Ky. must streamline business bureaucracies to be competitive

September 11, 2013 

By Maurice McTigue

Washington's war on coal is wreaking havoc in Kentucky's own backyard. As one-fifth of the nation's coal plants prepare to shut down, a once-thriving industry is laying off thousands and the state's unemployment is steadily on the rise.

Kentucky families are not the only ones tightening their belts: counties and the state are losing significant revenue from coal production severance taxes, which means tough fiscal choices lie ahead.

Lawmakers should certainly do what they can to protect Kentucky's energy freedom, but Frankfort must also consider ways to make Kentucky more competitive with its neighbors when trying to attract the people, investments and capital needed to spur economic growth.

Much work is to be done.

According to CNBC, Kentucky ranks 36th in the nation among "America's Top States for Business," a measurement of the state's ability to attract economic development and provide an environment in which local businesses can grow without government hindrance. A heavy tax burden, excessive regulatory red tape, and a lack of transparency are making it difficult for job creators and taxpayers to succeed.

Meanwhile, the states that are bringing in economic growth and job creation for the long haul have a business-friendly culture when dealing with the private sector. Kentucky lawmakers should follow their example, and never implement a new policy without first weighing how it will affect those who might choose to invest in the state or its people.

A valuable tool used by some of the most economically competitive states is a government streamlining commission.

Consisting of a team of experts from the public and private sectors, it conducts a thorough, ongoing audit of government policies, with a focus on what is and isn't working for the citizens. It can have one broad, wide-ranging goal, such as improving an overall business climate, or more targeted goals like identifying government waste, inefficiencies and bureaucratic barriers to businesses.

It is essential that any streamlining commission include a wide variety of experts from outside the government in order to provide firsthand knowledge about how policies affect functioning businesses. Members of the private sector can offer insights into improved mana gerial practices and identify excessive compliance costs, regulatory burdens or other barriers to success.

Many legislators make attracting new or relocating businesses their priority, but they should not ignore the established ones. Contrary to current practice, spurring investment does not mean doling out tax incentives to out-of-state companies who might or might not stay for the long term. Offering special favors is not free. They come at a significant cost to those paying taxes.

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. Streamlining outdated and excessive government policies promotes the right kind of growth — and benefits more than just big business owners or the wealthy. Without as many bureaucratic hoops to navigate, local firms — especially the small ones with fewer resources to comply — can devote more energy to innovating. Instead of filling out endless paperwork or reaching for their checkbooks, businesses are able to focus on their customers.

Regardless of what happens in Washington, Kentucky's economy is changing and will continue to do so. To cope with whatever is in store for the state, Frankfort should leave the hoops to Kentucky's championship basketball teams rather than its job creators. A positive and permanent business climate keeps existing jobs in the state, attracts out-of state investment, increases tax revenues, and helps all Kentuckians succeed fairly and without favor.

Maurice McTigue, vice president for outreach with the Mercatus Center at George Mason University, is speaking Thursday in Frankfort at ab event cosponsored by the Bluegrass Institute and State Budget Solutions.

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