March 2009
"Key to Saving Manufacturing Jobs"
By Jim LeMaster, President and CEO of the Kentucky Association of Manufacturers
As I have traveled around the State over the last 18 months, the one constant I have heard from manufacturers is that we must have incentives for existing manufacturers. In many instances, companies are required to invest substantial sums of money in their operations to improve their productivity in order to stay viable in the current economy and maintain the jobs that they now provide to thousands of Kentuckians. While Kentucky has a number of useful incentive programs that are focused on new job creation, there is very little for existing Manufacturers who may not be adding positions, but who must re-tool their facilities and re-train their employees as they try to stay competitive in this global crisis. KAM has been talking with the Legislators, the Governor and anyone else that would listen about the need to provide incentives for existing manufacturers who want to stay in Kentucky, but are being forced to look elsewhere.
Governor Beshear and his administration have done an admirable job in researching what needs to be done to modernize Kentucky's economic development laws. Their recommendations include developing new programs to address identified gaps in Kentucky's economic development toolbox (i.e. incentives for existing manufacturers). They have also recognized the need to streamline and modernize existing programs to make them more flexible, transparent, and competitive.
Representative Tommy Thompson introduced HB 229, the Governor's omnibus economic development incentives package. A portion of that bill deals with a new tax credit program for existing manufacturers who need to make investments to update machinery and equipment in order to remain competitive, thus helping to prevent the loss of jobs to competitor states. A quick summary of the incentives in this legislation are (1) $10 Million minimum new investment; (2) credit may be up to 50% of eligible equipment and other related costs, and 100% of eligible skills upgrade training costs; (3) credits can be taken over 10 years; and (4) reinvestment would not occur but for the incentives.
KAM applauds and supports Governor Beshear, the Economic Development Cabinet and Representative Thompson for their efforts. However, we strongly believe that the $10 million threshold is too high. It is for that reason and that reason only that we asked Representative Jeff Greer to introduce HB 361. In a comparison of those portions of each bill that deal with the Manufacturing Industry, the key difference between HB 229 and HB 361 is the threshold amount. HB 361 uses a tiered approach based on the number of employees a Manufacturer has to determine the amount of investment necessary to qualify for the incentives. The tiers are (1) Over 250 employees the minimum investment would need to be $5 million; (2) 100-250 employees the minimum investment would need to be $2.5 million; and (3) Under 100 employees the minimum investment would need to be $1 million.
Now is the perfect time to address this glaring hole in our economic development portfolio. We need to make sure that the state has the tools necessary to help companies who must invest millions of dollars into their facilities to in order to stay competitive. KAM wants to work with all the interested stakeholders to keep those existing Manufacturers in Kentucky, along with the jobs they provide to our fellow Kentuckians. We urge you to contact your legislator in support of both HB 361 and HB 229 with the lower thresholds.
