a tax cut — even while the state has among the most to lose from people becoming uninsured.

What’s at Stake in ACA Repeal by Congressional District
Kentucky has 3 of the 25 congressional districts with the most to lose in health coverage gains from repeal of the Affordable Care Act, with Representative Hal Rogers’ district ranked 3rd of all 435 districts. As detailed in these fact sheets, every district in the state would be hit hard by the AHCA.

House Health Repeal Plan Would Worsen Kentucky’s Drug Problems
The ACA is playing a key role in helping combat Kentucky’s raging opioid epidemic, but the AHCA would roll back opportunities for treatment by reducing the number of people covered and allowing states to drop coverage of substance abuse treatment in Medicaid and no longer allow it in private plans.

Coverage for Kentucky Seniors Threatened by House Plan
The House plan would especially reduce coverage and affordability for older adults in Kentucky, including those seeking to buy coverage in the marketplace and those covered by Medicaid.

House Plan Unwinds Coverage Gains and Makes Harmful Changes to Medicaid Program
Our summary of the bill: it would unravel Kentucky’s highly successful Medicaid expansion, end Medicaid as we know it and raise costs for people buying insurance.

A County-by-County Look at Kentuckians at Risk if Congress Rolls Back Health Coverage
Nearly one in three Kentuckians has health insurance either through Medicaid or the marketplace, and the share reaches as high as 68 percent in 1 rural Kentucky county. Medicaid especially provides access to coverage and boosts local economies, and cutting and capping the program would be devastating to Kentucky’s health and economic well-being.

The Amended Bill Makes the AHCA Even Worse

New Amendment to Heathcare Repeal Bill Threatens Kentuckians with Pre-existing Conditions
The amendment makes the AHCA worse by jeopardizing coverage for the 1.8 million Kentuckians under 65 who have some kind of pre-existing condition, which is 50 percent of the non-elderly population.

Getting Rid of Essential Health Benefits Means Less Coverage, More Cost for Kentuckians
The amended version of the AHCA gives states the option of no longer requiring insurers to cover ten essential health benefits, including maternity care, pediatric dental services and mental health and substance abuse treatment.

Kentucky’s Experience with High Risk Pool Shows Danger of ACA Repeal
The amended bill means people with pre-existing conditions could no longer access affordable coverage, and relies on possible state “high risk pools” to cover people with expensive conditions. But evidence from Kentucky’s high risk pool shows why they don’t work.

 

 

New Amendment to Healthcare Repeal Bill Threatens Kentuckians with Pre-existing Conditions

The so-called “Meadows-MacArthur” amendment to the Affordable Care Act repeal bill does nothing to protect Kentuckians from the bill’s harmful changes, but makes things worse by jeopardizing coverage for people with pre-existing conditions. There are 1.8 million people in Kentucky under 65 who have some kind of pre-existing condition, which is 50 percent of the non-elderly population.

The amendment does not repeal what is called “guaranteed issue” (the requirement that insurers offer coverage to everyone, regardless of their medical history), but allows states to waive certain requirements, effectively gutting that guarantee. The bill would allow states to opt-out of ACA requirements such as:

  • The Essential Health Benefits like maternity care, preventive care and drug treatment.
  • The part of the law that makes insurers base premium prices on all the people in a given community rather than each person’s medical history.

Proponents suggest it would allow insurers to charge less in premiums on average. But insurers would be able to charge lower premiums on average exactly because they would charge prohibitively high premiums for people with pre-existing conditions and offer skimpy plans that don’t cover the kinds of care really needed.

The amendment effectively allows states to return the market to where it was before, when people with pre-existing conditions couldn’t access affordable coverage for their conditions.  The Center for American Progress (CAP) estimates how much more people with five different kinds of pre-existing conditions might be charged if the bill were to pass.

According to CAP, many of the 1.8 million Kentuckians with pre-existing conditions are over 45, but most are younger as shown in the graph below.

 

Source: Center for American Progress.

The ACA allowed cancer survivors, pregnant women, diabetics, and many others to get affordable, quality insurance, many for the first time. Since then, we’ve seen dramatic increases in screenings for diseases like diabetes and cancer screenings, more chronic disease management, and greater use of preventive care that keeps some people from developing pre-existing conditions. With this latest iteration of an Obamacare repeal bill, that coverage and subsequent care could be ripped away from even more people.

A County-by-County Look at Kentucky’s Dramatic Health Coverage Gains

As we’ve written before, Kentucky has seen a dramatic drop in those without health insurance in every county, especially since 2013. Using the same Census estimates starting the year the Affordable Care Act became law, it is clear that 2014, the first year of Medicaid expansion and the insurance exchanges, is when Kentucky started to see large declines in uninsured residents.

By several counts, Kentucky saw the largest drop in uninsured, and those gains are now at risk with the American Health Care Act. With the potential for the effective elimination of the Medicaid expansion, as well as significant roll-backs of the premium subsidies (particularly for older Kentuckians), the Congressional Budget Office estimates 24 million Americans will lose coverage. An increase of uninsured to this degree would likely lead to large job losses in the healthcare and other industries, an increase in chronic disease, and a bigger strain on our state budget. Our healthcare gains are a success we cannot afford to do without.

Who Pays, and How Much in Tax Reform?

Lexington Town Hall is a Sea of Discontent

Lexington Town Hall is a Sea of Discontent

by Daniel Desrochers

Young Undocumented Immigrants in Kentucky Contributing More than $9 million in State and Local Taxes

With uncertainty around how the Trump administration will treat policies that currently offer protection to undocumented immigrants brought here as children, a new report from the Institute on Taxation and Economic Policy (ITEP) shows these young immigrants pay a higher state and local tax rate in Kentucky than the wealthiest people in the state do.

The report estimates the 6,000 young undocumented immigrants in Kentucky who are either eligible for or currently receiving temporary protection from deportation under Deferred Action for Childhood Arrivals (DACA) pay more than $9 million in state and local taxes. Known as “DREAMers,” they pay an effective state and local tax rate of 9.1 percent of their income, higher than the wealthiest one percent in Kentucky who pay just 6 percent.

Because the work authorization component of DACA not only increases employment and wages, but provides immigrants with channels for full income tax compliance, the program increases their tax contributions. The report also finds that in Kentucky:

  • If all those eligible for DACA were enrolled, their tax contributions would increase by $3 million, raising their effective tax rate to 9.7 percent. Currently in Kentucky, about 56 percent of those who are eligible for DACA are enrolled.
  • If all DACA-eligible immigrants were given a path to citizenship, an additional $400,000 would be contributed through taxes (for $3.4 million total above current tax contributions).
  • Though DREAMers would still pay taxes – income, sales and property – in Kentucky if their DACA protections were lost, their tax contributions would fall by an estimated $3.9 million.

“DREAMers are productive members of our communities, going to school, working and contributing taxes through their jobs and on the things they buy and own, just like Kentuckians who were born here,” said Anna Baumann, a research and policy associate with the Kentucky Center for Economic Policy. “This report, and others like it, support the idea that we should move forward, not backward, on legal status for DACA-eligible and other undocumented immigrants.”

A recent report from ITEP puts the total amount of taxes undocumented immigrants of all ages contribute to Kentucky in state and local taxes at $37 million annually.

For more information, contact Kenny Colston at kcolston@kypolicy.org or 502-938-1817.