Kentucky Falls Again in National Economic Health Forecast

By Richard Nelson

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July 17, 2014

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 The American Legislative Exchange Counsel (ALEC) has released their 2014 state by state economic forecast. The report, called Rich States, Poor States, explains its methodology and philosophy thus:

The Economic Outlook Ranking is a forecast based on a state’s current standing in 15 state policy variables. Each of these factors is influenced directly by state lawmakers through the legislative process. Generally speaking, states that spend less—especially on income transfer programs, and states that tax less—particularly on productive activities such as working or investing—experience higher growth rates than states that tax and spend more.

The news for Kentucky isn’t good. The Commonwealth is ranked 39th in the economic projections ranking, meaning that Kentucky’s economic health is likely headed downwards. If you’re familiar with ALEC’s report, this won’t come as a surprise: Kentucky hasn’t ranked above 38th since Governor Steve Beshear took office in 2008 (one exception: 2009, which saw the state ranked 36 before shuffling back down to 40th the next year).

Kentucky’s economic struggles stand in stark contrast with our neighbor to the north. Indiana’s economic projections placed them 3rd in the nation, a tremendous surge from just two years ago when the report placed the Hoosiers at 24. In fact, with Ohio projected at 24 for 2014, Kentucky is well behind the rest of the tri-state.

Kentucky’s recovery from the national recession has been slow. That is understandable. What is harder to explain is why the Bluegrass has failed to follow Indiana’s lead in recovery through tax relief. Kentucky ranks 37th in “remaining tax burden” (percentage of $1,000 income still taxed after income and sales taxes are accounted for) while Indiana ranks 14th. Indiana’s tax burden is, according to this report, generation a healthier economy. This contrast should lead us to ask whether the Governor’s economic strategies are competent to restore the Commonwealth’s economic health. So far, they have not been.

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Director, Commonwealth Policy Center