Call to Order and Roll Call
The 3rd meeting of the Interim Joint Committee on Labor and Industry was held on Thursday, August 18, 2016, at 10:00 AM, in Room 131 of the Capitol Annex. Representative Rick G. Nelson, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Alice Forgy Kerr, Co-Chair; Representative Rick G. Nelson, Co-Chair; Senators Perry B. Clark, Carroll Gibson, Denise Harper Angel, Ernie Harris, Wil Schroder, and Reginald Thomas; Representatives Lynn Bechler, Linda Belcher, Regina Bunch, Larry Clark, Jeffery Donohue, Jim DuPlessis, Dennis Horlander, Joni L. Jenkins, Adam Koenig, Mary Lou Marzian, Charles Miller, Jerry T. Miller, Tom Riner, John Short, Jim Stewart III, James Tipton, and Brent Yonts.
Guests: Caroline Baesler, Executive Director and General Counsel, Kentucky Cabinet for Economic Development; Peter Nicholas Lengyel, President and CEO, Safran USA; and Kris Kimel, President, Kentucky Science & Technology Corporation; Chairman and Co-Founder, Space Tango; and President and Founder, Kentucky Space LLC.
LRC Staff: Carla Montgomery, Adanna Hydes, Andrew Manno, and Sasche Allen.
Approval of Minutes
A motion to approve the minutes of the July 21, 2016 meeting was made by Representative Belcher, seconded by Representative Bechler, and approved by voice vote.
Aviation and Aerospace Industry in Kentucky
Caroline Baesler, Executive Director and General Counsel, Kentucky Cabinet for Economic Development, gave an update on the aviation and aerospace industry in the state. Kentucky has 60 aviation or aerospace facilities employing more than 15,000 people. The most recent expansion announcement was Safran Landing Systems. Safran is located in Walton, Kentucky and is a $150.3 million investment. It was an expansion of Messier-Bugatti-Dowty and provided an addition of 80 new jobs. Within the past five years, there have been 51 announcements of new or expansions to already existing companies in the aviation or aerospace industry with an anticipated investment of $677 million and 2,318 high wage jobs.
The top five aviation and aerospace employers in the state are UPS, DHL Express, Lockheed Martin, Mazak, and GE Aircraft Engine. The industry employers export to 87 countries including Brazil, United Kingdom, France, China, and Singapore. Also in the past five years, the aviation and aerospace industry has been Kentucky’s top growing exporting industry. In 2015 the industry had $8.77 billion of exported products from within the state, which put Kentucky third nationally behind only Washington and California. The trend has continued this year, and as of June 2016 Kentucky is ranked second nationally, surpassing California with a 19 percent increase from 2015. As a result of the industry doubling since 2011, aviation and aerospace products make up a third of all exported products in the state.
The 2015 Regular Session the General Assembly passed HJR 100. HJR 100 directed the Transportation Cabinet, Cabinet for Economic Development, and Commission on Military Affairs to study the economic impact of the overall aerospace/aviation industry in the Commonwealth. Although there are 60 aviation or aerospace facilities in Kentucky, these are only the self-identified companies. Therefore, there may be more manufacturers in the state that service other industries and are not identified as an aviation or aerospace facility as well. The study will assist in obtaining a more accurate total number of aviation and aerospace companies, as well as gathering information about the aviation airport network and the status of aviation and aerospace educational programs being offered to students across the Commonwealth. This will allow for a better understanding of the economic impact on the state and assisting in providing a more adequately prepared and trained workforce within the industry, which will be more appealing to companies that are interested in relocating to Kentucky. Ms. Baesler said that Thomas P. Miller and Associates have been contracted to conduct the economic impact study.
Safran at a Glance
Peter Nicholas Lengyel, President and CEO, Safran USA, gave a presentation about the company’s national and global business logistics and operations. Safran is a tier one engineering company and the oldest aerospace propulsion company in the world. Its business is focused in the three areas of aerospace, defense, and security. Fifty-four percent of its sales are in aerospace propulsion, 28 percent are in aircraft equipment, 11 percent in security, and seven percent in defense. Due to Safran being such a high technology focused company, 12 to 13 percent of its annual revenue is invested in research and development. Safran manufactures all aircraft equipment that is responsible for what makes a plane take off, fly, and land safely. It manufactures optronic solutions for all branches of the United States Armed Forces, and it provides security solutions for the FBI and TSA, including fingerprinting and baggage screening systems.
Safran has over 70,000 employees in over 60 countries, with 49,000 in Europe and 14,250 in North America. In the area of commercial and general aviation, it is number one worldwide in single-aisle commercial jet engines through their partnership with GE, helicopter turbine engines, and mechanical power transmission systems; number two in electrical power generation and auxiliary power units for business jets, helicopters, and military aircrafts; and a world leader in aircraft engine nacelles and onboard power electronics. In the area of defense, Safran is number one worldwide for helicopter flight controls, FADEC engine control units for aircrafts through their partnership with BAE Systems; number three worldwide and number one in Europe for inertial navigation systems; number four worldwide for military aircraft engines; and number one in Europe for tactical drones and optronic systems. In the area of security, it is number one worldwide for biometric identification solutions, automated fingerprint identification systems, and computer-tomography explosive detection systems for checked luggage; number two worldwide for gaming terminals; number three worldwide for smart cards; and a world leader in trace detection equipment. In the space industry Safran is number one worldwide in launch vehicles through Airbus Safran Launchers, an equal partnership company between Safran et Airbus Group, number one in Europe for plasma propulsion, and number one worldwide for high performance optics.
In the United States, Safran has 7,000 employees at 58 locations in 22 states. The company makes $1.5 million in purchases every year in the United States that helps economies across the country. Twenty-five percent of its global revenues are generated in the U.S. Some of its leading U.S. technologies include the automated fingerprint identification systems used by over half of U.S. law enforcement agencies, driver licenses and identification issuance technology in 40 states, and 100 percent of the wiring on the Boeing 787 Dreamliner. National customers include Boeing, Airbus, Lockheed Martin, Bell Helicopter, UPS, American Airlines, Southwest, and Delta. United States government partners include the Department of Justice, NASA, and Department of State. Mr. Lengyel described Safran as having a symbiotic relationship with Kentucky. The state’s work programs have been fantastic, the energy prices have been competitive, and Kentucky’s partners, such as UPS, give the company flexibility to get its products out to its market. Other states that supply Safran a similar type of symbiotic business relationship are Florida, South Carolina, and Nevada. All three of these states have offered Safran incentives for its investment and additions to their economies. He thanked the General Assembly for its open dialogue with Safran, but, because of economic incentives ultimately determining where Safran grows and multiple states competing to give the best offer, if the aerospace industry is going to continue to thrive in Kentucky, then the legislature needs to do what is necessary to win Safran USA’s business and ensure the company stays in Kentucky.
Space Tango
Kris Kimel, President, Kentucky Science & Technology Corporation; Chairman and Co-Founder, Space Tango; and President and Founder, Kentucky Space LLC, gave an overview of the innovative and groundbreaking research being conducted by Space Tango. Space Tango enable research and development, bioengineering, and manufacturing in microgravity, particularly in the area of exomedicine. It was formed in 2013 to assist in creating and commercializing a new industry to improve the lives of people on Earth. The idea of Space Tango was initially formed in 2003 when the Kentucky Science & Technology Corporation began to observe the possibility of an entrepreneurial space industry. The company began working with Morehead State University, University of Kentucky, and University of Louisville to design and launch suborbital vehicles that were launched into space from the United States and Russia.
This innovative and progressive work led to Space Tango. Space Tango’s goal is to convert and commercialize the knowledge gained through the ideas and technology coming out of Kentucky into the creation of new companies and jobs within the growing space industry. It was created in 2013 as a for profit company that builds technology platforms and conducts experiments for its own gain and interests and for customers around the world. The company recently signed a partnership agreement with Airbus. The area of exomedicine is being explored to test how living systems change and function outside the Earth’s gravity. Space Tango is also performing research to examine certain medical solutions outside of Earth’s atmosphere and how they can be applied on Earth. For example, Mr. Kimel has met with top cancer specialists at the Dan-Farber Cancer Institute Boston, MA to discuss how cancer would react in the absence of gravity.
Space Tango recently installed its first permanent installation on the international space station, which is a laboratory called Tango Lab 1. The lab designed and built in Kentucky, predominately in Lexington, and has the ability to perform 21 experiments simultaneously. It has a fully automated system that does not require astronauts. Installations such as this are possible due to the rare Space Act Agreement that Space Tango has with NASA that allows them access to the international space station to not only perform research but to manifest launches. Space Tango’s office in Lexington is equipped with a mission operation system that gives them 24 hour a day visual and audio data from the space station with a line of communication to the astronauts. Mr. Kimel said that Space Tango has upcoming missions and testing to explore cystic fibrosis, cancer, regenerative medicine, neurobiology, and drug design. He showed a video of Tango Lab 1 being installed at the end of his presentation.
Senator Ernie Harris, a former military pilot, expressed that he was impressed by Safran USA and amazed by the innovation of Space Tango.
In response to Representative Larry Clark, Mr. Kimel said that education and talent development within the state is critical for Space Tango to grow. He said the company employs mechanical, electrical, computer, and biomedical engineers. It is necessary for the legislature to continue supporting the Cabinet for Economic Development because they are very sensitive to growing a technology driven economy. Representative Clark said that it is important to align Kentucky’s education system with the needs of emerging areas such as the aerospace industry. Senator Kerr added that Kentucky has 60 to 70 aerospace high schools, which makes up two thirds of all aerospace high schools in the country.
Addressing Representative Brent Yonts, Ms. Baesler stated, in regards to exporting, the aviation and aerospace industry in Kentucky has exceeded that of the automotive manufacturing industry. She also explained there needs to be an alignment between the workforce and workforce partners and mentioned the announcement of programs such as the Work Ready Skills Initiative. Kentucky Federation for Advanced Manufacturing Education (KY FAME) program is addressing the area of partnerships amongst education facilities and private employers to assist with ensuring companies are being provided with a well-trained and capable workforce. Ms. Baesler pointed out the shortage of engineers in Kentucky and the need for workers that can manage advanced manufacturing facilities. There are a number of programs offered such as apprenticeships and dual credit programs that are guiding students in this area.
Mr. Kimel commented that one issue he has seen in Kentucky with growing technology and advanced manufacturing based companies is raising private capital. He said that one important thing the legislature can do is getting the word out about new and progressive companies, such as Space Tango, to attract the type of investors that are needed for growth. After an inquiry from Senator Alice Forgy Kerr, Mr. Kimel explained some different types of investors. Ms. Baesler said that the legislature passed the Kentucky Angel Investment Act that gives a tax credit for angel investors.
Responding to Representative Jerry Miller, Mr. Lengyel said that is the employers’ responsibility to work with the local economic development boards and education systems to ensure the companies are being supplied with an adequately trained workforce due to the companies already being aware of what their needs are. The KY FAME program has been extremely helpful with the Safran location in Walton, KY. Ms. Baesler added that the economic study that will be conducted will help with having a better understanding of supplying companies with the workforce they need and how to attract more companies in the aviation and aerospace industry to Kentucky.
Ms. Baesler answered a question from Senator Wil Schroder by saying that the statistics gathered to determine that the aviation and aerospace industry is the largest exporting industry in Kentucky came from the U.S. Census Bureau and the Bureau of Labor Statistics but more information will be available on the impact of the industry after the economic study commissioned by HJR 100 is completed. Addressing a follow up question, Mr. Kimel said that with the growth and progression of the aviation and aerospace industry, there will be displacement of jobs but with that will come the creation of careers that cannot even be imagined right now. Mr. Lengyel also commented saying the aviation and aerospace industry will continue to thrive in Kentucky based on the amount of available investment that can be made into it.
In response to Representative Lynn Bechler, a former aerospace engineer, both Mr. Lengyel and Mr. Kimel confirmed that cyber security is of the utmost importance due to the sensitive nature of the information that they handle.
Answering Senator Reginald Thomas, Mr. Kimel said that the Lexington Space Tango Office is located at 333 East Short Street, Lexington, KY 40507.
In response to Representative Tom Riner, Mr. Lengyel stated that the type of systems Safran manufacturers do not require electromagnetic pulse shielding, although providing such shielding is possible.
Addressing Representative Linda Belcher, Mr. Kimel said that students and others wanting information about the work and research that Space Tango does can visit www.spacetango.com. Representative Belcher suggested the committee visit the Space Tango office in Lexington.
Responding to Representative Brent Yonts, Mr. Kimel said that Space Tango is working with a company in Louisville called Advanced Technologies on 3D tissue manufacturing to assist in manufacturing tissue and cells on the international space station. Bio-manufacturing and bioengineering experiments are being performed in space to be brought back and applied on Earth.
There being no further business, the meeting was adjourned at 11:16 a.m.