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Kentucky’s lowest cost of living in the nation helps moveit into this year’s top ten for taxes and regulation; thestate has also clocked in as the 12th fastest for job growthover the past two years. This is independent recognitionof the strategic and sound approaches the state has takento rebuilding its economy. In order to further streamlinebusiness interactions with state government, Kentuckyrecently passed legislation that will lead to the creationof a business “One-Stop” web site. The online interface

business owners to complete multiple forms.

Shrinking Government and Slashing

Spending

Despite repeated budget shortfalls, Governor Steve Beshearhas balanced Kentucky’s budget eight different times,

education, critical public safety programs, and job creationefforts. The state, too, has not allowed any broad-based taxincreases on Kentucky families and businesses.

The governor, along with a proactive legislature, hasshrunk state government to its smallest size in a generation,

have been taken include cutting political appointees andcontracts, as well as selling off unneeded state propertyand vehicles. In addition, the governor, his senior staff,and Cabinet secretaries have each taken 10 percent paycuts and reduced the so-called non-merit workforce by $5million, starting at the highest levels.

Kentucky also made the tough decision to save $24million by furloughing most state workers for six days.Recognizing the growing cost of the state employees’pension system, the governor has proposed and signed alandmark pension reform to reduce out-of-control costswhile honoring the state’s commitment to teachers, police

helped ease the burden on the budgets of county and localgovernments and school districts. This was accomplished

pension double-dipping and requiring appropriate expertisefor those making investment decisions.

Job Retention and Creation Key

The state’s top priority continues to be creating and

retaining jobs. To accomplish this, Kentucky creatednew incentive programs in the summer of 2009. Thusfar, 248 projects have been approved and are movingforward. These programs point to a potential investmentof $2.2 billion that has helped create 14,700 new jobs andretain more than 4,800 existing jobs. Creating new jobs isimportant, but from the state’s perspective, retaining jobsthat are in jeopardy is just as critical.

The state’s economic development toolbox includes severalprograms aimed at new and emerging businesses andjob retention efforts. Through the Kentucky EconomicDevelopment Finance Authority (KEDFA), establishedwithin the Cabinet for Economic Development to

KENTUCKY

Kentucky’s Place in the Rankings

1st Cost of Living

4th Export Intensity

8th

12th Short-term Job Growth

15th Export Intensity Growth

19th STEM Job Growth

19th Academic R&D Intensity

19th Budget Gap

19th Business Tax Climate

21st State and Local Tax Burden

21st High Speed Broadband Intensity

22nd Small Business Survival Index

23rd Entrepreneurial Activity

25th High School Advanced PlacementIntensity

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encourage economic development, business expansion, and

programs.

One of those programs is the Kentucky Small BusinessInvestment Creditof its kind for small businesses in Kentucky. The programis designed to encourage small business growth and jobcreation by providing a nonrefundable state income taxcredit to small businesses hiring one or more eligibleindividuals and investing at least $5,000 in qualifyingequipment or technology. With certain exceptions, most

are considered eligible for this program, which allocates a

The Kentucky Business Investment Program is aimedat any business entity engaged in manufacturing oragribusiness or that is a regional or national headquarters,regardless of the underlying business activity. The programis designed to serve companies doing business in a multi-state, national or international market where services areprovided to a customer base that includes more than 50percent non-residents. Eligible businesses include callcenters, centralized administrative or processing centers,telephone or Internet sales order or processing centers,

and research and development facilities.

Any business entity primarily engaged in manufacturing,service, or technology activities, or in operating ordeveloping a tourism attraction in Kentucky, has access tothe Kentucky Enterprise Initiative Act program. Serviceand technology companies must use technology or provide

the state and serve a multi-state, national or internationalmarket. To qualify for the incentives, an eligible companymust make a minimum investment of $500,000 in aneconomic development project. Eligible investmentcosts include expenditures for building and constructionmaterials, research and development equipment, andacquisition of real property to be owned, used or occupiedby the approved company.

Two other state programs are aimed at reinvestment withinKentucky Reinvestment Act

program, which is targeted at any Kentucky companyengaged in manufacturing and related functions operatingwithin the commonwealth on a permanent basis for areasonable period preceding the request for assistance.

to ten years, including tax credits for up to 100 percentof corporate income or limited liability entity tax

liability. The other program is the Kentucky IndustrialRevitalization Act. Companies approved under theprogram may receive state income tax credits, KentuckyCorporation License Fee credits, and job assessment feesfor up to ten years. These incentives can add up to 75percent of the cost of the rehabilitation or constructionof buildings, as well as the refurbishing or purchasing ofmachinery and equipment.

The One-Stop Shop

Kentucky has worked to ease the burdens of doing businessin the state by creating a one-stop shop to conductbusiness in the commonwealth. This effort authorizesthe establishment of an electronic portal that will serve

access information about state services and requirementsfor operating a business in Kentucky. Additionally, theportal will allow Kentucky companies to submit forms andapplications, make payments, and complete other requiredtransactions as part of doing business in the state.

As part of this effort, an advisory committee wascreated to oversee the implementation of the portal. Thecommittee includes the Secretary of State, secretaryof the Governor’s Executive Cabinet; secretary of theFinance and Administration Cabinet, secretary ofthe Cabinet for Economic Development, secretary ofthe Education and Workforce Development Cabinet,secretary of the Public Protection Cabinet, secretary ofthe Transportation Cabinet, secretary of the Tourism, Artsand Heritage Cabinet and and the secretary of the Energyand Environment Cabinet. This effort aims to reducegovernment red tape and ease the burden on businesses,small and large alike, that have chosen to invest inKentucky’s future.

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Clusters in Kentucky

Largest Cluster: Business & Financial Services,197,197 jobs

Largest Growth Cluster: Business & FinancialServices, 38,247 new jobs since 2002

Most Competitive Cluster: Business & FinancialServices, 3,866 new or retained jobs due to statecompetitive advantage

Most Concentrated Cluster: TransportationEquipment Manufacturing, 2.25 times the nationalconcentration level