Only 15 states perform more poorly than Kentucky on CNBC’s annual ranking of business climates based on 10 categories, including workforce, infrastructure and education.
It’s not a coincidence that the two states ranking highest overall among Kentucky’s neighbors – Virginia (No. 13) and Indiana (No. 16) – also rate much higher than the Bluegrass State in “business friendliness.”
Only nine states are more unfriendly toward business.
For years, politicians from both parties have constructed growth policies centered on offering taxpayer-backed goodies – called “incentives” by economic-development bureaucrats – to companies they deem “winners” and able to improve Kentucky’s rankings.
It’s not working.
Kentucky rated in the bottom 13 states in six of the latest CNBC index’s 10 categories. Worse, we’re becoming even more business-unfriendly – sliding from No. 36 in 2014 to No. 41 in 2016.
Rather, stifling and archaic regulations that discourage entrepreneurial Kentuckians from engaging in start-ups and existing businesses from expanding must be eliminated if we’re going to rise in the rankings.
The Bevin administration’s Red Tape Reduction initiative has been created to call out costly, ineffective or outdated rules hiding among the commonwealth’s 4,500 administrative regulations – nearly 700 of which haven’t even been evaluated for close to a half-century to determine whether they actually help, harm or serve any purpose, for that matter.
Getting rid of burdensome and obsolete rules for doing business in the commonwealth likely will do more in a year or two to improve Kentucky’s attractiveness to employers considering expanding or relocating here than overpaid, underperforming bureaucrats accomplish in decades.
Maurice McTigue, a former cabinet member of parliament in his native New Zealand, helped dramatically reform his country’s economy by reducing regulation and implementing pro-growth policies to the point the turnaround became known as the “New Zealand miracle.”
“Kentucky’s economy would be stronger if 1,000 local businesses hired an additional person than if the state created a tax handout to bring in 1,000 new jobs,” wrote McTigue, who advises state governments on streamlining their operations as vice president of outreach at George Mason University’s Mercatus Center.
Regulations were never intended to discourage employers from growing their businesses by keeping them neck-deep in cesspools of red tape and paperwork.
Instead, they were meant as common-sense measures to protect consumers, create a level playing field and help guide – and provide certainty to – business owners.
Paul Durbin, who’s owned and operated Judy’s Castle, a popular mom-and-pop diner in Bowling Green, for 22 years, says it helps him when the fire-department inspector comes twice a year to check his building and alert him to needed repairs involving wiring or equipment.
“They come in and actually help me,” Durbin said. “For example, they update their computer assessment of the building to make sure they know where the gas-shutoff switch, oven equipment and exits are so that if there’s a fire, they know what they’re getting into before they even get here.”
But he’s concerned about the costly effect some potential regulations – such as menu-labeling requirements – would have on his 13-employee operation.
“Someone would have to break down all the ingredients; I would have to print new menus and all of that would take up more space and it’s going to cost more money,” he said. “I’m either going to have to pass on the cost or eat it myself.”
Indiana, meanwhile, is knocking on the door of the top 10 business climates in the nation because its regulatory policies free employers from heavy-handed rules forcing them to decide between reducing current payroll, raising prices or just eating the cost.
The focus of Hoosier employers has become: “How many workers do I need to hire just to keep up with all of this new business?”
Are there any good reasons why similar results cannot be achieved south of the Hoosier State’s border?
Jim Waters is president of the Bluegrass Institute; Kentucky’s free-market think tank. Reach him at firstname.lastname@example.org. Read previously published columns at www.bipps.org.