BAILEY [♪♪] [♪♪] GOOD EVENING.

WELCOME TO KENTUCKY TONIGHT.

I'M RENEE SHAW.

THANKS FOR JOINING US.

OUR TOPIC TONIGHT: KENTUCKY’S ECONOMY, JOBS, AND TAXES.

SO, HOW ARE WE DOING, OVERALL?

THERE’S GOOD NEWS AND BAD NEWS.

THE STATE HAS A BUDGET SURPLUS OF ABOUT THREE-POINT-SEVEN BILLION DOLLARS.

THE GENERAL ASSEMBLY HAS CUT THE INCOME TAX TWICE, BUT THE STATE DIDN’T MEET CERTAIN FINANCIAL CONDITIONS THAT WOULD HAVE ALLOWED FOR A THIRD CUT IN 20-25.

IT’S BECOME A TALKING POINT IN THE GOVERNOR’S RACE.

AND WHILE UNEMPLOYMENT IS AT FOUR PERCENT, KENTUCKY’S WORKFORCE PARTICIPATION RATE IS WELL BELOW THE NATIONAL AVERAGE.

TO DISCUSS ALL THIS, AND MORE, WE’RE JOINED, IN OUR LEXINGTON STUDIO, BY: STATE SENATOR CHRISTIAN MCDANIEL, A RYLAND HEIGHTS REPUBLICAN AND CHAIR OF THE SENATE APPROPRIATIONS AND REVENUE COMMITTEE; STATE SENATOR ROBIN WEBB, A GRAYSON DEMOCRAT AND MEMBER OF THE SENATE APPROPRIATIONS AND REVENUE COMMITTEE; CHARLES AULL, EXECUTIVE DIRECTOR OF THE KENTUCKY CHAMBER CENTER FOR POLICY AND RESEARCH; AND JASON BAILEY, EXECUTIVE DIRECTOR OF THE KENTUCKY CENTER FOR ECONOMIC POLICY.

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SEND AN EMAIL TO K-Y TONIGHT AT K-E-T DOT O-R-G. OR USE THE WEB FORM AT K-E-T DOT O-R-G SLASH K-Y TONIGHT.

OR YOU CAN CALL 1-800-494-7605.

WELCOME TO ALL OF OUR GUESTS.

GOOD TO HAVE YOU BACK ON THIS FULL WEEK AFTER FALL HAS ARRIVED.

LET'S TALK ABOUT WHERE WE ARE FISCALLY.

AND I WANT TO DO AN OVERALL QUESTION ABOUT HOW YOU ASSESS KENTUCKY'S ECONOMY RIGHT NOW, HOW STRONG IS IT?

>> WE'RE SEEING SIGNS OF GROWTH.

WE LOOK AT A COUPLE DIFFERENT GOVERNMENT SURVEY METRICS THAT COME OUT AND GIVE US A GOOD SENSE WHERE KENTUCKY'S ECONOMY STANDS COMPARED TO THE NATIONAL ECONOMY.

IN TERMS OF GROWTH WE'RE SEEING GOOD PROGRESS IN THAT AREA.

THAT IS A GOOD SIGN THAT EMPLOYERS ARE STILL INVESTING AND CREATING JOBS.

UNEMPLOYMENT IS STILL LOW.

4% COMPARATIVELY IS STILL A VERY LOW UNEMPLOYMENT RATE FOR KENTUCKY.

ONE METRIC WE'RE WATCHING CLOSELY IS THE NUMBER OF OPEN JOBS.

THAT IS A METRIC THAT HAS BEEN RUNNING VERY HIGH THROUGHOUT THE COURSE OF THE PANDEMIC AT TIMES SEEING TWO OPEN JOBS FOR EVERY UNEMPLOYED WORKER.

THAT'S BEEN SLOWLY NARROWING OVER TIME AND THAT IS SOMETHING WE HAVE EBEEN EXPECTING TO SEE.

IF WE GO BACK SEVERAL MONTHS AGO YOU WOULD SEE 2 TO 1.9 OPEN JOBS.

MOST RECENT DATA THAT IS COMING CLOSER TO 1.4.

THE WAY I LIKE TO DESCRIBE KENTUCKY'S ECONOMY IS ESSENTIALLY IT'S SHOWING SIGNS OF NORMALIZATION.

WHAT WE'VE SEEN OVER THE PAST COUPLE OF YEARS THAT IS NOT A TYPICAL WAY FOR AN ECONOMY TO BEHAVE THAT MUCH GROWTH IS DIFFICULT TO SUSTAIN.

THE ECONOMY IS STARTING TO LOOK MORE SIMILAR TO WHAT WE SAW IN 2019.

WITH THAT BEING SAID THERE'S STILL A LOT OF VOLATILITY.

THERE'S STILL A LOT OF IRREGULARITIES.

INFLATION WOULD BE THE MOST PRIME EXAMPLE OF THAT.

WE'RE DEALING WITH QUITE A BIT OF INFLATION.

SO I THINK ONE OF THE THINGS WE ARE GOING TO BE WATCHING FOR OVER THE NEXT SEVERAL MONTHS DOES THE FEDERAL RESERVE CONTINUE TO INCREASE INTEREST RATES AND MIGHT WE SEE THAT HAVE AN IMPACT ON KENTUCKY'S UNEMPLOYMENT RATE.

MIGHT THAT RANCH UP A LITTLE BIT.

>> THAT IS WHAT THE FEDS WANT?

>> WHAT THE FED IS TRYING TO ACCOMPLISH MAINTAIN LOW UNEMPLOYMENT AND AT THE SAME TIME REDUCING INFLATION.

WHAT TYPICALLY HAPPENS, HOWEVER IS THAT AS YOU INCREASE INTEREST RATES IN THE EFFORT TO FIGHT INFLATION THAT TRENDS TO TRIGGER HIGHER RATES OF URN EMPLOYMENT.

IT'S ENTIRELY POSSIBLE WE CAN GET TO A POINT TO ACHIEVE THE SOFT LANDING AT JEROME POWELL IS TRYING TO ACCOMPLISH THERE ARE GOOD SIGNS WE ARE ON THE PATH TO DO THAT.

IN KENTUCKY WE HAVE A STRONG ECONOMY AND UNFILLED JOBS AND STILL SEEING PAYROLL GROWTH.

THOSE ARE GOOD INDICATORS WE COULD BE ON THE PATH TO THAT TYPE OF SOFT LANDING AND ACCOMPLISHING OUR GOAL OF LOWERING INFLATION.

>> Renee: Mr. BAILEY, WHO IS THE ECONOMY WORKING BEST FOR AND WHO IS BEING LEFT BEHIND?

>> WELL, I THINK THAT ONE THING ABOUT THE ECONOMY WHERE WE ARE NOW IS ALL THE PANDEMIC STIMULUS THAT PASSED THAT SORT OF PULLED US OUT WHAT COULD HAVE BEEN A DEPRESSION DID WORK TO STIMULATE FAST ECONOMIC GROWTH AND DRIVE THE UNEMPLOYMENT DOWN AND GIVE WORKERS BARGAINING POWER THEY HAVE NOT HAD IN DECADES.

AND WE'RE SEEING THAT IN WAGE GROWTH AND INFLATION CAUSED BY THE SUPPLY CHAIN ISSUES DURING THE PANDEMIC.

THAT OFFSET.

BUT INFLATION IS COMING DOWN AS THOSE ISSUES WORK THEMSELVES OUT AND WORKERS HAVE FEELING MORE CONFIDENT THE FULL EMPLOYMENT ECONOMY THAT WE WANT TO SEE IS COMING TO FRUITION TO SOME DEGREE AND YOU ARE SEEING THAT IN THE TWO LARGEST EMPLOYERS IN KENTUCKY.

U.P.S.

AND FORD.

THE WORKERS IN BOTH CASES THE UNIONS HAVE BARGAINED HARD IN THE CASE OF THE TEAMSTERS AND U.P.S.

THEY GOT A GOOD CONTRACT.

AND WE'LL SEE TRUCK DRIVERS FOR U.P.S.

AND PACKAGE HANDLERS GET A SIGNIFICANT WAGE INCREASE AND THE AUTO WORKERS ARE ON STRIKE RIGHT NOW AND SEEM TO HAVE 75% OF AMERICANS SUPPORTING THEM IN THEIR BID FOR HIGHER WAGES BECAUSE SO MANY PEOPLE ARE IN THAT SAME SITUATION.

THEY'VE SEEN THAT HAPPEN IN THEIR JOBS OVER THE PAST FEW DECADES WHERE WAGES HAVE NOT KEPT UP WITH GROWTH.

IN THE ECONOMY.

THEY HAVE NOT KEPT UP WITH INFLATION.

THEY SEEING THEIR PENSION BENEFITS AND HEALTH BENEFITS ERODE.

AND THEY ARE FRUSTRATED YOU ARE SEEING A TURN IN PUBLIC OPINION.

WE HAVE A GOOD START SO IN TERMS OF THAT BUT WE HAVE A LOT OF GROUND TO MAKEUP AND THE CONCERN IS THAT THE FEDERAL RESERVE WILL ACT TOO QUICKLY IN RAISING INTEREST RATES AND WILL INCREASING THE COST OF BORROWING AND POTENTIALLY PUSH US INTO SLOWER GROWTH AND GET OFF THAT FULL EMPLOYMENT PATH THAT WOULD BE A BAD TRACK WHEN WE ARE JUST NOW STARTING TO SEE THE BENEFITS.

>> Renee: LET ME ASK THE LAWMAKERS, CHAIRMAN McDANIEL HOW DO YOU SIZE UP KENTUCKY'S ECONOMY AND JOB GROWTH AND WE HAVE PRIVATE INVESTMENT AND GOOD THINGS ARE HAPPENING ARE YOU SATISFIED WHERE WE ARE ECONOMICALLY?

>> I DO NOT THINK YOU CAN BE SATISFIED WITH WHERE WE ARE AND I HAVE TO DISAGREE WITH JASON THE PRIMARY DRIVER OF INFLATION WAS TOO MUCH FEDERAL STIMULUS WAS PUMPED IN AND IF YOU LOOK AT THE NATION'S DEBT IT'S EXPLODED OVER THE LAST FIVE YEARS.

AND OVER THE COURSE OF THIS CENTURY, AS A WHOLE AND SOMETHING WE HAVE TO LOOK AT.

YOU CANNOT CONTINUE TO CREATE NEW MONEY WITHOUT AN ABILITY TO PAY FOR THE DEBT WITHOUT LEAVING YOURSELF LONG-TERM PROBLEMS.

HERE IN KENTUCKY CERTAINLY THERE ARE DEFINITELY GOOD SIGNS THAT WE HAVE BEGUN TO LIKE.

BUT WE HAVE A TALE OF TWO ECONOMIES IN THIS COMMONWEALTH.

WE STILL CONTINUE TO SEE VERY TROUBLING DIFFICULTIES OVER IN APPALACHIA THEY ARE NOT ENJOYING A LOT OF THE SAME BENEFITS THE BALANCE OF KENTUCKY HAS SEEN.

AND I THINK THAT IS WHY YOU SAW FOCUS AND WILL CONTINUE TO SEE FOCUS IN TRYING TO FIGURE OUT WHAT IT IS THAT WE CAN DO REGIONALLY TO HELP THOSE FOLKS OVER THERE ENJOY THE SAME LEVEL OF PROSPERITY AND THE SAME RISE THAT THE BALANCE OF KENTUCKY HAS SEEN.

>> Renee: YOU KNOW THAT AREA VERY WELL.

AND THEY ARE NOT EXPERIENCING THE SAME TYPE OF GROWTH THAT THE GOLDEN TRIANGLE IS.

WHAT DO YOU THINK?

>> NO WE'RE NOT.

I WAS IN PIKEVILLE SATURDAY AND TO THE NORTHEAST WHERE I REPRESENT THE WHOLE INDUSTRY AMONG OTHER THINGS AND ALL THE INCIDENTALS THAT COME WITH THAT WITH THE SUPPLY CHAIN ISSUES AND SOME WORKFORCE ISSUES THAT WE HAVE INHERENTLY.

ADDICTION AND OTHER WORKFORCE ISSUES WE HAVE.

THERE ARE POCKETS THAT ARE SUFFERING WITH ALL THE GOOD THINGS THAT ARE GOING ON.

SO AND I APPRECIATE MY COLLEAGUES STEPPING UP DURING THE FLOOD AND LOOKING FOR ALTERNATIVES FOR TRANSITIONING OUT OF INDUSTRIES.

THAT ARE NO LONGER WITH US OR ON LIFE SUPPORT.

SO WE HOSTED THE APPALACHIAN REGIONAL COMMISSION IN ASHLAND LAST WEEK AND WE HAD 13 STATES THERE, FEDERAL OFFICIALS, STATE OFFICIALS AND THE COMMUNITY THERE'S A LOT OF HOPE IN OUR COMMUNITIES AND THEY HAVE STEPPED UP AND THEY ARE MAKING DOING THE BEST THEY CAN DO.

WE'RE TALKING ABOUT TOURISM, TALKED ABOUT TRAILS, TALKED ABOUT THINGS THAT WE DO HAVE.

AND WE'VE GOT THINGS HAPPENING THERE.

WE'RE GETTING QUARTERHORSE TRACK IN ASHLAND.

THE PEOPLE ARE HUNGRY FOR GROWTH.

AND GET THEIR SHARE OF THE PIE BACK AND WE'RE GOING TO CONTINUE TO TRY TO DO THAT.

AND LOOK WE ARE INNOVATIVE SOLUTIONS THE POWER BILLS ARE A BIG THING FOR US.

AND TRYING TO MAKE SURE THAT PEOPLE CAN AFFORD TO KEEP THEIR LIGHTS AND HEAT ON.

THAT'S WHERE MY PEOPLE ARE RIGHT NOW.

>> Renee: WELL, LET'S TALK ABOUT AN ITEM IN THE NEWS AND THAT IS THE INCOME TAX BECAUSE WE DID LEARN THIS MONTH WE DID NOT MEET ONE OF THE CONDITIONS TO IGNITE THAT TRIGGER IF YOU WILL FOR THE INCOME TAX TO BE LOWERED ANOTHER HALF PERCENT IN 2025.

THE BIG QUESTION IS: WILL YOU SUSPEND YOUR OWN RULES TO ALLOW FOR THAT TAX CUT TO HAPPEN ANYWAY DESPITE THE FACT THAT BOTH CONDITIONS THE GENERAL ASSEMBLY SET FORTH WERE NOT MET?

>> I THINK IT'S IMPORTANT TO NOTE, RENEE, BY THE END OF 2024 THIS TAX THESE TAX CHANGES WE'VE PUT INTO PLACE WILL SAVE WORKING KENTUCKY FAMILIES $1.8 BILLION.

DOLLARS GOING DIRECTLY INTO KENTUCKIANS POCKETS THAT THEY CAN CHOOSE TO SPEND HOW THEY SEE FIT.

THE MEASURES WE PUT INTO PLACE TO BE ABLE TO EFFECTUATE THIS POLICY, THE BALANCE IN THE RAINY DAY FUND, THE REQUIREMENT OF TWO TIMES THE AMOUNT OF ACCESS VERSUS THE AMOUNT OF THE CUT.

THOSE WERE PUT IN THERE TO AVOID SOME OF THE DISASTROUS RESULTS THAT WE SAW IN KANSAS AND THIS PROVED THAT WHEN THE COMMONWEALTH HAD TO TAKE PARTICULAR ACTIONS I MEAN AS SENATOR WEBB REFERENCED, THE FLOODS THE TORNADOES, THE HUNDREDS OF MILLIONS OF DOLLARS WE NEEDED TO PUMP IN THERE THOSE DO THINGS TO GOVERNMENT SPENDING THAT CAUSE REACTIONS.

IN THIS CASE THEY DID.

AND THE MECHANISM FUNCTION AS IT WAS DESIGNED TO DO TO PUMP THE BRAKES ON THIS AND MAKE SURE WE'RE IN THE APPROPRIATE PLACE.

I THINK THAT IT REALLY HAS BEEN TELLING THAT LIKE I SAY IT DID WORK AS INTENDED AND I CERTAINLY DON'T THINK I WOULD SEE US GOING BACK ON THE MEASURES THAT WE PUT INTO PLACE WHEN WE BEGAN THIS PROCESS.

>> Renee: YOU ARE GOING TO STICK TO THAT STATUTORY LANGUAGE THAT REQUIRES THOSE CONDITIONS TO BE MET AND NOT JUST PROCEED FORWARD AND MAYBE INSTITUTE OTHER CUTS ELSEWHERE TO MAKEUP FOR THAT?

>> THAT IS WHAT I ANTICIPATE.

>> Renee: SENATOR WEBB?

>> THAT WORKS FOR ME.

I THINK THOSE MECHANISMS ARE THE SAFETY NET THAT'S IMPORTANT.

I'VE GOT A LITTLE BIT I LIKE A MORE DIVERSE TAX PORTFOLIO.

THE SITES THAT HAVE DONE AWAY WITH THE INCOME TAX RELY ON NATURAL RESOURCES AND SALES AND PROPERTY TAX.

IF YOU ARE NOT PAYING ONE YOU'RE PAYING THE OTHER AND SOMETIMES THE LOWER 30% OF THE POPULATION DOESN'T FARE WELL BECAUSE SALES TAXES ARE REGRESSIVE AND IT'S HARDER ON THOSE FOLKS.

I SPEND A LOT OF TIME IN TENNESSEE I'VE GOT HORSES THERE AND WITH THE GROWTH THEY ARE EXPERIENCING, THAT DEMOGRAPHIC IS STRUGGLING.

THAT'S MY FEAR IN TOTAL ELIMINATION OUR TAX SYSTEM A LITTLE BIT ARCHAIC AND NEEDS WORK BUT YOU HAVE TO ADAPT.

SO I'M GLAD TO HEAR THAT.

I THINK IT WILL BODE WELL FOR THE COMMONWEALTH AS WE MOVE FORWARD ON TAX POLICY.

>> I WANT TO ASK YOU ABOUT THAT BECAUSE THE KENTUCKY CHAMBER CHAMPIONED THE HOUSE BILL 8 THAT BECAME HOUSE BILL 1 AND THIS IS SOMETHING YOU ALL HAVE BEEN CHAMPIONING TO ELIMINATE THE INDIVIDUAL INCOME TAX AND THE CHAMBER IS AFOR ABIDING BY THE CONDITIONS SET FORTH AND HAVING IT TAKE A PAUSE?

>> I THINK CHAIRMAN McDANIEL'S STATEMENT WAS WELL PUT.

THIS IS HOW THE SYSTEM IS SUPPOSED TO WORK.

IT WAS DESIGNED SPECIFICALLY TO DO THIS.

I THINK IT'S IMPORTANT ANYBODY WATCHING THIS, UNDERSTANDS THAT WHAT THE GENERAL ASSEMBLY IS TRYING TO ACCOMPLISH IS VERY DIFFICULT.

VERY, VERY DIFFICULT ECONOMIC PUBLIC POLICY THEY'VE SET OUT TO DO.

WHEN YOU THINK ABOUT STATES THAT HAVE ELIMINATED INDIVIDUAL INCOME TAXES ONE STATE HAS DONE THAT WHICH IS ALASKA.

AND ALASKA WAS ABLE TO DO IT DUE TO THE GOOD FORTUNE OF DISCOVERING A TON OF OIL.

OTHER STATES THAT DON'T HAVE THE INCOME TAXES THEY NEVER HAD ONE IN THE FIRST PLACE LIKE TENNESSEE, TEXAS AND FLORIDA THEY DID NOT DO THAT.

WE ARE GOING DOWN A PATH THAT IS DIFFICULT AND I APPLAUD CHAIRMAN McDANIELS AND COLLEAGUES IN THE HOUSE THEY ARE TRYING TO DO SOMETHING THAT IS HARD BUT IT'S THE RIGHT THING TO DO IT IS A GOOD THING FOR OUR STATE TO GRADUALLY REDUCE OUR RELIANCE ON INDIVIDUAL INCOME TAXES.

AND THERE ARE REASONS FOR THAT.

OVERALL BUSINESS INVESTMENT WILL FOLLOW THOSE TYPES OF STATES THAT ARE PURSUING REDUCTIONS TO INDIVIDUAL INCOME TAXES.

>> Renee: AND WE'VE SEEN THAT BEAR OUT EMPIRICAL EVIDENCE THAT SUGGESTS THAT?

>> THERE'S STRONG RESEARCH TO ILLUSTRATE THAT BUSINESS INVESTMENT WILL FOLLOW TAX ENVIRONMENTS I THINK IT IS NOT A SURPRISE WE'RE SEEING INVESTMENT IN TENNESSEE AND TEXAS AND FLORIDA.

THERE IS A WHOLE NUMBER OF DIFFERENT REASONS AS TO WHY THAT'S HAPPENING INCLUDING ISSUES WITH FEDERAL TAX POLICY LIKE THE CAP ON THE STATE AND LOCAL TAX DEDUCTION THAT HAS BEEN AN INCENTIVE FOR BUSINESSES AND INDIVIDUALS TO LEAVE THE HIGHER TAX ENVIRONMENTS.

THE KEY THING, THOUGH AS WE HEAD DOWN THIS PATH IS THAT WE DO THIS RESPONSIBLY AND CAREFULLY.

AND THAT IS AT THE HEART OF HOUSE BILL 8.

THERE'S OFTENTIMES COMPARISONS BETWEEN WHAT KENTUCKY IS DOING AND KANSAS, NOTHING COULD BE FURTHER FROM THE TRUTH.

WHAT KANSAS DID IS A RIP-OFF A BAND-AID AND KEB KEN IS DOING THE OPPOSITE OF THAT.

WE ARE DOING THIS CAREFULLY, DILIGENTLY AND IN A WAY THAT WILL INSURE THAT WE ARE ABLE TO CONTINUE INVESTING IN KEY SERVICES WHILE SLOWING REDUCING THE INDIVIDUAL INCOME TAX RATE.

>> Renee: I DO WANT TO ASK YOU BECAUSE YOU SAID ON KENTUCKY EDITION THAT IT WAS ALWAYS ANTICIPATED THIS TYPE OF PLAN COULD TAKE 10, 20 YEARS.

WOULD YOU SHARE YOUR ANALYSIS ABOUT THAT?

>> YEAH.

THE WAY THAT HOUSE BILL 8 IS SETUP, IS THAT IT IS SETUP TO REDUCE INCOME TAX RATES IN HALF PERCENTAGE POINT INCREMENTS.

WE STARTED AT 5%.

PRESUMABLY WE HIT THE METRICS EVERY TIME, BEST CASE SCENARIO WE WILL END UP IN 10 YEARS WE'LL SEE THAT PHASE DOWN.

THE REALITY IS THERE'S GOING TO BE TIMES WHERE WE MISS THE TRIGGERS.

AND WHAT THAT MEANS IS AS A STATE WE NEED TO CONTINUE WORKING HARD TO MAKE SURE WE ARE ACHIEVING THE GROWTH WE ARE WANTING TO ACHIEVE.

AND SPENDING IN WAYS THAT ARE VERY STRATEGIC AND WITH THE INTENT OF OBTAINING A STRONG ROI AND THAT IS THE WAY WE CAN CONTINUE MOVING FORWARD AND HITTING THE BENCHMARKS.

BUT THIS IS SOMETHING FOLKS HAVE TO ACCEPT WILL TAKE TIME AND IT WILL REQUIRE PATIENCE.

IN THE MEANTIME ILY WE'LL SEE THE BENEFITS OF THE PATH.

>> Renee: Mr. BAILEY YOU'VE WRITTEN THIS IS 41% OF STATE REVENUES THAT WE COULD BE LOSING HERE?

>> RIGHT.

THE MAIN DIFFERENCE BETWEEN US AND KANSAS, KANSAS DID IT WHEN THE ECONOMY WAS NOT GOOD.

IN 2013 WE WERE RECOVERING FROM THE GREAT RECESSION.

UNEMPLOYMENT WAS STILL HIGH.

NOW WE'RE IN THIS REALLY UNIQUE PERIOD WHERE WE HAVE HAD THIS STIMULUS FUNDS CREATING A LOW UNEMPLOYMENT RATE.

STUDENTS HAVE NOT BEEN MAKING LOAN PAYMENTS.

THESE THINGS PUSHED UPSTATE REVENUES AND RESULTED IN A SURPLUSES THAT ARE USED TO MAKE PERMANENT TAX CUTS THERE'S NO SACRIFICE NO BUDGET CUTS HAVING TO BE MADE BUT RECESSIONS COME.

GOOD TIMES DON'T LAST FOREVER.

AND WE WILL BE IN THAT RECESSION WITH OUR LARGEST REVENUE SOURCE 41% OF OUR REVENUE COLLECTED DIMINISHED.

AND THERE'S JUST NO WAY TO OFFSET.

THE FOLKS WHO WANT TO MOVE DOWN THE PATH OF A ZERO INCOME TAX PRESENTED NO OPTION TO REPLACE HALF OF OUR STATE BUDGET AND ONLY ONE STATE HAS DONE THAT.

ONE STATE HAS DONE THIS, ALASKA AND THEY ONLY DID IT WHEN THEY STRUCK OIL.

IT'S A DANGEROUS PATH TO GO ON.

WE WILL SEE THE HARMS OF IT WHEN THE ECONOMY TURNS AROUND.

AND THE RESULT IS ONE OF TWO THINGS: WE HAVE A MUCH HIGHER SALES TAX.

WE'D HAVE TO HAVE A SALES TAX OF THIRTEEN% TO REPLACE OUR INCOME TAX.

THE HIGHEST SALES TAX IN THE COUNTRY IS SEVEN AND A QUARTER.

WE ARE NOT GOING TO DO THAT.

WE HAVE TO APPLY SALES TAX TO GROCERIES AND PRESCRIPTION DRUGS THAT WILL HURT FAMILIES VERY HARD AND THE WEALTHY ARE THE ONES THAT BENEFIT.

THE MILLIONAIRES WILL GET A $55,000 ANNUAL TAX CUT IF YOU ELIMINATE THE INCOME TAX OF TAX.

TWO-THIRDS OF THE MONEY GOES TO THE TOP 20% OF PEOPLE.

THERE WOULD BE A SHIFT IN TERMS OF WHO PAYS AND THOSE WHO STRUGGLE THE MOST WOULD BE THE ONES THAT WOULD BE HARDEST HIT.

EITHER WE'VE HAVE TO HAVE THE HUGE TAX INCREASES OR GIVE UP MAJOR FUNCTIONS OF GOVERNMENT LIKE PUBLIC SCHOOLS, HIGHER EDUCATION, THE MEDICAID PROGRAM AND THAT IS WHAT KEEPS OPEN OUR HOSPITALS AND OUR DOCTOR'S OFFICES THAT EVERY COMMUNITY RELIES ON.

PARTICULARLY IN THE RURAL AREAS, THOSE THINGS WILL BE VERY HARD TO LOSE AS WE ALREADY TALKED ABOUT ARE ALREADY STRUGGLING FROM SO MUCH JOB LOSS.

>> .

>> Renee: ARE THERE CONVERSATIONS ABOUT SPREADING THE SALES TAX TO INCLUDE MORE SERVICES.

IN THE ORIGINAL HOUSE BILL 2022, THE SALES TAX WAS EXTENDED IT MORE THAN 30 SOMETHING SERVICES, 6% SALES TAX.

IS THAT A DIRECTION THAT THE GENERAL ASSEMBLY COULD EMBRACE IN THIS UP COMING SESSION?

>> WELL, I THINK FIRST OF ALL I NEEDED TO COMMENT ON WHAT JASON SAID.

BECAUSE HE PRESENTS FIGURES AS IF THIS WERE A REVENUE SOURCE THAT WOULD GO AWAY OVERNIGHT THERE WOULDN'T BE ECONOMIC GROWTH AND WOULDN'T BE MORE BUSINESSES AND POPULATION AND SALARY INCREASES ALL THE THINGS THAT WE BELIEVE WITH THE CONSERVATIVE TAX POLICY WOULD HAPPEN AND IT IS NOT JUST A CONSERVATIVE TAX POLICY IT WAS RECOMMENDED AS THE EUROPEAN UNION CAME OUT OF THE RECESSION FROM THE ECONOMIC COMMISSION WAS TO GO TO MORE OF A CONSUMPTION BASED TAXATION SYSTEM AND SHIFT AWAY FROM A PRODUCTION BASED SYSTEM WHICH IS WHAT THIS IS DESIGNED TO DO.

YOU HAVE TO RECOGNIZE THERE ARE OTHER ACTIONS THAT HAPPEN AS A RESULT OF THESE TYPES OF TAX POLICIES AND THEY THIS IN NO WAY SHAPE OR FORM EVER WAS DESIGNED OR WILL HAPPEN OVERNIGHT.

NOW, YOU DO MENTION THE IDEA OF TAXATION ON SERVICES.

AND CERTAINLY, THAT ALWAYS COMES UP.

AND EVERYONE'S ALWAYS FOR THE IDEA OF MORE TAXATION ON SERVICES UNLESS IT'S THEIR SERVICE IN WHICH CASE IT IS NOT SUCH A POPULAR IDEA ANYMORE.

SO YOU KNOW, I CERTAINLY ANTICIPATE THOSE CONVERSATIONS WILL CONTINUE TO OCCUR.

BUT I DON'T THINK THAT THEY WILL NECESSARILY OCCUR IN ERNEST IN ANYTIME SOON.

>> Renee: FOOD AND MEDICINE SACRED COWS?

>> I THINK SO, ABSOLUTELY.

>> SENATOR WEBB?

>> SENATOR ARMSTRONG WE PRESENTED A BILL LAST WEEK ON DIAPERS AND THE IMPACTS OF THAT PHYSICAL IMPACT ON THE STATE BOTTOM LINE BUT THE IMPACT ON THE FAMILIES MADE A COMPELLING CASE.

>> Renee: TAX EXEMPT ON TYPERS.

>> AND THAT CUTS A WIDE SWATH SOCIOECONOMIC SWATH.

AND I AM INCLINED TO SUPPORT THAT.

BUT, AGAIN, I JUST THINK THAT DIVERSIFICATION HAS CARRIED US THROUGH RECESSION AND ECONOMIC DOWNTURNS.

AND EVEN THOUGH I'M FOR CUTTING TAXES AND THE PLAN THE INCREMENTAL PLAN MIGHT WORK, I STILL FEAR TOTAL ELIMINATION FOR THAT VERY REASON BECAUSE THE REVENUE IS GOING TO COME FROM SOMEWHERE IF WE'RE GOING TO MAINTAIN THE STATE AND ALLOW THE INFRASTRUCTURE FOR THAT GROWTH.

WE HAVE TO FUND THE INFRASTRUCTURE.

FOR THE POTENTIAL GROWTH THAT WE HOPE WE HAVE.

BUT NOBODY'S GOT A CRYSTAL BALL HERE.

I LIKE HOPING FOR THE BEST AND PLANNING FOR THE WORST.

I LIKE TO DIVERSIFICATION OF OUR SYSTEM AS IMPERFECT AS IT IS, I'D LIKE TO SEE IT MAINTAINED IN SOME FORM.

>> Renee: BECAUSE THE GROWTH DOES NOT HAVE A DATE CERTAIN?

TENNESSEE, I THINK, THEY'VE NEVER HAD A PERSONAL INCOME TAX AN INDIVIDUAL INCOME TAX AND FOR A PERIOD OF 40 YEARS THEY STARTED OUTPACING KENTUCKY IN TERMS OF POPULATION GROWTH, EXPONENTIALLY YOU COULD SAY BUT HOW LONG WILL IT TAKE FOR KENTUCKY TO MEET WHERE TENNESSEE IS?

AND THERE ARE MORE CONDITIONS THAT JUST THE ECONOMIC CONDITIONS AND TAXES THAT MAKE TENNESSEE MAYBE MORE ATTRACTIVE FOR MORE PEOPLE AND MORE INDUSTRY.

>> SURE.

TAX IS GOING TO BE ONE OF A MULTIPLE VARIABLES THAT WILL FACTOR INTO THE ECONOMIC GROWTH AND POPULATION GROWTH OF KENTUCKY BUT IT IS AN IMPORTANT ONE.

THE OTHER THING WE'RE LEAVING OUT OF THIS CONVERSATION, TOO, WHAT KENTUCKY IS TRYING TO DO WE ARE NOT THE STATE AIMING TOWARDS THIS GOAL WE ARE SURROUNDED BY STATES THAT ARE DOING THE SAME THING.

GOOD EXAMPLE IS WHILE WE HAVE TENNESSEE TO OUR SOUTH, THAT HAS ZERO INCOME TAX RATE, INDIANA IS ABOUT 3.15.

INDIANA HAS RECENTLY FORMED ITS OWN COMMISSION FOCUSED SPECIFICALLY ON HOW THEY CAN MOVE MORE QUICKLY TO REDUCE THEIR INDIVIDUAL INCOME TAX RATE.

OHIO REDUCED ITS.

MISSOURI REDUCED ITS.

ARKANSAS, WEST VIRGINIA, VIRGINIA EVERY STATE AROUND US IS HEADING DOWN THIS PATH.

I THINK WHAT WE'RE SEE SOMETHING LIKE IN THE EARLY 20TH CENTURY WHEN A NUMBER OF DIFFERENT STATES WERE ADOPTING INCOME TAXES I THINK WE'RE HEADING DOWN A PATH THAT FEWER STATE ALSO HAVE THAT AS PART OF THE REVENUE PORTFOLIO BECAUSE THEY RECOGNIZE THE ECONOMIC BENEFITS OF HAVING A LOW TO NO INDIVIDUAL INCOME TAX.

WHAT WE WANT TO AVOID IS A SITUATION WHERE KENTUCKY HAS MAYBE A 4% INDIVIDUAL INCOME TAX WHILE WE ARE SURROUNDED BY OTHER STATES RANGING FROM 0-2%.

IF YOU ARE A BUSINESS, IF YOU ARE AN INDIVIDUAL AN ENTREPRENEUR AND THINKING ABOUT STARTING A BUSINESS IN THE STATE YOU ARE GOING TO TAKE THOSE THINGS INTO CONSIDERATION ALONG WITH OTHER FACTORS SUCH AS WORKFORCE AVAILABILITY, INFRASTRUCTURE AND WEATHER.

IT'S GOING TO BE AN INPUT IN THAT DECISION MAKING PROCESS IN WHAT WE'RE DOING IS POSITIONING KENTUCKY TO BE A STATE WHERE WE CAN ADDRESS THAT MAJOR CONCERN AND IT IS A MAJOR CONCERN.

PARTICULARLY AMONGST A LOT OF DIFFERENT EMPLOYERS AS WELL AS INDIVIDUALS WITH HIGH SKILLS THAT MIGHT WANT TO DOME HERE AND WORK.

>> THERE'S TWO TRAINS GOING ON IN THE STATES.

STATES THAT ARE TAKING ADVANTAGE OF THIS ONE TIME REVENUE BUMP FROM THE STIMULUS TO MAKE PERMANENT INCOME TAX CUTS AND ANOTHER GROUP OF STATES THAT ARE GOING IN THE OPPOSITE DIRECTION THEY ARE RAISING TAXES ON MILLIONAIRES AND GENERATING PROGRESSIVE TAX REVENUE SO THEY CAN BETTER FUND SCHOOLS, INFRASTRUCTURE AND HEALTHCARE.

AND OVER THE PAST 10 YEARS, THE NINE STATES THAT HAD THE HIGHEST TOP INCOME TAX RATE ON THE WEALTHY ARE DOING BETTER THAN THE NINE STATES WITH NO INCOME TAX AT ALL.

THE NARRATIVE IS LOW TAXES IS WHAT IS DRIVING ECONOMIC INVESTMENT HAS TO EXPLAIN HOW STATES LIKE TENNESSEE AND KENTUCKY HAVE A LIFE EXPECTANCY SIX YEARS SHORTER THAN THE WEALTHY STATES DO.

TENNESSEE IS CLOSE TO US IN LOTS OF WAYS IN TERMS OF IT BEING A HIGH POVERTY SOUTHERN STATE AS OTHER STATES NEAR US THAT HAVE A LOT OF TROUBLE AND A LOT OF PROBLEMS THAT NEED TO BE FIXED.

IT'S THE CASE THAT THE STATES NEVER CREATED AN INCOME TAX HAVE ONE OR TWO TYPES OF ECONOMIES, TOURISM, FLORIDA, TENNESSEE AND NEVADA OR NATURAL RESOURCES LIKE TEXAS, WYOMING AND ALASKA.

AND WE'RE NOT IN THOSE CAMPS ANYMORE.

WE HAVE TO HAVE THIS DIVERSIFIED TAX SYSTEM INCLUDING AN INCOME TAX IF WE INVEST IN THE THINGS THAT DO CREATE A THRIVING ECONOMY LIKE INFRASTRUCTURE AND QUALITY OF LIFE.

THERE WERE THINGS PUT IN THE LAST BUDGET WHICH I DIDN'T THINK THE BUDGET WAS GOOD ENOUGH BUT A LOT OF THINGS WE WOULD BE ABLE TO FUND IF WE GIVE AWAY OUR BEST SOURCE OF REVENUE.

AND THAT IS CONCERNING WHEN YOU ALSO LOOK AT SOME WAYS IN WHICH WE HAVEN'T RECOVERED FROM THE GREAT RECESSION.

WE'RE LOOKING AT YOU KNOW, SCHOOL FUNDING AT THIS POINT THAT IS IF YOU LOOK AT THE DISPARITY BETWEEN THE WEALTHY AND THE POOR SCHOOL DISTRICTS WE'RE BACK TO WHERE WE WERE WHEN THE SUPREME COURT SAID IT WAS UNCONSTITUTIONAL OUR FUNDING LEVEL THERE'S LONG-TERM TRENDS THAT WE NEED TO TURN THE OTHER WAY.

AND I WORRY IF WE CONTINUE TO DIMINISH OUR LARGEST REVENUE SOURCE WE ARE NOT GOING TO BE ABLE TO DO THAT.

>> Renee: AND TO THAT POINT WE HEAR REPUBLICANS SAY THERE'S RECORD LEVELS OF SEEK INVESTMENT TO THE BASE FUNDING IN K-12 EDUCATION AND YET WE HEAR Mr. BAILEY SAY FOR SOME DISTRICTS THERE IS AN EQUITY DISPARITY WHERE THE POORER DISTRICTS ARE NOT GETTING WHAT THEY NEED AND BACK TO THE UNCONSTITUTIONAL LEVELS BEFORE THE KENTUCKY EDUCATION REFORM ACT.

WHAT IS THE ACTUAL STORY HERE?

>> SO I THINK FIRST OF ALL WE HAVE TO REALIZE THAT THE STATES DECIDED TO IMPOSE TAX ON THEIR HIGHEST INCOME EARNERS HAVE SEEN A FLIGHT OF THOSE HIGH INCOME EARNERS FROM THE STATES.

CALIFORNIA IS ATTEMPTING TO POTENTIALLY RETROACTIVELY TAX PEOPLE WHO MOVE OUT WHO ARE FACING NEGATIVE TAX CONSEQUENCES.

WE SAW NEW JERSEY AND RHODE ISLAND HAD A SINGLE INDIVIDUAL MOVE OUT AND PUT $150 MILLION HOLE IN THE BUDGET BECAUSE THEY TRIED THIS STUNT.

WHEN YOU TALK ABOUT RAISING THE TAXES THEY SOUND GOOD UNTIL YOU REALIZE THOSE ARE THE PEOPLE WHO BY AND LARGE YOUR ENTREPRENEURS WHO ARE RUNNING YOUR BUSINESSES AND CREATING THE JOBS THAT WE COUNT ON AS THE MIDDLE CLASS TO BE ABLE TO PROSPER INSIDE OF AN ECONOMY.

WHEN YOU RUN THOSE PEOPLE OUT OF YOUR STATE, WHEN YOU SAY YOUR SUCCESS IS UNWARRANTED AND WE WANT A LARGER SHARE OF IT, YOU DRIVE THEM SOMEWHERE ELSE.

SO YOU HAVE TO BE VERY, VERY CAREFUL WHEN YOU LOOK AT THOSE STATES THAT HAVE DONE THAT.

BECAUSE YOU'VE SEEN A MASS EXODUS OF HIGH PRODUCERS FROM THE STATES.

TO YOUR POINT, OBVIOUSLY, SEEK IS A TOUCHY ISSUE LIKE THE TAX CODE.

I KEEP ON MY DESK A COPY OF A TAX REFORM COMMISSION FROM 1903.

ABOUT EIGHT YEARS AFTER THE ADOPTION OF THE CONSTITUTION TALKING ABOUT THE TAX CODE IS UNFAIR WE TAX THE WRONG THINGS IT'S HITTING THE WRONG PEOPLE ON AND ON.

IT IS A PERPETUAL DEBATE AS IS SCHOOL FUNDING.

AND I WILL TELL YOU I REPRESENT ONE-THIRD OF KEN TON COUNTY AND I HAVE FIVE SCHOOL DISTRICTS ALL OF THEM WOULD AGREE THAT SEEK IS AN UNFAIR DISTRIBUTION OF THE COLLARS BUT FOR DIFFERENT REASONS.

I HARKEN BACK TO THE IDEA PEOPLE MIGHT NOT LIKE THE SEEK FORMULA IT WAS DEVELOPED AFTER A LOT OF LITIGATION, IT IS FOLLOWED AS CLOSELY AS IS HUMANLY POSSIBLE.

AND I ALWAYS CAUTION PEOPLE WE'RE WALKING WHAT A SUPREME COURT FROM THE 1990s SETUP IS A CONSTITUTIONAL TIGHT ROPE AND WE HAVE TO BE VERY CAREFUL TO INSURE THAT WE WALK IT APPROPRIATELY SO THAT WE DON'T END UP IN A SITUATION WHERE WE'RE YOU KNOW, POTENTIALLY THROWING THE BABY OUT WITH THE BATH WATER.

>> Renee: IT SEEMS LIKE YOU'VE FALLEN OFF THE TIGHT ROPE IF YOU GO WHAT THE REPORT SET OUT THE POORER DISTRICTS THERE IS AN EQUITY GAP IN TERMS OF FUNDING.

HASN'T THE GENERAL ASSEMBLY ALREADY FALLEN OFF THE TIGHT ROPE?

>> NOT IN THE LEAST.

IT IS AN APPROACH HOW SEEK IS ALLOCATED BASED ON ASSESSED PROPERTY VALUES AND AS THE ASSESSMENTS GO DOWN THE SEEK CONTRIBUTION GOES UP.

SUBSEQUENTLY, YOU'RE WEALTHIER DISTRICTS ARGUE IT'S UNFAIR ON THE OTHER SIDE THEY ARE HAVING TO SEND TOO MANY TAX DOLLARS.

IT IS A FORMULA THE GENERAL ASSEMBLY FOLLOWED WITH GREAT PRECISION OVER THE LAST 30 YEARS.

AND I KNOW THERE IS A WORKING GROUP HAVING THESE CONVERSATIONS RIGHT NOW ABOUT WHETHER OR NOT IT IS HITTING APPROPRIATELY MEETING THE CONSTITUTIONAL MEASURE.

BUT YOU KNOW, FOR RIGHT NOW, I THINK IT'S DOING WHAT IT WAS INTENDED TO DO.

>> Renee: ANY OTHER COMMENT ON THAT?

WITH THE JEFFERSON COUNTY BUSING SITUATION THAT THEY WERE OWED ESSENTIALLY $25 MILLION OVER THE PAST FOUR YEARS, AND THAT COULD HAVE MADE A SIGNIFICANT DIFFERENCE HOW THEY ROLLED OUT THEIR NEW SCHOOL TRANSPORTATION PLAN THIS YEAR.

>> THAT IS FUNDAMENTALLY NOT AN ACCURATE ARGUMENT.

JEFFERSON COUNTY PUBLIC SCHOOLS WAS GIVEN $10 MILLION OF NEW FUNDING FOR TRANSPORTATION THAT THEY NEVER SEEN BEFORE.

JEFFERSON COUNTY IN THE LAST FOUR YEARS HAS SEEN $ONE00 MILLION IN STATE CONTRIBUTION.

IN THE LAST THREE YEARS THEY RECEIVED HALF OF A BILLION DOLLARS IN FEDERAL PANDEMIC FUNDS.

JEFFERSON COUNTY HAD THE MONEY.

THERE'S PEOPLE LOOKING FOR SCAPEGOATS AND THERE'S ONE AND THAT IS THE JEFFERSON COUNTY PUBLIC SCHOOL SYSTEM.

>> WE HAVE A BUS DRIVER SHORTAGE ACROSS THE STATE AND IT'S BEEN BUBBLING FOR ACROSS THE COUNTRY.

BUT STATES ARE THE ONES THAT HAVE TO RESPOND TO THAT AND MANY OF THEM ARE.

BUT IN KENTUCKY WE HAVE A LAW THAT UNDER THE SEEK FORMULA THE LEGISLATURE WILL FUND 100% OF THE COST GETTING KIDS TO AND FROM SCHOOL AND WE HAVE NOT DONE THAT SINCE 2005.

THIS IS ONE OF THE WAYS IN WHICH WE'VE THE SEEK FORMULA WORKS IF YOU FUND IT.

BUT IF YOU DON'T FUND IT THEN THE INEQUITIES FORM.

SINCE 2005 EVERY TIME THE LEGISLATURE SUSPENDS THAT LAW AND PUTS IN A LOWER AMOUNT.

IT'S 124 MILLION LESS TO THE STATE TO THE DISTRICTS FOR SCHOOLS IN THE CURRENT YEAR.

AND BUS DRIVERS ARE MAKING $15,000 A YEAR ON AVERAGE IN KENTUCKY.

I MEAN WITH THE COMMERCIAL DRIVER'S LICENSE THERE ARE BETTER OPTIONS.

IF WE CAN'T GET KIDS TO AND FROM SCHOOL WE ARE NOT GOING TO HAVE SCHOOL.

IT IS AN EXAMPLE OF HOW THERE ARE NEEDS UNMET IN THE CURRENT BUDGET THAT I THINK WE HAVE TO LOOK AT REALLY HARD WHEN WE'RE THINKING ABOUT POTENTIAL VERY LARGE TAX CUTS.

HALF A POINT CUT IN THE INCOME TAX IS $600 MILLION THIS FUNDING GAP IN TRANSPORTATION IS ONLY 124 MILLION.

WE CAN DO A LOT IF WE FOREGO THESE LARGE TAX CUTS AND WE CAN MAKE PROGRESS ON THESE THINGS.

>> WE HAVE TO RESTORE EFFECTIVE LEVELS FOR EVERYONE THROUGHOUT THE STATE.

THE PARITY ISSUES ARE IMPORTANT AND A KID IN A POORER AREA IT IS THE GREAT EQUALIZER AND THE COURT REALIZED THAT.

AND I THINK THE COURT WOULD REALIZE IT AGAIN.

WE'VE GOT TO BE DILIGENT HOW WE ARE LOOKING AT THAT.

AND WE HAVE THE WORKFORCE ISSUE, COMMUNICATING WITH ONE OF MY SUPERINTENDENTS RIGHT NOW WE'RE TRYING TO WORK WITH AGENCIES TO INCENT BUS DRIVERS.

EVEN PEOPLE THAT ARE WORKING IN THE SYSTEM AND HOW BEST TO DO THAT AND SEE WHAT WE CAN DO WITHOUT STATUTORY RELIEF.

THAT IS HOW DESPERATE IT IS IN THESE DISTRICTS.

AND THERE'S MANY DIFFERENT THINGS THAT GO INTO THIS.

I LOOK FORWARD TO SEEING WHAT THE TASK FORCE SAYS BUT I UNDER PRESENT CONDITION I ANTIES PARTICIPATE ANOTHER COURT CHALLENGE.

>> Renee: THAT WAS GOING TO BE MY NEXT QUESTION AND THE REPORT IS DUE BY DECEMBER?

>> I THOUGHT IT WAS DECEMBER THE FIRST.

BUT DON'T HOLD ME TO THAT ANSWER.

>> Renee: THEY TEND TO BE AROUND DECEMBER 1, WHICH IS SESSION RIGHT AFTER THE NEW YEAR.

THIS QUESTION WILL GET TO SOME THAT COME IN FROM OUR VIEWERS.

DREW FROM JEFFERSON COUNTY FOR SENATOR McDANIEL WITH THE STATE IN A $3 BILLION SURPLUS WHEN WILL KENTUCKY PENSION RETIREES RECEIVE COLA?

>> I WILL SAY AND I WANT TO BACK UP FOR A SECOND BECAUSE I AGREE WITH JAY SOB NOW.

THERE IS A STATE-WIDE BUS DRIVER ISSUE AND IT'S NOT JUST UNIQUE TO KENTUCKY NOT UNIQUE TO BUS DRIVERS BUT IT IS ACUTELY FELT IN THOSE DISTRICTS THAT HAVE TRANSPORTATION.

YOU HAVE TO REMEMBER NOT EVERY DISTRICT HAS TRANSPORTATION.

WHEN YOU TALK ABOUT THE FUNDING DISPARITIES, ONCE AGAIN, THE DISTRICTS THAT DON'T HAVE IT THEY DON'T GET MONEY FOR TRANSPORTATION.

TO THE QUESTION FROM YOUR CALLER ABSOLUTELY.

SO THE STATE PENSION SYSTEM WHEN I SHOWED UP 10 YEARS AGO IT WAS AN ABSOLUTE MESS.

THE STATE HAD NO RAINY DAY FUND LEFT.

THE PENSION SYSTEM WAS A MESS AND WE'VE WORKED IN A DISCIPLINED MANNER TO REALLY WRANGLE THAT BACK IN FOR THE FIRST TIME SINCE I'VE BEEN IN THE GENERAL ASSEMBLY, THE KENTUCKY RETIREMENT SYSTEM RECOMMENDED A REDUCTION IN CONTRIBUTION BECAUSE THE FUNDING IS GOING IN THE APPROPRIATE DIRECTION.

NOW, I WILL PUSH US THAT ALTHOUGH THE RECOMMENDATION IS SLIGHTLY LOWER WHICH THE IS APPROPRIATE ACT AERIAL RECOMMENDATION.

>> Renee: IS THERE A NUMBER?

>> A DROP BY A COUPLE OF PERCENTAGE POINTS IN THE CONTRIBUTION BUT I WILL PUSH US NOT TO REDUCE THE AMOUNT WE'RE CONTRIBUTING.

THAT CONTINUES WHILE IT IS A PROBLEM THAT IS IMPROVING IT REMAINS A PROBLEM AND WE NEED TO CONTINUE TO REMAIN VERY FOCUSED ON THE STATE OF THE COMMONWEALTH'S PENSION SYSTEMS.

TO HIS POINT, ABSOLUTELY.

THERE IS A LOT OF CONVERSATION GOING ON REGARDING THAT.

THE CONVERSATION VARIES.

BUT BECAUSE RETIREES VARY.

FOLKS THAT RETIRED A YEAR OR TWO AGO ARE IN A DIFFERENT SITUATION THAN THOSE WHO RETIRED IN 2010.

BOTH OFF OF THE SALARY THE PENSION WAS CALCULATED ON AND THEIR AGE AND ABILITY TO POSITIVELY INFLUENCE THEMSELVES.

THERE'S PRETTY WIDESPREAD HOPE FOR ACTION THIS TIME AROUND.

>> Renee: TO GIVE THEM A COLA INCREASE?

>> SOMETHING.

>> Renee: SOMETHING.

WHAT ELSE WOULD THERE WE?

>> THERE'S CONVERSATIONS ABOUT COLAS AND CONVERSATIONS ABOUT ONE TIME LUMP SUM PAYMENTS, AND CONVERSATIONS ABOUT A MEANS TESTING OR AN AGE BRACKETING OR A RETIREMENT DATE BRACKETING THERE'S DIFFERENT TYPES OF OPTIONS ON THE TABLE.

PEOPLE TEND TO THINK IN THIS BY THEORY COLA OR NO COLA.

>> Renee: BECAUSE THEY DON'T KNOW THE OTHER OPTIONS PERHAPS.

>> ABSOLUTELY.

THOSE ARE ALL BEING RUN THROUGH THE PROCESS.

>> LONG OVERDUE IN MY OPINION.

RETIREMENT SYSTEMS REPORT WAS GREAT TO SIT IN THERE AND HEAR THAT NEWS.

IT WAS GOOD NEWS.

AND ON TRACK.

SO I THINK NOW THAT SITUATION'S HANDLED WE KEEP FUNDING IT ACT USE AIRLY AND WE PUT OUR CONCENTRATION ON THE RETIREES WHO SERVED THIS STATE MOSTLY UNDERPAID AND OVERWORKED.

AND IT'S TIME TO RECOGNIZE THEIR SERVICE.

>> AND I GIVE CREDIT SENATOR MCCANNLE IS A LEADER IN MAKING SURE AND STARTING TO FUND THE DETERMINED CONTRIBUTION AGAIN AND THAT IS THE REASON WE ARE IN THAT POSITION.

BUT IT'S REALLY GOOD TO HEAR THAT THAT MAYBE ON THE TABLE.

BECAUSE IT IS AN ISSUE WITH HIRING TOO IF FOLKS THING THEY WILL NEVER GET A COLA FOR THE PENSION BECAUSE THERE HASN'T BEEN ONE SINCE 2011 IT DISCOURAGES PEOPLE FROM COMING INTO PUBLIC SERVICE.

TO HEAR THAT THAT MAY BE POSSIBLE THIS TIME AND MAYBE WE CAN GET BACK ON TRACK TO DO THAT IN A REGULAR BASIS I THINK WOULD BE A REALLY IMPORTANT THING FOR RETENTION.

>> Renee: NEXT QUESTION STATE WORKERS YOU ENVISION A RAISE FOR THEM THIS TIME AROUND?

>> IN FACT WE APPROPRIATED FOR AN 8% RAISE AND THERE IS A 12.5% CONTINGENT ON A SALARY SURVEY WE WILL BE GETTING AFTER THAT AS WELL.

CERTAINLY, I ANTICIPATE THAT SECOND ROUND COMING OUT.

I KNOW WE'RE HAVING THOSE CONVERSATIONS ABOUT WHAT THAT LOOKS LIKE EXACTLY.

WE DO HAVE TO CONTINUE TO BE DILIGENT IN ADDRESSING THE COMPETITIVENESS ISSUE.

BECAUSE FOR SOME AREAS OF STATE GOVERNMENT, I THINK THE SALARY IS GOING TO SHOW US WE ARE ON PAR AND A LITTLE BIT BETTER.

BUT OTHER AREAS WHERE WE'RE WOEFULLY INADEQUATE.

RATHER THAN SAYING ACROSS THE BOARD WE HAVE TO BE SMART WHAT WE ARE DOING SO WE ARE COMPETITIVE.

THE IT MARKETPLACE IS NOWHERE CLOSE TO WHAT IT WAS 20 YEARS AGO.

AND CERTAINLY ONLY WILL CONTINUE TO ACCELERATE IN THIS PARTICULAR ECONOMY.

THE SERVI SECTOR HAS PICKED UP E MIGHT HAVE TO HAVE THE CONVERSATIONS ABOUT THE FOLKS WHO WORK IN THE STATE PARKS WE WILL RELY ON THE SURVEY TO INFORM OUR DECISIONS.

AND WE HAVE TO RECOGNIZE THERE ARE AREAS WHERE THE COST OF LIVING IS HIGHER THAN OTHER AREAS AND WE HAVE TO RECOGNIZE THAT BECAUSE IT DOESN'T MATTER IF A KID LIVES IN JEFFERSON COUNTY THEY STILL MAY NEED ACCESS TO A SOCIAL WORKER AND THE COST OF EMPLOYING THAT EMPLOYEE IN JEFFERSON COUNTY MIGHT BE HIGHER.

WE HAVE TO RECOGNIZE THOSE THINGS TO PROVIDE THOSE SERVICES WHEN PEOPLE NEED THEM.

>> THE LAST BUDGET MADE GREAT ACCOMMODATIONS BUT WE HAVE MORE TO DO.

YOU TRY TO HIRE A MEDICAL EXAMINER OR A STATE VETERINARIAN, WE'RE GETTING KICKED BY OTHER STATES.

OUR JUDGES ARE REALLY UNDERFUNDED WHEN YOU LOOK AT NEIGHBORING STATES.

A LOT ABOUT NEIGHBORING STATES FOR OUR JUDGES AND OTHER WORKERS THAT ARE JUST NECESSARY, NECESSARY EMPLOYEES.

WE'VE GOT TO BE MORE COMPETITIVE BECAUSE THESE WORKFORCE ISSUES IT'S NOT JUST BUS DRIVERS IT GOES ALL THE WAY TO THE TOP.

>> Renee: THE PERSONNEL CABINET WAS SUPPOSED TO SUBMIT THIS COMPENSATION STUDY WAS THAT DUE JULY?

>> ONCE AGAIN, I THOUGHT IT WAS A SEPTEMBER DUE DATE ON THAT ONE BUT I BELIEVE IT'S FINISHED AND WE ANTICIPATE IT ROLLING OUT SOON.

>> Renee: AND THAT WILL BE INFORMATIVE ON WHAT THE DIRECTION THE ASSEMBLY TAKES.

>> IF I COULD ADD A COUPLE THINGS.

I THINK A LOT OF THE CHALLENGES WE'RE SEEING WITH STATE EMPLOYEES AND A LOT OF PUBLIC SECTOR EMPLOYEES SOME IS A SIDE EFFECT THE EXTENT TO WHICH THE PRIVATE SECTOR INCREASED COMPENSATION.

SO THAT HAS PUT A SQUEEZE ON OUR PUBLIC SECTOR EMPLOYEES.

THE COMPENSATION ANALYSIS IS BEING DONE IS PRUDENT AND AN EXCELLENT WAY TO DO THAT AND THIS IS SOMETHING THAT IS GOING TO HAVE TO HAPPEN.

HOWEVER EVEN IF YOU GET THE WAGES HIGHER, AND EVEN FOR SOCIAL WORKERS, BUS DRIVERS WHOEVER IT MIGHT BE, IT'S STILL GOING TO BE INCREDIBLY DIFFICULT TO HIRE WHEN YOU HAVE A WORKFORCE PARTICIPATION RATE IN THE RANGE OF 57.6% AND ONE OF THE TOP 10 LOWEST IN THE NATION.

I THINK ALL THESE STEPS HAVE VERY, VERY IMPORTANT BUT THEY STILL NEED TO BE PAIRED WITH BROADER EFFORTS TO BRING MORE PEOPLE INTO KENTUCKY'S LABOR MARKET.

UNTIL WE SOLVE THE LARGER SYSTEMIC ISSUES AND SOME OF WHICH AREN'T NECESSARILY THINGS THAT CAN BE SOLVED SUCH AS THE DEMOGRAPHIC CHANGE AND RETIREMENTS WE'RE SEEING THOSE ARE DIFFICULT FACTORS TO OVERCOME.

BUT AT THE END OF THE DAY, FOR THE SAKE OF OUR PUBLIC SECTOR WORKFORCE AND OUR PRIVATE SECTOR WORKFORCE INCREASING WORKERS PARTICIPATION IS GOING TO BE KEY TO ADDRESSING BOTH CHALLENGES.

>> Renee: LAST YEAR WE TALKED ABOUT THAT AND THE POINT WAS MADE FOR THOSE 25-54, THE PARTICIPATION RATE IS 79%.

TRUE OR FALSE?

>> TRUE.

HOWEVER THAT IS SIGNIFICANTLY LOWER THAN THE NATIONAL PRIME AGE LABOR FORCE PARTICIPATION RATE CLOSER TO 82% AND IN ADDITION TO THAT IT'S STILL IN ONE OF THE BOTTOM 10 AMONGST STATES ACROSS THE NATION.

YOU CAN CUT THAT APPLE HOWEVER YOU WANT.

WE HAVE REMARKABLY LOW RATES OF WORKFORCE PARTICIPATION.

AND WHEN YOU LOOK AT THAT PRIME AGE WORK GROUP THAT GROUP IS NOT GROWING.

THE PARTICIPATION RATE IS STABLE BUT IT'S NOT GROWING.

SO THAT IS A REALLY SERIOUS LONG-TERM PROBLEM BECAUSE WHAT'S HAPPENING IS OUR OVERALL WORKFORCE IS GETTING OLDER AND OLDER, AND THERE'S 25-54-YEAR-OLDS THEY ARE BECOMING MORE FEW AND FAR BETWEEN.

SO WHETHER YOU ARE LOOKING AT THE BROADER WORKFORCE PARTICIPATION RATE OR PRIME AGE WORKFORCE RATE YOU COME TO THE SAME PROBLEM WE SIMPLY HAVE A SMALLER SHARE OF OUR ADULT POPULATION THAT IS PARTICIPATING IN THE WORKFORCE AS THE NATION AS A WHOLE AND OTHER STATES.

>> SO 80% OF THE PEOPLE IN THE PRIME WORKING AGE ARE WORKING IN KENTUCKY.

79%.

SO 21% ARE NOT.

ALMOST EVERYBODY WHO IS NOT IN THAT CATEGORY IS EITHER A CAREGIVER IF WE WANT THOSE FOLKS TO HAVE A PAID JOB WE HAVE TO LOOK AT CHILDCARE AND ELDERCARE.

THEY ARE A STUDENT WHICH I THINK ALL OF US WOULD SUPPORT PEOPLE BEING IN SCHOOL.

OR THEY HAVE A DISABILITY.

THEY ARE CURRENTLY UNEMPLOYED AND THEN THERE IS A SMALL NUMBER THAT WE DON'T KNOW WHAT THEY ARE.

AND WHY THEY ARE NOT IN THE WORKFORCE.

THIS ISSUE IS OVERSTATED AND WHEN NOBODY SHOULD SAY THAT 57% OF PEOPLE ARE IN THE WORKFORCE THAT IS TALKING ABOUT PEOPLE IN THEIR 80s AND 90s.

IT'S ALSO THE CASE, THOUGH, THAT WHEN YOU BREAK KENTUCKY'S NUMBERS DOWN, AND THE KENTUCKY CENTER FOR STATISTICS DID A REPORT ON THIS THIS YEAR IF YOU LOOK AT KENTUCKY'S WORKFORCE PARTICIPATION RATE IN THE ENTIRE STATE IS RIGHT ON PAR WITH THE NATIONAL AVERAGE EXCEPT IN ONE PART OF THE STATE IN EASTERN KENTUCKY WHERE THERE ARE NOT JOBS.

WHERE WE HAVE SEEING THIS TREMENDOUS LOSS OF COAL JOBS AND OTHER JOBS WHERE THE UNEMPLOYMENT RATE IS HIGH.

IT'S NOT LOW.

IT'S VERY HIGH.

AND WHERE THE PEOPLE JUST LACK OPPORTUNITIES.

SO IF WE WANT TO DO SOMETHING ABOUT IT IT'S NOT THERE ARE ALL THESE JOB OPENINGS THERE ARE NOT JOB OPENS IN THAT PART OF THE STATE.

WE NEED TO TALK ABOUT JOB CREATION AND GET US BACK TO WHAT WE WERE TALKING ABOUT EARLIER, ABOUT THE NEED TO LET'S TAKE ALL THE FEDERAL MONEY FOR INFRASTRUCTURE AND MAKE SURE THAT THE MATCHING FUNDS ARE AVAILABLE IN THE EASTERN KENTUCKY COUNTIES SO THEY CAN CREATE SOME JOBS IN THE PUBLIC SECTOR.

BUT IT'S IF YOU LOOK AT URBAN KENTUCKY, AND SUBURBAN KENTUCKY AND THE REST OF RURAL KENTUCKY IT IS NOT UNUSUAL.

PEOPLE ARE WORKING.

THEY HAVE TO WORK TO GET BY IN THIS ECONOMY AND THE BIGGER ISSUE IS THE QUALITY OF THE JOBS THAT ARE AVAILABLE.

>> Renee: GO AHEAD.

>> QUALITY OF JOBS.

LET'S TAKE THE COAL INDUSTRY, THE RAILROAD, THE STEEL INDUSTRY, THE HOSPITALS THAT ARE CLOSING.

THOSE ARE GOOD JOBS.

GOOD QUALITY JOBS.

AND SHOULD MY PEOPLE HAVE TO MOVE SHOULD EAST KENTUCKIANS HAVE TO MOVE?

I WANT TO SEE EMPHASIS AND FOCUS ON BRINGING HIGH PAYING JOBS IN.

WE SERVICE JOBS ARE NOT GOING TO DO THAT.

SO WE'VE GOT TO CONCENTRATE ON JOBS TO REPLACE THAT.

OR RETRAIN OUR WORKERS AND FOCUS BROADBAND INFRASTRUCTURE WE'VE GOT TO HAVE BROADBAND IF WE ARE GOING TO HAVE PEOPLE WORKING FROM HOME.

IN A REMOTE ECONOMY.

AND THOSE THINGS ARE SLOW TO GET THERE.

BUT WE'RE GETTING THERE.

BUT LIKE JASON SAID, WE'VE GOT AN AMOUNT OF DISABLED FOLKS BECAUSE THE ECONOMY THAT RELIED ON HAS BEEN HARD ON PEOPLE.

WE HAVE HIGH RATES OF CANCER IN EAST KENTUCKY NOT JUST LIFESTYLE.

SOME ENVIRONMENTALLY AT FAULT.

I MEAN WE'VE GOT TO FOCUS ON GOOD FOR EVERYBODY.

WE'VE LOST ENOUGH PEOPLE NOW.

WE'VE TOOK HARD HITS IN EAST KENTUCKY AND I REPRESENT THE NORTHEAST BUT I'VE LIVED IN THE SOUTHEAST AND I'M THERE OFTEN.

AND IT'S URGENT AND ALL THE MONEY WE PUT IN WE'RE GOING TO HAVE NEEDS THERE.

SOME OF THE COMMUNITIES AREN'T COMING BACK.

AND THE STEEL INDUSTRY MAY NOT COME BACK.

IN THE COAL INDUSTRY CERTAINLY ISN'T COMING BACK.

WE ARE TRYING TO LOOK AT WAYS IN THE ENERGY SECTOR TO FIND WAYS TO REPLACE SOME OF THOSE JOBS FOR PEOPLE WHO STILL WANT TO WORK IN THE ENERGY SECTOR.

AND FIND RELIEF ON PEOPLE'S POWER BILLS I'M ON THE NUCLEAR ENERGY TASK FORCE I NEVER THOUGHT THE COAL MINER WOULD BE ON THE NUCLEAR ENERGY TASK FORCE.

>> Renee: SENATOR CAROL IS PERVASIVE?

>> I'M PROUD TO DO IT AND I THINK IT WILL BRING OPPORTUNITIES AS WE MOVE FORWARD.

>> THIS IS A PIVOT FROM OUR DISCUSSION.

BUT JEFF SIMS FROM CALDWELL COUNTY ASKS HOW IS KENTUCKY GOVERNMENT AND THE LEGISLATIVE EXECUTIVE DEPARTMENT OF LABOR, DEPARTMENT OF EDUCATION WORKING TOGETHER TO FIND KENTUCKY'S WAY FORWARD IN THE FACE OF AI AND THE RADICAL AUTOMATION OF JOBS THAT KENTUCKIANS DO NOT WANT TO FILL.

THAT IS A DEEP QUESTION.

>> THAT IS A DEEP QUESTION AND SOME OF THE BEST MINDS IN ALL OF GOVERNMENT AND INDUSTRY ARE TRYING TO UNDERSTAND THAT.

AND IT IS A FEAR ACROSS INDUSTRIES WE DON'T THINK ABOUT THE HOLLYWOOD WRITERS STRIKE ONE OF THE CENTRAL ISSUES WAS THE INVOLVE THE.

AI IN THE PRODUCTION OF NEW SHOWS AND WRITING.

AND SO IT IS AN ABSOLUTELY TRANSFORMATIVE TECHNOLOGY.

IT IS BEING HARNESSED INSIDE OF THE BIOMEDICAL RESEARCH INDUSTRY TO BRING US DRUGS QUICKER, USE DATA SETS IN NOVEL WAYS AND SLICE THINGS, THINGS THAT PREVIOUSLY WERE TAKING SCIENTISTS WEEKS TO RUN A PARTICULAR DATA SET ARE TAKING 15 MINUTES.

THEY ARE ABLE.

IT WILL REVOLUTIONIZE OUR SOCIETY IN MANY, MANY GOOD WAYS AS AI BECOMES MORE ACCEPTED.

BUT THERE ARE TREMENDOUS CHALLENGES THAT IT WILL PRESENT AND I THINK MOST OF US DON'T EVEN CAN'T BEGIN TO UNDERSTAND IT BECAUSE THE TECHNOLOGY ITSELF IS SO NEW AND SO NOVEL BUT IT WILL ABSOLUTELY IT WILL BE A DOMINATING CONVERSATION FOR THE NEXT FIVE TO 10 YEARS.

AS WE REALLY BEGIN TO UNDERSTAND HOW THIS NEW POWER IS HARNESSED.

>> .

>> I THINK IT'S IMPORTANT WHEN WE THINK ABOUT ARTIFICIAL INTELLIGENCE OR AUTOMATION WE NOT NECESSARILY THINK ABOUT THEM AS JOB DISPLACERS OR THINGS THAT WILL TAKE JOBS AND FILL JOBS WE CAN'T FILL.

OFTENTIMES THE TECHNOLOGY ALSO SERVE MORE TO AUGMENT JOBS.

THEY CAN IMPROVE SAFETY, THEY CAN MAKE US MUCH MORE EFFICIENT.

NOW THERE ARE JOBS THAT MAYBE CAN BE INCREDIBLY DIFFICULT TO FILL.

MAYBE IN THE HEALTHCARE SECTOR SOME OF THE CLERICAL WORK THAT NEEDS TO HAPPEN.

ARTIFICIAL INTELLIGENCE IS STEPPING IN AND HELPING STREAMLINE THOSE PROCESSES.

THERE IS A LOT OF POSITIVE THINGS THAT CAN HAPPEN BOTH FOR BUSINESSES AND WORKERS THROUGH THE ARRIVAL AND UTILIZATION OF AI AND AUTOMATION.

I DO THINK IT DOES MEAN WE NEED TO START THINKING HARDER ABOUT EDUCATION AND JOB TRAINING.

BECAUSE AS THOSE FEATURES BECOME MORE PREVALENT IN THE WORKFORCE, I CAN TELL YOU I'M NOT WELL EQUIPPED TO UTILIZE ARTIFICIAL INSURANCE TELL JEANS IN MY JOB AND I HAVE A PH.D. FOLKS ARE GOING TO NEED TO EMBRACE THAT TYPE OF TRAINING AND BECOME MORE COMMON LIKE EASTERN KENTUCKY THOSE ARE THE THINGS WE NEED TO MAKE SURE THOSE ARE HAPPENING IN THOSE AREAS SO WE ARE MORE PREPARED FOR THIS ECONOMIC TRANSITION IN COMPARISON TO SAY PREVIOUS TRANSMISSIONS WE'VE MADE.

IT WILL BE A KEY COMPONENT WITH WORKFORCE TRAINING.

>> Renee: THIS QUESTION POSED TO SENATOR WEBB FROM CARTER COUNTY.

WHAT WILL SENIOR CITIZENS DO IF THERE IS THIS IS A FEDERAL GOVERNMENT SHUTDOWN AND THEY CAN'T RECEIVE THEIR SOCIAL SECURITY CHECKS WHAT KIND OF AID WILL KENTUCKY PROVIDE?

>> WELL, I'D LIKE TO THINK WE'D STEP UP TO THE PLATE IN A COMPLETE FEDERAL FAILURE.

WE GO THROUGH THIS QUITE A BIT LATELY BEING ON THE BRINK OF A SHUTDOWN.

AND IT'S JUST REALLY NOT PRUDENT OR GOOD POLICY FOR THE FEDS TO DO THAT TO US.

AND I'M SURE WE WOULD ACT QUICKLY.

>> Renee: CAN YOU ACT QUICKLY?

>> WE CAN MAYBE DO A STOPGAP MEASURES JUST TO CERTAIN POPULATIONS AND SOME FORM.

BUT I DON'T THINK THAT'S GOING TO HAPPEN.

BASED ON HISTORICAL CONTEXT.

BUT YOU KNOW WE WOULD CERTAINLY HAVE HAVING AVAILABLE HAVE ALL HANDS ON DECK IF SOMETHING LIKE THAT WOULD HAPPEN.

>> Renee: THE GOVERNOR WOULD HAVE TO CALL YOU INTO SPECIAL SESSION.

>> HE PROBABLY WOULD FOR SURE AND SOME OF THAT STUFF COULD BE DEEMED NG NECESSARY GOVERNMENT EXPENSE.

BUT IT WOULD DEPEND ON THE GRAVITY OF THE SITUATION.

>> Renee: CHAIR DO YOU HAVE ANYTHING TO ADD TO THAT?

>> VERY LITTLE.

SPECULATING WHERE THE FEDERAL GOVERNMENT WILL GO IN THE BUDGET NEGOTIATIONS IS PERILOUS AT BEST.

I REMAIN WORRIED ABOUT THE SPENDING AND THE DEFICITSES WE CONTINUE TO RUN.

AND CERTAINLY, HOPE THAT OUR LEADERS CAN COME TOGETHER TO GIVE US A GOOD SOLUTION TO IT.

BUT ANY PARTICULAR BETS ON WHERE THEY WILL WOULD BE A LITTLE BIT DANGEROUS.

>> Renee: STICK TO FAN DUAL.

AS WE ENTER THE BUDGET SESSION, THE GOVERNOR WHOEVER HE IS WILL, OF COURSE, PRESENT THEIR PRIORITIES AND WE'VE HEARD FROM THE CANDIDATES ABOUT WHAT THE BUDGET PRIORITIES ARE.

SENATOR AND CHAIRMAN McDANIEL HAVE YOU TALKED ABOUT WHAT ARE THE ABSOLUTES THAT SHOULD BE CONTINUED IN THIS UP COMING BUDGET CYCLE?

>> I THINK THE BIGGEST ABSOLUTE FOR ME WOULD BE THAT THE COMMONWEALTH'S PENSION PLANS.

WE'VE GOT TO CONTINUE TO ADDRESS THEM.

WE CANNOT LEAVE FOR THE NEXT GENERATION OF LEADERS OF THIS COMMONWEALTH THE PROBLEMS THAT WERE LEFT FOR US.

AND I THINK YOU WILL CONTINUE TO SEE US REMAIN INTENSELY FOCUSED ON THAT ISSUE.

I THINK YOU WILL CONTINUE TO SEE US WORKING ON ECONOMIC DEVELOPMENT.

SENATOR WEBB AND SEVERAL COLLEAGUES FROM THE EAST AND I WORKED THROUGH MANY MACHINATIONS OF TRYING TO DO THINGS.

THE ECONOMIC PROBLEMS IN EASTERN KENTUCKY ARE NOT AN EASTERN KENTUCKY PROBLEM THOSE ARE A NORTHERN KENTUCKY PROBLEM AND WESTERN KENTUCKY PROBLEM BECAUSE ULTIMATELY THE SUCCESS OR FAILURE OF ANY REGION OR THE RICE RISE AND DECLINE IMPACTS THE BALANCE OF THE COMMONWEALTH.

WE HAVE TO CONTINUE TO STAY FOCUSED ON THOSE TYPES OF ITEMS AS WELL.

YOU'LL SEE US CONTINUE TO FOCUS ON TRYING TO BRING THE INCOME TAX RATE DOWN AND CRAFTING RESPONSIBLE SPENDING PLAN THAT LEAVES ENOUGH AT THE END THAT WE CAN PUT MORE MONEY BACK IN THE POCKETS OF EVERYDAY KENTUCKIANS.

>> Renee: SOME PEOPLE HEAR THAT AND THEY SAY THAT MEANS CUTS?

>> THERE WILL NOT BE NECESSARY CUTS IN ORDER TO EFFECTUATE THAT POLICY.

>> Renee: OK.

THIS QUESTION QUICKLY FROM FAYETTE COUNTY.

WITH ALL THE TALK ABOUT SURROUNDING STATES WHY NOT LOOK AT TAKING AN AVERAGE OF STATE INCOME TAX OF THE SEVEN SURROUNDING STATES?

>> I WOULD LIKE TO TAKE THAT ONE ON.

BECAUSE I THINK THAT CHARLES MADE AN EXCELLENT POINT WHICH IS THE OVERALL ECONOMIC SUCCESS WHILE TAX POLICY IT IS UNPARALLELED AND UNQUESTIONED THAT STATE WITH THE LOWER INCOME TAX RATE DO BETTER THAN OTHER STATES IN ATTRACTING BUSINESSES.

BUT THERE ARE OTHER THINGS THAT GO INTO WHY BUSINESSES AND INDIVIDUALS LOCATE.

WHY YOU HAVE A LARGE POPULATION OF PEOPLE OVER 65 THAT WANT TO BE IN FLORIDA INSTEAD OF MAINE.

AND IT'S NOT THEIR AFFINITY FOR MAPLE SYRUP.

SO YOU KNOW, YOU'VE GOT TO HAVE A GOOD COMPREHENSIVE LOOK AT WHAT MAKES YOUR STATE COMPETITIVE WITH NEIGHBORING STATES WHEN YOU LOOK AT TENNESSEE, TO JASON'S POINT YOU HAVE TO REALIZE THEY TAX GROCERIES AND POSSIBLY PHARMACEUTICALS AS WELL DOWN THERE.

THERE ARE TRADE OFFS IN THESE POLICIES THAT YOU HAVE TO BE AWARE OF.

AND SO JUST WHILE THE INCOME TAX LOOK IS IMPORTANT AND I CAN ASSURE YOU AT LEAST SEVERAL TIMES A YEAR WE RECEIVE AN UPDATE ON WHAT EACH STATE IS DOING WITH THAT TAX POLICY.

IT DOESN'T GET TO EXIST IN A VACUUM WHEN WE GO TO CRAFT OUR PLANS.

>> I THINK IT'S ONE THING THAT IS IMPORTANT TO UNDERSTAND ABOUT MIGRATION IS PEOPLE DON'T MOVE AS MUCH AS THEY USED TO BETWEEN STATES AT ALL.

THE SHARE OF PEOPLE WHO MOVE BECAUSE OF TAXES IS EVEN LOWER.

PEOPLE MOVE TO FLORIDA BECAUSE THEY HAVE BEACHES IN FLORIDA.

EVERYBODY KNOWS THAT.

CLIMATE IS A BIG DRIVER.

FOR EXAMPLE, WHEN FOLKS TALK ABOUT PEOPLE MOVING BECAUSE OF TAXES AND SAYING THEY MOVED TO FLORIDA THEY DON'T MENTION SOUTH CAROLINA WHICH IS ONE OF THE TOP STATES TO WHICH PEOPLE MOVE AND THEY HAVE AN INCOME TAX THEY HAVE A 6% OR 7% TOP INCOME TAX IN SOUTH CAROLINA BUT THAT GETS LEFT OUT BECAUSE IT DOESN'T FIT THE NARRATIVE PEOPLE ARE TRYING TO RIGHT.

PEOPLE MOVE TO OTHER STATES THAT HAVE INCOME TAXES.

IT HAPPENS TO BE THE STATES THAT DON'T HAVE THEM ARE IN THE SOUTH WHERE PEOPLE MOVED TO BE IN A DIFFERENT CLIMATE.

TAXES ARE VERY SMALL IN TERMS OF THEIR IMPACT ON HOW PEOPLE MAKE DECISIONS ABOUT WHERE TO BE WHERE BUSINESSES MAKE DECISIONS ABOUT WHERE TO BE AND KENTUCKY HAS THINGS THAT IT SHOULD TAKE ADVANTAGE OF THAT HAVE NOTHING TO DO WITH TAXES OUR CENTRAL LOCATION IN THE EASTERN HALF OF THE UNITED STATES THAT IS WHY WE HAVE A LOGISTICS INDUSTRY AND AUTO INDUSTRY.

BUT TO CONTINUE TO GROW THAT WE NEED TO HAVE AN INFRASTRUCTURE, WE NEED TO HAVE BROADBAND WE NEED TO HAVE ALL THE THINGS AN EDUCATED WORKFORCE ALL THE THINGS THAT DO REQUIRE TAX REVENUE AND TO HAVE THAT REVENUE YOU HAVE TO HAVE A BALANCED TAX SYSTEM THAT HAS LOTS OF SOURCES AND NO ONE HAS PROPOSED AN OPTION THAT CAN REPLACE THE INCOME TAX.

>> AND KENTUCKY'S A GOOD ECONOMIC INVESTMENT WE'VE GOTTEN QUITE A BIT COMING OUT OF THE PANDEMIC.

I'D LIKE TO HAVE MORE IT IN IN EAST KENTUCKY BUT WE'VE BEEN GETTING IT IN THOSE UNEMPLOYMENT RATES IN CERTAIN AREAS ARE ALMOST NOTHING AND YOU LOOK AT DRIVE BY THE BATTERY PLANT AND SEE WHAT IS GOING ON THERE.

WE'VE GOTTEN INVESTMENT WITH OUR PRESENT STRUCTURE.

BUT AS FAR AS PRIORITIES GO, PENSION IS CERTAINLY AT THE TOP ALONG WITH BROADBAND AND OTHER INFRASTRUCTURE THAT IS GOING TO TAKE TO ACCOMPLISH THAT GROWTH AND IF WE'RE GOING TO GO ON A TREND OF CUTTING INCOME TAX WE HAVE TO INVEST IN OUR TOURISM.

WE HAVE TO INVEST IN OUR PARKS.

GOVERNOR BESHEAR HAS BEEN DOING THAT.

BUT WOEFULLY NOT MAINTAINED FOR THE PAST FEW YEARS.

IF WE'RE GOING TO RELY ON OTHER FORMS WE'VE GOT TO INVEST IN THOSE SECTORS THAT PRODUCE THAT THAT WILL FILL IN THE GAP.

WE GOT TO FOCUS ON MAINTAINING A RAINY DAY FUND.

AND THOSE ARE IMPORTANT THINGS.

>> Renee: AND WE'LL GET IDEAS FROM THE GUBERNATORIAL CANDIDATES TOO ABOUT HOW TO MAYBE INVEST SOME OF THAT AS WELL.

AND WE THANK YOU ALL FOR BEING HERE IT'S BEEN A GOOD DISCUSSION.

BE SURE TO JOIN US EACH WEEKNIGHT AT 6:30 EASTERN, 5:30 CENTRAL FOR ‘KENTUCKY EDITION.’ AND JOIN BILL BRYANT AND A TEAM OF WORKING JOURNALISTS TO DISCUSS THE NEWS OF THE WEEK ON ‘COMMENT ON KENTUCKY,’ FRIDAY AT VE A GOOD WEEK.SEVEN CENTRAL.