Beshear and Cameron dispute Kentucky’s economic health. Who’s actually right?

During the COVID-19 pandemic, Democratic Gov. Andy Beshear became well-known for his televised afternoon news conferences that served to both inform and comfort Kentuckians.

But as the virus has faded both in cases and collective memory, Beshear’s pressers have taken on a new, consistent theme: Kentucky’s “red hot” economy by listing off every economic development project, big and small.

He has touted a half-billion dollar paper and packaging mill opening in Henderson. A $3.2 million small spirits company re-location to Lexington. A $5.35 million HVAC distributing center opening up in Graves County.

And the biggest celebration: A record-breaking $5.8 billion investment for twin electric vehicle battery plants by Ford Motor Company and SK Innovations in Hardin County. That one has received a mention in several news conferences with Beshear reporting details as minute as the cubic yards of earth moved in construction (6.8 million), weight of constructed steel in Statues of Liberty equivalents (nearly 200), and football fields worth of roof constructed (48).

Beshear has parlayed this message into a key plank in his campaign against Republican challenger Attorney General Daniel Cameron, running ads on his handling of the state economy and touting new employment numbers spurred by investments like the one Ford/SK Innovations is making.

Meanwhile, Cameron has cited the fact that Kentucky’s economy hasn’t fully recovered from the pandemic in some ways: total number of Kentuckians employed and the percentage of people participating in the workforce. The Kentucky Chamber of Commerce is waving the warning sign on similar issues, decrying Kentucky’s “workforce crisis.”

So, how is Kentucky really doing economically?

It’s not an easy question to answer completely. There is truth to both candidates’ claims. That’s because the metrics that measure and determine economic success vary, often depending on who you ask.

• Private investment really is at an all-time high, and outside experts say the governor and his administration does play a role in this.

• Many experts say market forces and factors beyond a governor’s control play the biggest role in landing private investment.

• The workforce participation rate is historically low as Cameron points out, although many of Kentucky’s neighboring states and much of the nation is in a similar position. The number of Kentuckians employed has stagnated in recent months.

• Unemployment, as Beshear likes to mention, is at an historic low. However, this is also true for much of the United States.

• Personal income has risen in Kentucky at a rate significantly higher than that of the rest of America. However, Republicans cite U.S. Census Bureau estimates of inflation-adjusted median household income dropping significantly more than the rest of the county as cause for concern.

There is common ground, however, from many experts: When it comes to people’s economic well being, market forces and federal government policy dwarf the actions of state government.

In Kentucky, specifically, there’s also a debate about how much a Democratic governor politically outnumbered by the GOP-led legislature even matters for what the state government ends up pursuing.

Private investment deal-making

An estimated $27.5 billion is the total private investment that has come into Kentucky during Beshear’s term as governor.

That tops another high-water mark touted by Republican former governor Matt Bevin, who ran on bringing in more than $20 billion into the state before his close loss to Beshear in 2019.

Big projects account for a sizable chunk of the Beshear term’s mark. The Ford/Sk Innovations plant, at $5.8 billion, alone is more than one-fifth of the total. Envision AESC, another battery company with plans to locate in Bowling Green, is another $2 billion.

In this department, who’s in the governor’s chair matters according to Larry Gigerich, board chair of the Site Selector’s Guild.

It’s a mix of economic development professionals employed by state departments such as Kentucky’s Cabinet for Economic Development – whose leader is appointed by the governor – and the governor who deserve a lion’s share of the credit when it comes to luring and landing big projects like Ford and SK Innovations, he said.

“I think it is absolutely appropriate, especially on these big projects where governors tend to be a little bit more personally involved, that they as a part of a broader team certainly get some credit for being engaged and being at the table,” Gigerich said.

“I’ve seen over 20-plus years of doing this and some governors that aren’t engaged at all and economic development is not a priority for them and they don’t participate.”

The “real heroes,” Gigerich said, are the economic development professionals hired by state cabinets. Those are the folks who put in the legwork to advertise sites and make connections between available land and big investors.

Governors are important in their role as figureheads and salesmen, Gigerich said. Trade missions out of the country are part of the job, as is constant communication with the big investors swirling sites in your state.

Perhaps the most important step for governor’s is their involvement in a site visit in a given project’s final stages.

“When a company is coming in and you’ve got just a handful locations under final consideration, the governor taking time to spend with the group that’s coming in to visit is something that’s really, really impactful. That’s because, at the end of the day, especially when you have two or three places on paper you look at and say, ‘OK, we can be successful in any of these places,’ part of what comes into play is, ‘Do you have confidence in the people that you’re talking to that they’re going to be able to deliver?’”

Did one such visit just happen in Madison County, where a large economic development project appears to be circling?

Potentially, according to reporting from Eastern Progress, the Eastern Kentucky University student newspaper. The outlet documented a meeting where Beshear and senior advisor Rocky Adkins met with Asahi Forge of America – a Japan-based automotive parts manufacturer with a location already in Richmond – and others on EKU’s campus.

Beshear told the Herald-Leader he could not comment on whether the visit had anything to do with the potential project on the Madison County land.

An environment for investment?

For House Speaker David Osborne, R-Prospect, it’s more about the fiscal environment created by the GOP legislature over its past six years with supermajorities in Frankfort than any one sales pitch.

“I don’t doubt that Gov. Beshear is a good salesman, but I think that in attracting Fortune 500-type companies they’re not gonna be captured by a sales pitch. They look at the bottom line, they look at what is the best environment for them to operate in,” Osborne said.

“Right-to-work,” prevailing wage, unemployment insurance cuts, worker’s compensation reform – these policies are ones that have moved the needle on business development in Kentucky, Osborne said, with no help from Beshear.

Many Republicans in the legislature point to getting a “right-to-work” law, barring labor unions and employers from requiring that non-union employees pay union dues, passed when they took the majority as a major factor in attracting more investment.

These laws play a role in attracting investment, according to University of Louisville College of Business professor Stephan Gohmann, a libertarian-leaning academic who is also director of the school’s center for free enterprise.

“When we became a Right to Work state, it made Kentucky more attractive to firms because firms really don’t want to be unionized. I’m sure (Beshear’s) charm and so forth helps, but for firms it’s probably: workforce availability, tax rebates and forgiveness, and quality of the workforce. Those are the most attractive things,” Gohmann said.

But for manufacturing deals, in particular, it’s also important to note Kentucky’s natural advantages, Gigerich said. Kentucky straddles the South and the Midwest, making its position quite strategic for companies looking to serve both regions.

Though bipartisanship can often be more campaign message mirage than reality – Republicans in the legislature regularly say that’s the case with Beshear – Gigerich said that when it comes to landing economic development projects, partisan labels really do go by the wayside.

That’s been the case for the major battery plant projects.

“Even though we’re in such a divided political environment, when it comes to economic development, usually Democrat and Republicans come together,” Gigerich said.

“Economic development really is not a partisan issue, you know. it comes back to the fundamentals of trying to get somebody, to invest in your community and put people to work in your community and state. Typically, people can rally around that together, even if they have different political views on social issues or whatever it may be.”

Workforce

Kentucky’s workforce has been of particular interest for business groups, the Republican majorities in Frankfort and Cameron.

The Republican gubernatorial candidate often calls Beshear to the carpet for overseeing the lowest workforce participation rate in state history.

“He has told people to stay home so much so that we have the lowest workforce participation rate in this commonwealth’s history under this governor,” Cameron said at the most recent gubernatorial debate. “We need a governor that’s going to get folks back working again.”

It’s true that, under Beshear, Kentucky’s workforce participation rate dipped to the lowest level since individual state’s records have been recorded – which has been the case since 1976.

However, the COVID-19 pandemic led a majority of states to drop to the lowest level of workforce participation in recorded history, according to the Federal Reserve of St. Louis. The same could be said for all of Kentucky’s bordering states except West Virginia and Missouri, whose COVID dip was beaten by just one month in 1976.

Cameron has also regularly berated Beshear for overseeing one of the lowest workforce participation rates in the country.

That’s true. Kentucky’s current seasonally adjusted workforce participation rate of 57.6% is only higher than five other states: Alabama, New Mexico, South Carolina, Mississippi and West Virginia.

But that isn’t unique to Beshear’s tenure. Instead of sixth-lowest, Kentucky was seventh-lowest at this point during Bevin’s tenure. The rate has regularly ranked among the lowest in the nation.

At the end of former Democratic governor Steve Beshear’s second term, it was third-lowest; at the end of Republican Ernie Fletcher’s lone term before him it was fifth-lowest.

The race has also been punctuated by squabbles over numbers, with Cameron repeatedly mentioning how fewer Kentuckians are employed now than were employed just before the pandemic. This is true, and many other states have already surpassed that mark.

According to the Bureau of Labor Statistics, 1,966,987 Kentuckians were working in August of this year. That’s still more than 20,000 shy of the immediate pre-pandemic mark of 1,978,980.

While the number of Kentuckians employed has fallen, the personal income per capita in the state has grown tremendously in the past four years. From the second fiscal quarter of 2019 to the same time in 2023, the mark has shot up from $43,293 to $54,321, an increase of 25.4%. The U.S. average during the same time period is an increase of 23.3%.

Cameron’s campaign has pointed to estimates of real, inflation-adjusted, median household income from the U.S. Census Bureau as reason to be less than bullish on what Kentuckians are bringing in. Though the numbers are only estimates and a new data point hasn’t been released since Jan. 2022, the drop from 2019 to 2022 was a more than 12% dip from $63,980 to $55,880. The average in the U.S. was only about 2.7%.

What to do about it?

Cameron and Beshear have different visions for how to get Kentucky’s workforce participation rate up.

Beshear has focused on expanding Medicaid to cover dental, vision and hearing care, an action that he took to provide the coverage to more than 900,000 Kentuckians. That’s received pushback from the legislature, but the Beshear administration has put it back in place via administrative regulation.

“We know that when people cannot see or hear well, or have poor oral health, it hinders their ability to seek and maintain a job,” Beshear said.

Cameron has also focused his workforce message on Medicaid, with the emphasis on further regulating it to add work requirements for able-bodied people.

There’s also a regional element to the unemployment and workforce participation story.

Eastern Kentucky, which has long faced economic hardships, is somewhat on an island.

“If you look at it Kentucky’s workforce participation rate, the entire state is right on par with the national average except in one part of the state: Eastern Kentucky, where there are no jobs right since we have seen this tremendous loss of coal jobs and other jobs where the unemployment rate is very high,” Kentucky Center for Economic Policy Executive Directory Jason Bailey said.

A recent study done by the Kentucky Center for Statistics backed up Bailey’s point. The disparities are stark. In urban centers like Fayette County, workforce participation was at 68% as of mid-year and in the far Eastern Martin County the rate was 36%.

Senate Appropriations & Revenue Committee Chair Chris McDaniel, R-Ryland Heights, said that the recent announcement of big creators coming to Central and South-Central Kentucky is great, but the real challenge for Kentucky’s economy is attracting business to Eastern Kentucky.

So far, his biggest disappointment with Beshear is he’s “seen no no plan for the areas that need success reinforced the most” like the East.

“Without a large number of diverse employers, you will never get there in Eastern Kentucky,” McDaniel said. “No amount of government, no amount of you nonprofit, no amount of anything will get there without a diverse base of employers. And you know, it’s a function of going out and attracting those businesses and bringing them.”