Kentucky Economic Overview

entucky Economic Overview

INTRODUCTION  Louisville, Kentucky's Largest City Although nearly 10 percent of all cars and trucks manufactured in the United States are made in Kentucky, the southern state is probably best known for its bourbon distilleries, horse breeding, bluegrass music, and the Kentucky Derby, not to mention a certain popular brand of fried chicken. Kentucky’s gross state product hit a record $156 billion in 2008, giving it a ranking of number 27 among U.S. states. Total state taxes paid are approximately $10 billion, giving the state the 24th highest ranking. Since the beginning of the recession in 2007, Kentucky lost 112,400 jobs, with the transportation equipment sector losing the most, at 12,690 seasonally adjusted jobs. The largest industries in Kentucky are manufacturing, services, government, insurance, real estate, and the retail trade. ECONOMIC HISTORY Kentucky Horse Farm Due to its rich soil, Kentucky agriculture flourished early in the state's history. By 1860, the tobacco industry accounted for half of the agricultural income. Due to the calcium present in the bluegrass areas of the state, horse breeding and racing also developed at this time. Coal mining increased, and by World War II, the state was busy supplying the country with coal, farm products, and manufactured goods, led by companies such as General Electric and Ford. The town of Lexington turned into a metropolitan area with the arrival of International Business Machines (IBM) in 1956, and manufacturing cities along the Ohio River were able to provide high levels of employment. Kentucky is currently trying to attract new businesses while developing its traditional industries. AGRICULTURE With some 84,000 farms, Kentucky’s farm revenue is around $4.13 billion. The leading source of income is horses, as Kentucky is the home of some of the world’s leading thoroughbred farms and auctions. In addition, Kentucky ranks second in tobacco production, seventh in broiler production, and eighth in beef cattle production. Other important agricultural products in Kentucky are corn, soybeans, winter wheat, and hay. Horses make up 25.4 percent of the total agricultural revenue, accounting for more than $1.12 billion. Broilers, at 16.3 percent, bring in more than $721 million. Cattle and calves, at 13.7 percent, generate $605 million. Corn accounts for more than $465 million at 10.5%, and soybeans, at 7.9 percent, generate $348 million in yearly revenue. Tobacco brings in more than $295 million annually. BANKING AND FINANCE AEGON Center, Downtown Louisville Kentucky is home to the headquarters of nearly 200 financial institutions, 156 of which are state-chartered, and its banks rank eighth in the country in return on average assets (ROAA). Although the ROAA has dropped from 1.02 to around 0.8, this rate is still much higher than that of the rest of the country, and Kentucky’s banks have high capital levels. According to Kentucky’s Department of Financial Institutions, the state-chartered banks offer a wide variety of accounts and options that withstand market fluctuations. Total assets are more than $55 billion, and more than 90 percent of the state’s insured banks are community institutions. COMMUNICATIONS The telecommunications industry in Kentucky has 690 establishments with 12,573 employees earning a combined annual payroll of more than $423 million. Internet service providers and related services have annual revenues of more than $303 million and employ 3,634 workers at a combined annual payroll of more than $123 million. Radio, television, and cable broadcasting bring in more than $306 million and employ 3,310 workers at an annual combined salary of more than $99 million. CONSTRUCTION There are more than 83,900 construction workers in Kentucky, resulting in more than $12.6 billion worth of business at a combined annual payroll of more than $2.6 billion. Residential building construction accounts for more than $2.8 billion annually, while nonresidential building construction accounts for more than $2.4 billion. Heavy and civil engineering construction resulted in more than $2.4 billion, while specialty trade contractors, such as poured concrete structure, framing, masonry, glass, and roofing contractors account for more than $4.8 billion a year. EDUCATION Belknap Research Building at the University of Louisville Kentucky has 1,249 elementary and high schools. The average annual salary for Kentucky teachers is $46,417, and the total state education revenue amounts to more than $4.57 billion. Approximately 84.5 percent of high school students in Kentucky graduate, and more than 95 percent of them continue on to college or other post-secondary institutes. The University of Kentucky, with more than 27,000 students, and the University of Louisville, with more than 20,000 students, are major research institutions. The University of Louisville participated in the first fully self-contained artificial heart transplant surgery and the first successful hand transplantation. ENERGY The Kentucky New Energy Ventures Fund gives seed stage capital to support the development and commercializing of alternative fuel and renewable energy products, with grants of $30,000 and investments ranging from $250,000 to over $750,000. The electricity sector employs more than 7,800 workers at an annual payroll of more than $480 million. ENTERTAINMENT The Kentucky Film Office is energetically marketing the state as a filming site to the film, television, and advertising industries and offers a sales tax rebate program, which refunds the six percent sales and use tax to eligible movie and television producers. A newly created incentive is a refundable income tax credit of up to 20 percent of approved expenses for companies that film movies, television shows, documentaries, or commercials in the state. A total of 233 filming days took place in Kentucky in 2007 with a direct economic benefit to the state of $3.1 million, not including the ripple effect on local business for set construction and transportation. A total of 93 films have been shot entirely or partially in Kentucky since 1955, including Coal Miner’s Daughter and many horse-related movies. INSURANCE Kentucky’s insurance industry generates revenue of about $2.75 billion. The industry is a major contributor to the economy, providing some 39,000 jobs and tax revenue of $209 million in fiscal year 2008. The insurance industry also provides $300 million in revenue to Kentucky cities and towns through the local government municipal premium tax. The National Association of Insurance Commissioners ranks Kentucky 28th in the nation in premium volume. Some 85 percent of Kentucky’s residents have medical insurance, including those who are covered by Kentucky Access, a state-run high-risk pool, which enables people who are unable to obtain private health insurance to buy individual health insurance policies. In addition, Kentucky runs KCHIP, the Kentucky Children’s Health Insurance Program, for children from low-income households. MANUFACTURING 2012 Ford Focus Kentucky ranks third in the U.S. in terms of light vehicle production—almost 10 percent of all the cars and trucks made in the U.S. are manufactured in the state. Ford Motor Company, with 8,745 employees, is the third biggest employer in the state, and Kentucky is also home to the world’s only Corvette plant. The manufacturing industry produces more than $88.5 billion worth of goods. Its 263,000 employees have an annual combined payroll of more than $10 billion. Transportation equipment (motor vehicles and parts, aerospace products, railroad stock, and ships) accounts for more than $31.7 billion in annual revenue. Machinery manufacturing accounts for more than $3.7 billion, and the food manufacturing sector accounts for more than $6.6 billion. MINING AND EXTRACTION Kentucky ranks third in the U.S. in coal production, with more than $3.9 billion worth of goods mined per year. More than 120 million tons of coal is mined annually by more than 16,000 workers. In addition to coal, crushed stone, clay, and gemstones are also found in this state. Crushed stone accounts for $347 million, while clay accounts for more than $4.5 million in value. Sand and gravel make up $49.7 million, while around $22,000 worth of gemstones are mined annually. NONPROFIT Together with tax-exempt organizations, there are more than 21,500 nonprofit organizations based in the state, with a total reported annual income of more than $30 billion. The total reported amount of assets held by these tax exempt and nonprofit organizations is more than $38 billion. There are more than 1,000 social assistance agencies in Kentucky, with a combined annual income of more than $932 million. More than 16,000 paid employees receive a combined annual payroll of $260,000 million in organizations for family services, community food and housing services, and vocational rehabilitation services. RETAIL KFC Is Popular Worldwide With more than 16,800 establishments, Kentucky’s retail industry generates around $40 billion annually. It has more than 214,000 employees with an annual payroll of more than $3.8 billion. Motor vehicles and parts dealers bring in the most sales, at more than $9.5 billion a year. Next are general merchandise stores, at more than $7.6 billion, followed by the food and beverage sector, at more than $5.5 billion. The internationally famous chicken chain, KFC, is headquartered in Louisville. Employing 24,000 workers, the fast-food chain shows annual revenues of $520.3 million. There are more than 80 Walmart stores in Kentucky employing more than 33,100 workers. Aside from contributing more than $244.3 million in state sales tax annually, the sector also pays more than $36.3 million in state corporate income tax. TECHNOLOGY Kentucky’s Department of Commercialization and Innovation has allotted some $113 million for 91 high-tech initiatives and projects and more than $14 million to 34 companies for funding high-tech jobs. More than 140 companies have been created in the technology industry from more than $504 million in sales revenues. As a result, some 400 high-tech jobs have been created, with an average salary of $64,928. Sector state payroll tax revenues account for more than $1.69 million annually. In addition, Kentucky’s Small Business Innovation Research and Technology Transfer programs created 87 jobs and 29 patents from 2006 to 2009 and disbursed state funds of more than $14 million to Kentucky-based technology companies. Companies that relocated to Kentucky as a result of the programs include Advanced Dynamics, Transposagen Biopharmaceuticals, Louisville Bioscience, and Bexion Pharmaceuticals. Commonwealth Seed Capital provides seed capital for promising high-tech Kentucky businesses and has invested more than $17 million to create more than 250 high-tech jobs. TRANSPORTATION Kentucky has more than 27,000 miles of highways, including around 20,500 miles of secondary roads, 3,600 miles of primary roads, and more than 1,400 interstate and parkway miles. There are more than 2,600 miles of railways in the state, with coal accounting for 76 percent of all cargo loaded. United Parcel Service (UPS) maintains an international air hub and sorting center in Louisville, where it is the largest employer with more than 18,000 workers. More than 2.1 million tons of freight passes through the Louisville International Airport yearly. There are two additional major airports in the state, Cincinnati/Northern Kentucky International Airport and Blue Grass Airport in Lexington, as well as another 64 regional airports. The transportation industry has revenues of $8 billion, and has more than 56,000 employees. TRAVEL AND TOURISM Kentucky is home to Mammoth Cave National Park, where the world’s longest cave system is located. With 365 miles of passageways, the Mammoth Cave system is more than twice as long as the second longest cave system. The Kentucky Bourbon Festival draws more than 50,000 people annually. More than $64 million is spent on historical sites, nature parks, and similar tourist attractions, and $782 million is spent on accommodations annually. SPECIAL INDUSTRIES Kentucky Bourbon According to the Kentucky Distillers Association, a whopping 98 percent of all bourbon in the world is made in Kentucky. (The whiskey’s name actually comes from its place of origin, Kentucky’s Bourbon County.) Since corn grows better in Kentucky than rye or wheat, distillers in the 18th century used corn to make bourbon instead of the grains used elsewhere to make scotch or vodka. Six of Kentucky’s nine distilleries are within a short drive of one another, and almost half a million tourists visit this "Bourbon Trail" each year. The bourbon industry provides jobs for 3,000 people and contributes more than $2 billion to Kentucky’s economy. Bourbon and distilled spirits are the highest taxed consumer products in the state. There are also five horseracing tracks in Kentucky, which yield the state nearly $7 million in taxes and licensing fees. The Thoroughbred Breeders Incentive Fund encourages breeders to use horses born in Kentucky for breeding and racing. More than 1.5 million fans attend Kentucky horse races annually, with a total purse of more than $95 million. Betting on the 2006 Kentucky Derby set a record for the most wagered on a single race in North America at $118 million. The net amount to the winning horse is nearly $1.5 million. -World Trade Press