Call to Order and Roll Call
The 4th meeting of the Interim Joint Committee on Economic Development and Tourism was held on Thursday, October 18, 2012, at 10:00 AM, at Midway College. Senator Alice Forgy Kerr, co-chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Alice Forgy Kerr, Co-Chair; Representative Leslie Combs, Co-Chair; Senators Jared Carpenter, Julian M. Carroll, Denise Harper Angel, Ernie Harris, Jerry P. Rhoads, Kathy W. Stein, Katie Stine, and Jack Westwood; Representatives Julie Raque Adams, Royce W. Adams, Linda Belcher, John "Bam" Carney, Larry Clark, Will Coursey, Jim DeCesare, Mike Denham, Ted Edmonds, Jim Gooch Jr., Keith Hall, Mike Harmon, Melvin B. Henley, Dennis Horlander, Wade Hurt, Dennis Keene, Thomas Kerr, Kim King, Adam Koenig, Tom McKee, Terry Mills, David Osborne, Ruth Ann Palumbo, John Short, Fitz Steele, Wilson Stone, Addia Wuchner, and Jill York.
Guests: Dr. Robert Vogel, President, Midway College; Tom Bozarth, Mayor, Midway, Kentucky; Jim Gray, Mayor, Lexington, Kentucky; and Margaret Handmaker, Director, Louisville Innovation Delivery Team.
LRC Staff: John Buckner, Louis DiBiase, and Dawn Johnson.
Minutes
A motion by Representative McKee and second by Representative Carney to approve the minutes of the September 20 meeting carried by voice vote.
Welcome to Midway College and Midway Kentucky
Dr. Robert L. Vogel, President, Midway College, and Mayor Tom Bozarth welcomed the committee and guests to the college campus and the city of Midway.
NCCI Loss Cost Filing for Workers’ Compensation Approval
Commissioner Sharon P. Clark, Department of Insurance, presented an overview of the National Council on Compensation Insurance (NCCI) and its annual 2012 Loss Cost Filing, which was approved by the department and became effective October 1. NCCI is an advisory organization that serves as the oldest provider of workers’ compensation and employee injury data and statistics in the nation. Medical claims continue to be a cost driver and represent 65 percent of workers’ compensation claims.
Randy Pepper, Actuary, Department of Insurance, reviewed the Loss Cost Filing for the committee. For the seventh year, loss costs have continued to decrease resulting in a 42.2 percent decrease. In 2012, a decrease of 7.9 percent was reported for the 590 industrial classes used in Kentucky. These classes include manufacturing, office and clerical, contracting, and goods and services. For coal classes, underground mining costs decreased 8.9 percent and surface mining decreased 7.0 percent. Premiums have increased from $475.1 million (2010) to $507.1 million (2011), among the top five market share writers, Kentucky Employers’ Mutual Insurance (KEMI), Liberty Mutual Group, AIG, Zurich Group, and Travelers Group.
The average loss cost nationwide is $1.34. The region (including Tennessee, Illinois, Indiana, and Virginia) is $1.56 based upon varying benefit levels for each state. Kentucky’s average loss cost is $1.35, which ranks 18th among 38 states that have been reviewed by NCCI. Kentucky had the third largest decrease. The 2012 filing is based on the loss experience averages for policy years 2009 and 2010. The loss experience for 2010 will be included in the filing for 2013, so it is possible that Kentucky will experience an eighth year of decreases in loss costs.
In response to questions from Representative Clark, Mr. Pepper explained that the loss cost filing is advisory, and approximately 90 percent of carriers adopt the loss cost.
Cooperative Efforts and Initiatives Between Lexington and Louisville to Promote Economic Development
Lexington Mayor Jim Gray explained the Business Economic Advancement Movement (BEAM), an initiative formed by Louisville and Lexington to promote regional manufacturing and logistics. The initiative is supported by the Mayors’ Project, which is a program created by Bloomberg Philanthropies to help mayors by using “Innovation Delivery Teams” to address ongoing challenges faced by cities. Following a meeting with the Brookings Institute, Louisville Mayor Greg Fischer approached Mayor Gray to discuss the institute’s Metropolitan Business Plans that have been developed for other regions. Mayor Gray said while there has always been a healthy competition between the two cities, the program goal is simply about jobs— creating higher wages and higher value jobs for the future. The plan is based on market-driven analysis and planning. While studies conclude that record numbers of people are migrating to cities and productivity is growing, the plan will benefit surrounding regions as well.
The Brookings Institute’s Metropolitan Business Plan focuses on core industries and strengthening through “lead initiatives” in terms of talent, investment, jobs, and training. The program has been successful in other cities, and includes renewed manufacturing in northeast Ohio, start-ups in the Minneapolis and St. Paul area, alternative energy initiatives in Puget Sound, Washington, and data driven decision-making across industries in central New York.
He noted that during the Mayors Summit, Bloomberg Philanthropies commended Lexington and Louisville for their collaborative efforts.
Mayor Gray said elements of the plan included the creation of a board and business community outreach. Chaired by Jim Host, the board consists of university leaders and business and manufacturing representatives. Through community outreach, it was determined that it is consistently difficult for manufactures to find qualified, skilled employees. Also, the perception of manufacturing jobs is problematic. Data collected suggested a focus on advanced manufacturing as a common industry cluster.
Margaret Handmaker, Director, Louisville Innovation Delivery Team, said the Bloomberg Foundation is interested in what is replicable in other cities. Ms. Handmaker discussed the importance of manufacturing. While job vacancies exist, the skill set employees need is not easily obtained. Manufacturing jobs have a 2:1 multiplier effect. Exports and innovation are the main components of the plan. The Kentucky Association of Manufacturing has joined the “Dream It Do It” program, which was created to rebrand manufacturing by making it more attractive as a career, and the Science, Technology, Engineering, and Manufacturing (STEM) Education Coalition has created “Project Lead the Way,” which focuses on engineering and engineering technology education in middle and high schools. The Kentucky Community and Technical College System’s (KCTCS) new strategic plan includes more manufacturing program. The manufacturing industry will see a major retirement wave over the next ten years.
Ms. Handmaker said other areas Louisville is focusing on through the Bloomberg initiative include reducing health care costs through restructuring emergence medical services, and converting vacant/abandoned properties to productive use. The city needs to reverse the negative effects of abandoned properties.
Representative McKee said the Lexington/Louisville partnership may be an example of how mayors of smaller cities can work together. Ms. Handmaker said rural communities have expressed interest in a new grant through the Brookings Institute for export initiatives to partner with other cities to develop the best possible strategy for growing exports.
Representative Henley said while there are many unemployed college graduates, he has yet to find one skilled laborer who does not have a job. KCTCS’s programs are on target for developing a skilled workforce. They quickly developed a business plan to address the skilled labor shortage.
Responding to Senator Westwood’s comments, Mayor Gray said a Brookings cluster analysis aligned northern Kentucky more with the Greater Cincinnati area.
Senator Westwood said it is important to educate children before they leave high school about the advantages of manufacturing careers. His Career Pathways bill will integrate project learning with regular coursework. He hopes the legislature provides appropriate funding for it to be effective. Mayor Gray said perception can be a problem among schools, noting that high schools often push more for university-based education.
Representative Carney said Senator Westwood’s bill is important and should be funded. The state should put more focus on vocational careers as an option, and that most school staff direct students towards four-year institutions instead of vocational training.
Representative Gooch said refurbishing brown fields is important. The state should use what is available, affordable, and reliable. He is concerned about the $50 million received by the Sierra Club, which may undermine the state’s efforts to grow its economy.
Responding to Representative Julie Adams’ question, Ms. Handmaker explained that while various phases of the initiative are being refined, it is too soon to see results. Publicity about the export initiative has generated inquiries from manufacturers. Mayor Gray added that recent publicity of the partnership also has the state seeing results outside the manufacturing sector.
Representative Denham said he had the same concerns as Representative McKee regarding rural areas and issued an invitation for members to attend the upcoming Rural Issues Subcommittee meeting, which will include discussions about rural/urban migration. He said the current trend will see rural manufacturing plants become vacant.
There being no further business, the meeting adjourned at 11:55 AM.