FRANKFORT — An overhaul of the state's programs to attract businesses and keep jobs in Kentucky cleared a key legislative committee Thursday, despite questions on how much the program could cost.
The powerful House budget committee voted 24 to 1 to pass the economic incentive program dubbed Kentucky INK, or Incentives for a New Kentucky. Gov. Steve Beshear, who campaigned on the promise of overhauling the state's economic incentive programs, said after the committee vote Thursday night that he thought there was enough support in both chambers to get HB 229 passed. The measure now moves to the House for a full vote.
In his remarks before the committee, Beshear said the state needed more tools to keep existing businesses in Kentucky. Kentucky's current incentive programs can also be confusing. This overhaul streamlines Kentucky's efforts to lure new businesses and help economically depressed counties, Beshear said.
"Up until now, there was very little if anything that Kentucky could do for existing businesses," Beshear said.
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The measure includes business tax credits for paying tuition for continuing education of employees and tax credits for businesses that make substantial investments in new technology.
It also includes tax credits to entice Hollywood to shoot more movies in Kentucky.
Many legislators applauded the new programs, particularly the expansion of the tax credit for historic preservation. Currently the state has $3 million for historic preservation tax credits. Under the proposal, the program would be expanded to $5 million.
But an analysis of the programs by staff with the Legislative Research Commission showed that it was unclear how much the new programs could cost the state. The analysis showed that it could cost the state as much as $32 million in lost revenue in its first year and as much as $44 million next fiscal year. But those are just estimates.
The analysis said that staff economists note "that the potential exposure for reduced revenue due to the proposed legislation could be significant, but the actual impact is uncertain."
"How can we vote for this if we don't know how much it costs?" asked Rep. Jim Wayne, D-Louisville. Wayne was the only member of the committee to vote against the measure, citing unanswered questions about costs and lack of transparency.
After the hearing, Beshear said the state could ill afford not to change its incentive programs and noted that the fiscal analysis did not include how much revenue through additional jobs and businesses the program could generate.
Wayne also questioned whether businesses would be penalized under the program if they did not create the jobs they said they were going to create.
Donna Duncan, commissioner of the Department of Financial Incentives, said a company that says it will create 100 jobs and creates only 80 jobs would have its incentive programs decreased by about 20 percent.
Wayne and Rep. Jamie Comer, R-Tompkinsville, also questioned the tax credit program for businesses that pay for continuing education of employees.
Under the program, businesses that create five jobs can receive a 50 percent tax credit for employee tuition.
However, there are no provisions in the bill stipulating that the employee be a Kentucky resident or go to school in Kentucky. Moreover, the five new hires do not have to be the ones who take advantage of the tuition credit.
Economic development officials said they did not want to place restrictions on where people go to school because some businesses send people to training out-of-state.
Holland Spade, general counsel for the Kentucky Economic Development Cabinet, said there is a provision that would keep the owner of the business or a family member of an employee from using the tuition credit.