2012 General Assembly Results for Business What passed. What didn’t. And what it means to your bottom line.

The Kentucky Chamber Public Affairs Team. From left, Charles George, President and CEO Dave Adkisson, Allyson Hamilton-McIntire, Chad Harpole and Bryan Sunderland.

Progress slow and difficult in Frankfort

THE 2012 REGULAR SESSION of the Kentucky General Assembly and the subsequent special session illustrate that progress and compromise on key issues remain difficult to achieve. After spending much of the first half of session trying to craft new legislative districts, the legisla- ture made substantial progress on many key issues; however, a number of priorities fell short. The good news is the legislature passed a two-year budget on time that was, by nearly all accounts, a fiscally responsible plan to fund government services without higher taxes. The legislature implemented a number of Chamber recommendations by reducing the state’s level of debt and eliminating a substantial portion of the structural imbalance by relying on fewer accounting gimmicks and the use of one-time monies for recurring expenses – a practice common in recent sessions.

SUCCESSES DURING REGULAR SESSION Perhaps the greatest relief for business was legislation that addressed the interest on the debt the state owes to the federal government for unemployment insurance. Without a mechanism to repay this interest, Kentucky employers would have faced a disastrous $420-per-employee tax penalty for a total cost to business of more than $600 million. Working with the Gov. ’s administration and business groups, legislators addressed this problem in a bipartisan way that provides for both the interest payment and opportunities for future tax relief. Ulti- mately, this critical legislation passed the House and Senate unanimously. Legislators also passed a career-based education initiative, and legislation to simplify local Kentucky Chamber President and CEO Dave Adkisson (center) along with Tyler Campbell (left) of Commerce business tax filings. Limited progress was also made on addressing concerns with the public pen- Lexington and Ron Wolf of Associated General Contractors testified in support of prescription drug legis- lation during the Special Session of the Kentucky General Assembly. sion system. Lawmakers crafted incentives for auto manufacturing lobs, and a law to improve the regulatory process. They were also able to pass a reasonable compromise that addresses the Lawmakers also did not address one of the most persistent problems faced by our signa- proliferation of meth labs. ture thoroughbred industry. For years, other states have been out-competing Kentucky and In the waning hours of the regular session, an impasse over road funding and road projects threatening our position as Horse Capital of the World. The availability of expanded gaming turned what would have been a successful conclusion into a disappointing end that resulted in a in nearly every other horse-racing state has resulted in a significant job loss for Kentucky – a contentious blame game and a special session. The transportation budget and a compromise to trend that studies indicate will continue as long as the industry here is denied a level playing address prescription drug abuse failed to pass in the regular session, so Gov. Beshear called law- field. Unfortunately, despite a strong coalition of supporters, lawmakers failed to advance a makers back immediately to address these issues. Both items passed in the five-day special ses- proposal to allow the people of Kentucky an opportunity to vote on the issue of expanded sion, but a number of other issues will have to wait until next year. gaming. In addition to bills that are enacted, another way to measure the success or failure of any The General Assembly also missed opportunities to improve the health of Kentuckians. A legislative session is to note whether any anti-job business legislation is passed. Fortunately, a measure to limit smoking in public places, a proposal to provide incentives for wellness plans in the number of such measures that were opposed by the Kentucky Chamber were defeated. Legisla- workplace and a measure to limit frivolous lawsuits that raise health care costs all fell short. tion that would have increased health and legal costs for businesses was defeated. The defeat of these measures was a positive development for the 2012 session, but business that remained un- CHALLENGES REMAIN finished overshadowed these victories. Kentucky faces persistent challenges that demand our attention. The public pension and Medicaid systems pose the greatest fiscal challenges to our prosperity. Our tax code, which is UNFINISHED BUSINESS being evaluated by a gubernatorial commission right now, needs reform to make Kentucky more A number of successes for the business community were achieved in a difficult political envi- competitive. We must also ensure our labor policies are not a hindrance to job growth as we see ronment; however unfinished business remains. Several key education issues were unaddressed neighboring right-to-work states out-compete us. Finally, we must reform our legal climate to during the 2012 session. Despite the introduction of many compromise proposals, lawmakers slow the increasing costs of civil litigation on Kentucky employers. left town without coming together on legislation to prevent 16-year-old students from dropping The legislative process is designed to be deliberate; however, these and many other issues will out of high school. They failed to enact charter school legislation to address persistently low-per- require swift action to create a competitive workforce and foster job creation and prosperity in forming schools. They also failed to pass several Senate measures to improve the quality of teach- Kentucky. We appreciate the support of our members and your willingness to be engaged in the ers in the classroom. legislative process to help us make a difference.

The Kentucky Chamber of Commerce provides leadership as a catalyst, consensus-builder and advocate to unite business and advance Kentucky. 464 Chenault Road, Frankfort, KY 40601 | 502-695-4700 | kychamber.com | twitter.com/kychamber PASSEPRO-BUSINESS LEGISLATION D

Unemployment Insurance HB 495 prevents a $609 million tax increase on Kentucky employers by creating a perma- nent mechanism to pay back the interest the state owes to the federal government for unemployment insurance. The bill requires the governor to seek a cap on federal taxes and provides additional tax relief in future years. Prescription Drug Abuse HB 1 (Extraordinary Session) addresses the prescription drug epidemic by strengthening the state’s KASPER system and cracking down on pain clinics. Prescription drug abuse is not only a social issue; it is a busi- ness issue. From a loss of productivity to creating serious workplace safety concerns Gov. Steve Beshear signs HB 495 into law. The legislation prevents a $609 million tax increase on Kentucky to increasing Kentucky’s workers’ compen- employers by creating a permanent mechanism to pay back the interest owed to the federal government for sation premiums, prescription drug abuse is unemployment insurance. having a negative impact on jobs. Pseudoephedrine Paducah Gaseous Diffusion Plant. It would Tax Simplification Unlike the prescription mandate opposed by also encourage the production of coal to the Chamber, SB 3, as enacted, further limits gas liquefaction at the Paducah plant. HB 277 streamlines state business tax the over-the-counter purchase of cold and filings by creating a one-stop portal for local allergy medication containing pseudoephedrine Protecting Business Records tax forms on the Secretary of State’s to 7.2 grams monthly and 24 grams annually. HB 496 protects private companies that website, and requires the establishment of a compete for state contracts from being standard tax form to be accepted by all local This legislation is a reasonable compromise forced to disclose all of their records under jurisdictions by 2017. to the effort over the past two years to mandate a prescription, which would have the state Open Records Act. unnecessarily increased employer health care Retirement Reform Responsible State Budget HB 300 modernizes the boards of costs and employee absenteeism. HB 365 is a fiscally responsible plan budget Kentucky’s various retirement systems and that funds government services without requires investment placement agents to Career-based Education higher taxes. The plan reduces the state’s register as executive branch lobbyists. SB 38 offers career-based programs of study with enriched career counseling for level of debt and the structural imbalance by Pension Study high school students, designed to keep relying on fewer accounting gimmicks and the use of one-time monies for recurring House Joint Resolution 162 creates a task more students engaged in school. expenses – a practice that had become force to study the state’s various pension common in recent sessions. systems. The task force must submit a report Student Achievement to the legislature by December 2012. HB 37 targets improving student achievement by allowing schools to be exempt from Copper Theft Regulatory Reform certain administrative regulations and to use HB 390 addresses the issue of copper theft – one that has been plaguing a SB 157 requires state agencies to use a innovative approaches. number of businesses – by changing the uniform method of drafting administrative Redevelopment process by which scrap metal is purchased regulations and makes publishing informa- HB 465 provides incentives to businesses and sold in the Commonwealth. tion online, instead of printing, the preferred to restore blighted properties, encouraging method of notice. economic growth, increasing surrounding Automotive Incentives property values and revitalizing communities. The bill extends non-liability protections to HB 400 amends the Kentucky Jobs Retention Act (KJRA) by allowing property owners seeking to redevelop a site companies with projects related to where a release of petroleum, pollutants or automobile and parts manufacturing to contaminants has occurred. seek economic development incentives regardless of their location in Kentucky. To Protecting Energy Jobs qualify, proposed projects must have at HB 559 encourages job retention and least 1,000 full-time employees and an expansion by endorsing the recycling of investment of at least $100 million. uranium tails and spent nuclear fuels at the DEFEATEDANTI-BUSINESS LEGISLATION Chiropractic Mandate Anti-Arbitration HB 202 would have increased health care costs, particularly on small HB 88 would have severely undermined the business owners, by mandating a minimum reimbursement rate and co-pays arbitration process in Kentucky, forcing employers for chiropractic services. This would have created a slippery slope enabling to litigate before they arbitrate and further increasing other providers to demand similar privileges from the legislature. Passed the legal fees. Passed the House; defeated in the House, defeated in the Senate. Senate. UNFINISHED BUSINESS CHAMBER-SUPPORTED LEGISLATION

Charter Schools Angel Investment HB 77 would have authorized charter HB 113 would have extended tax credits to schools, which are independent schools individual investors who further the estab- designed to provide tuition-free public lishment or expansion of small businesses, education choices to parents and students. create additional jobs and foster the devel- Charter schools could help areas with opment of new products and technologies. consistently low-performing schools. Not Not considered by the House. considered by the House. Employee Misclassification Teacher Workforce SB 77 would have clarified the definition of SB 122 and SB 132 would have made great an independent contractor, creating a fair, strides in correcting two antiquated personnel straightforward procedure that streamlines policies that can make it difficult to remove compliance and ensures a level playing field poor performing teachers from the classroom: for employers. Passed the Senate; not automatic tenure and the termination and considered by the House. suspension appeals process. These measures would have helped ensure we have qualified Limiting Debt Kentucky Chamber Board Member and Health and teachers in every classroom, increasing the Wellness Council Chair John Harryman spoke in SB 1 would have capped the state debt limit quality of education for our future workforce. support of HB 289 at a news conference in the Capitol. at 6% of General Fund revenues. Although SB 122 not considered by the Senate. SB Rep. introduced HB 289, a statewide SB 1 did not become law, the biennial smoke-free law that would have prohibited smoking in 132 passed the Senate; not considered by indoor public places. budget passed by the General Assembly the House. significantly reduces debt levels. Passed the Smoke-free Senate; not considered by the House. Early Graduation HB 289 would have created a statewide SB 86 would have allowed students who smoke-free policy that prohibits smoking in Alternative Fuel Incentives meet specific academic criteria to graduate indoor public places. Smoking is not only HB 246 would have created incentives for high school early and attend a public two-year killing us, it is bankrupting us through higher the construction of components used in or four-year postsecondary institution. The bill productivity costs, insurance premiums and alternative energy production and energy was amended to include a requirement to tax bills. Not considered by the House. efficiency projects. Passed the House; not raise the dropout age to 18. Passed the considered by the Senate. Senate prior to amendment; passed the Expanded Gaming House as amended; not reconsidered in the SB 151 would have given Kentuckians the Regulatory Reform Senate as amended. opportunity to vote on a constitutional HB 450 would have provided that adminis- amendment to expand gaming as a way to trative regulations declared by the executive Raising the Dropout Age help stem the loss of jobs in the Common- branch would not impose undue costs and HB 216 would have phased in a process to wealth’s signature equine industry. Failed in fees on Kentucky businesses. Not considered raise the mandatory school attendance age the Senate. by the House. to 18, keeping students in school and working toward a diploma. SB 109 would Medical Review Panels have made raising the dropout age to 18 HB 361 would have established an optional for local districts. As amended in independent medical review panel process the House, the bill would have phased in the for lawsuits against long-term care facilities, age requirement after the initial optional providing a screen for frivolous lawsuits period for school districts expired. Attempts without limiting access to the courts. Rising to compromise were unsuccessful. HB 216 costs associated with medical malpractice passed the House; not considered by the liability continue to take a significant financial Senate. SB 109 passed the Senate prior toll on Kentucky’s health care industry, to amendment; passed the House as resulting in increased costs for businesses amended; not reconsidered by the Senate and consumers. Not considered by the as amended. House. Investing in Great Teachers Worksite Wellness Program SB 11 would have provided financial rewards HB 549 would have helped address high for teachers and students of Advanced Place- employer health care costs by giving ment courses in science, technology, companies a nonrefundable tax credit equal engineering and math, with a goal of encourag- to 50% of the cost of offering a wellness ing students to pursue STEM careers. Passed program to employees. Not considered by the Senate; not considered in the House. the House.

False Claims E-Verify Utility Rate Increases Energy Cost Increases HB 401 would have created lucrative HB 5 would have created a more onerous HB 41 would have driven up the cost of HB 404 would have driven up electric financial incentives for employees to requirement in Kentucky than other states residential and business utilities by rates by treating coal ash that comes become “whistleblowers” to allege fraud by requiring any company doing business removing franchise fee agreements from the generation of electricity at and would have encouraged frivolous with a public agency – including any state between local municipalities and utilities power plants as a hazardous waste. lawsuits against employers who do or local government, school board, and spreading the costs of those Defeated in the House. business with the state. Passed the university or publicly created board – to agreements among the utilities’ entire House; defeated in the Senate. use the federal E-Verify system. Passed rate base. Defeated in the House. the House; defeated in the Senate. Kenneth Winters Mike Wilson David Williams Jack Westwood Robin Webb Johnny Turner Katie Stine Kathy Stein Brandon Smith Tim Shaughnessy Dan Seum Dorsey Ridley Jerry Rhoads Joey Pendleton R.J. Palmer Vernie McGaha Robert Leeper Alice Kerr Ray Jones Tom Jensen Ernie Harris Denise HarperAngel David Givens Carroll Gibson Julie Denton Perry Clark Julian Carroll Joe Bowen Walter Blevins BILLS SENATE LEGISLATOR at lrc.ky.gov. floor voteforeach house.To accessthelanguageofbillshighlightedinthisdocument,Kentucky Chamberinvitesyout inthe of abillmaybesignificantlyalteredduringthelegislativeprocess.Unlessotherwisenoted,legislationreferenced Session. Althoughwetookpositionsonseveralbills,thevotingrecordincludesonlythosethatreceivedafullvotebeforeth The rollcallvotesyouseeinthisrecordrevealhowlegislatorsvotedonbillstheKentucky Chamberpubliclysupportedoropp EXPLANATION OF BILLS USED IN VOTING RECORD VOTING IN USED EXPLANATION OFBILLS Find outhowyourlegislatorsvotedonkeybusinessissues 2012 RECORD VOTING encourage legislatorworkforlawsthat how theyvoted.Didyourstate bly. Findyourlegislatorson fortheiractionsintheGeneralAssem- them accountable with theknowledgetoevaluateyourlegislatorsandhold vote. The objectiveofthisinformationistoprovideyou opposed bytheChamberinadvanceoflegislative ness community, andeach onewaspubliclysupportedor were chosen forhavingsignificantmeaningtothebusi- bills canbefoundontheprecedingpages.These bills 2012 Kentucky GeneralAssembly. Descriptionsofthese received afullvoteintheHouseorSenateduring knowledge overtoyou–theconstituent. business climate.Butnowweturnthat and belief thatknowledgeiskeytoasuccessfulstate employers andpolicymakers.We doallofthiswiththe legislators, creatingavaluabledialoguebetween informative legislativebriefsandpersonallymeetwith provide experttestimonyat and bad–legislationmayhaveonemployers.We informs legislatorsofthepotentialimpact–bothgood wealth. That’s whytheChamber’s PublicAffairsteam about abillanditspotentialimpacttotheCommon- climate. It’s crucialtheymakewell-informeddecisions hundreds ofbillsthatcouldaffectKentucky’s business EACH LEGISLA The Chamberhascompiledalistofkeybillsthat job growthoractcontrarytoyourinterest? CHAMBER POS R-Russell Springs R-Bowling Green D-Elizabethtown D-Prestonsburg R-Georgetown D-Madisonville BILL NUMBER R-Nicholasville D-Hopkinsville TIVE SESSION R-Greensburg R-Manchester R-Owensboro D-Winchester D-Henderson R-Burkesville R-Crestwood R-Shelbyville R-Southgate R-Leitchfield D-Morehead D-Lexington R-Lexington D-Louisville D-Louisville D-Louisville D-Louisville D-Frankfort R-Louisville R-Louisville R-Lebanon D-Grayson DISTRICT R-Erlanger D-Pikeville I-Paducah R-London R-Hazard R-Murray R-Berea R-Union ITION committee meetings,

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X X Student Achievement a e Susan Westrom Alecia Webb-Edgington David Watkins Tommy Turner John Tilley Tommy Thompson Greg Stumbo Wilson Stone Fitz Steele Smart Rita Kevin Sinnette John Short Carl Rollins Tom Riner Steven Riggs Ryan Quarles Ruth AnnPalumbo Darryl Owens Sannie Overly Fred Nesler Mike Nemes Lonnie Napier Tim Moore Terry Mills Charles Miller Michael Lee Meredith Thomas McKee Lee Stan Martha King Thomas Kerr Dennis Keene Wade Hurt Brent Housman Melvin Henley Richard Henderson Mike Harmon Keith Hall Sara BethGregory Derrick Graham Jim Glenn Danny Ford Joseph Fischer Bill Farmer C.B. Embry Teddy Edmonds Bob DeWeese Jim DeCesare Robert Damron Ron Crimm Leslie Combs Larry Clark Mike Cherry John Carney Thomas Burch Linda Belcher John Arnold Royce Adams Julie Adams LEGISLATOR BILLS HOUSE CHAMBER POS D-Bowling Green D-Bowling R-Bowling Green D-Shepherdsville R-West Paducah R-Campbellsville D-Elizabethtown R-Mount Vernon R-Elizabethtown D-Prestonsburg D-Jeffersonville D-Brandenburg R-Tompkinsville D-South Shore D-South R-Williamsburg D-West Liberty R-Harrodsburg D-Nicholasville D-Sandy Hook D-Sandy D-Middlesboro R-Morgantown R-Fort Thomas R-Georgetown BILL NUMBER D-Hopkinsville R-Hopkinsville D-Owensboro D-Owensboro D-Wittensville R-Jamestown R-Brownsville D-Providence D-Henderson R-Winchester R-Fort Wright R-Bardstown R-Shelbyville D-Lewisburg D-Scottsville D-Covington R-Burlington D-Cynthiana D-Greenville R-Monticello D-Richmond R-Pembroke D-Dry Ridge D-Dry D-Lexington D-Lexington D-Lexington D-Lexington R-Lancaster R-Lexington R-Lexington D-Princeton R-Somerset R-Taylor Mill D-Louisville D-Louisville D-Louisville D-Louisville D-Louisville D-Louisville D-Louisville D-Louisville D-Louisville D-Frankfort D-Hindman D-Maysville R-Louisville R-Louisville R-Louisville R-Louisville R-Louisville R-Louisville D-Glasgow D-Lebanon R-Prospect R-Florence R-Paducah D-Mayfield R-Flat Lick DISTRICT D-Jackson R-Erlanger D-Pikeville R-Grayson D-Bedford D-Ashland R-Danville D-Midway D-Benton R-Harned D-Sturgis D-Shively D-Shively D-Hazard D-Murray R-McKee D-Phelps R-Hyden D-Wilder D-Paris ITION

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No No No No No No No No No No No No No No No No No No No Prescription X X X X X X X X X X X X X Drug Abuse es Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye No False X X X Claims es Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye No No No No No No No No No No No No X X X X X X Early Graduation

es Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye Regulatory X X Reform

es Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye Retirement X X X X X Reform es Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye No No No No No No No X X X X X X X Budget es Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye

X X X X X X Unemployment Insurance es Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye s Ye

X X X X X X X X X X X X X X X X X X Career-based Education Online resources How a bill becomes a law

DURING THE LEGISLATIVE SESSION, 1 2 3 the Kentucky Chamber helps guide legisla- Bill is introduced by the Committee on Committees Bill is reported from tion to improve our members’ bottom lines. State Senate or House of sends bill to committee. committee or left to die. Through newsletters and e-communica- Representatives. tions, we keep our membership up to date on initiatives that impact the business com- munity. Here are some additional resources:

kychamberblog.com Legislation Fails Visit the official public affairs blog of the 6 5 x 4 Kentucky Chamber throughout the year to Rules Committee places on receive timely updates on legislation and Bill is given second reading Bill is given first reading and order of day for a vote or and sent to Rules Committee. placed on calendar. issues affecting your business. recommits bill to committee.

kentucky.gov The state of Kentucky’s official website is a Bills in one chamber of the which recommits it to the commit- resource for Kentucky government as well General Assembly can be either tee it came from or another as education and doing business in the 8 new bills filed by a member of that committee. chamber or bills that have been state. 7 If passed by both House If passed, bill introduced and passed in the When a bill gets its third reading, it and Senate, bill goes to the other chamber and which must be can be called up for a vote. If it is goes to other governor.ky.gov Governor. approved by both the House and passed, and has already been chamber to go The Governor’s website provides constituents Senate to become law. passed by the other chamber, it through same goes to the governor for signature. with up-to-date news, issues and cabinet process. The Committee on Committees in If it has not yet been passed by information. both House and Senate are pow- the other chamber, it goes there erful committees chaired by the for approval, and if approved, to 9 Speaker of the House and the the Governor. thinkkentucky.com President of the Senate. They The website for the Cabinet for Economic Bill is either signed by decide to what committee particu- If one chamber changes a bill that Governor, becomes law lar bills are sent. The fate of a bill was already approved by the other, Development is an indispensable source for without signature or vetoed. can sometimes be determined by it must go back to the chamber in programs and services available to busi- which committee gets the bill. which it originated for approval. nesses, including existing businesses, This is called concurrence. When a bill is sent to a committee, newly locating companies, start-ups, and it can be reported out of a com- When the Governor gets the bill, small and minority businesses. mittee with a favorable or unfavor- the Governor can sign it, veto it or able report. It can also be refuse to act upon it. If the Gover- 10 amended or, in the Senate, re- nor signs the bill or does not act lrc.ky.gov ported out of the committee with upon it, it becomes law. The Legislative Research Commission If vetoed, bill goes back to no opinion. A bill can also be voted chambers. If veto is over- (LRC) is the Kentucky legislature’s home down. If a bill is not called up at all, If the Governor vetoes the bill, the ridden by a constitutional it simply dies in committee. bill goes back to the Legislature. page. It provides contact information for majority in both House and The veto can be overridden by a your legislators, the current legislative cal- Senate, it becomes law. The Rules Committee in both constitutional majority of both the Kentucky House and Senate is another House and the Senate (at least endar and the legislative record for current Revised powerful committee chaired by the 51 House votes and 20 Senate and past sessions. Statutes House Speaker and the Senate votes). President. When a bill gets its sec- ond reading, the Rules Committee If the Governor’s veto is not x can delay the bill coming to the overridden, the bill does not floor for a vote of all the members, become law. Legislation Fails

Kentucky Chamber Key Investors

COMMONWEALTH PARTNERS CHAIRMAN’S CIRCLE

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TRUSTEES

AK Steel Corporation Farmers Capital Bank Corporation Kentucky Spirit Health Plan NACCO Materials Handling Group Steel Technologies, Inc. Alliance Coal, LLC General Electric Company Kosair Charities Owensboro Medical Health System, Inc. Sumitomo Electric Wiring Systems Anheuser Busch Companies Gray Construction Lexington Clinic Passport Health Plan Sun Products Corporation Armstrong Coal Company, Inc. Gray Kentucky Television, Inc. Logan Aluminum, Inc Paychex, Inc. Sun Tan City Brenntag Mid-South, Inc. International Coal Group Louisville Bedding Company Peabody Energy Corporation UK HealthCare Century Aluminum of Kentucky, LLC Kentucky Community and Technical Lourdes Hospital Pikeville Medical Center Whitaker Bank, Inc. Coca-Cola Refreshment College System MAHLE Engine Components Planters Bank, Inc. Windstream Communications Columbia Gas of Kentucky, Inc. Kentucky Farm Bureau Insurance Maker's Mark Distillery, Inc. Ralcorp Frozen Bakery Products Dean Dorton Allen Ford, PLLC Kentucky League of Cities, Inc. Marathon Petroleum Company LP Signature HealthCARE Doe Anderson, Inc. Kentucky Medical Services Foundation,Inc. Mountjoy Chilton Medley LLP SRG Global TAX TALK Kentucky Chamber proposes tax changes to support economic growth

WITH THE CLOSE of the 2012 General Assembly, an issue of particular significance for Kentucky’s business community is expected to get more attention in the coming months: taxes. The governor’s Blue Ribbon Commission on Tax Re- form has started meeting with a goal of developing recom- mendations to reform the state’s tax code by late this year. The Kentucky Chamber is monitoring the process and has developed the following statement reflecting its position on the fundamental issue of tax reform.

A CLOSER LOOK Kentucky has an opportunity to take a close look at the realities of state taxes and spending, and develop a system that will help ensure the long-term sustainability of needed gov- ernment programs while building taxpayers’ confidence in how their money is being spent. There are several basic points that should be kept in mind during this process: • We’ve just experienced the worst economy in more than 75 years, resulting in revenue shortages for Kentucky and most other states. • Kentucky’s competitiveness is key. In 2009, the Kentucky Chamber, led by President and CEO Dave Adkisson (pictured above), released a review of state spending called the • We can’t just look at taxes; we have to look just as hard Leaky Bucket report, which documented a shift in state spending priorities away from investments in education. The report was followed up at state spending. State spending has grown faster, on last year with Building a Stronger Bucket. average than the state’s economy over the past 20 years. investments in education and toward programs that, in sev- The economic growth necessary to produce more tax eral cases, represent what happens when you fall short on ed- KENTUCKY CHAMBER revenue cannot happen if Kentucky’s employers are put at a ucation attainment. TAX PRINCIPLES disadvantage through tax changes that hamper their ability The numbers: to expand and create or retain jobs. And both employers and • Between FY 1986-88 and 2012-14, K-12 education’s Since taxes significantly impact business deci- individual Kentuckians would face enormous tax increases – share of General Fund appropriations declined from sions that lead to job creation and retention, the between 12% and 25% (that is, $1 billion to $2.3 billion) 48.2% to 43.7%. Kentucky Chamber supports comprehensive tax under a proposal already put forward by one statewide or- • Over the same period, postsecondary education’s share reform in accordance with the following principles: ganization. That proposal is based on the notion that state declined from 16.9% to 12.2%. SUPPORT GROWTH AND COMPETITIVENESS taxes as a percent of the economy should be what they were A 2008 study by the Center for Kentucky’s state and local tax system should in 1991 – the highest level recorded in 21 years. Business and Economic Research, “Economic Growth in Ken- support growth-oriented tax policies that improve A frequently quoted report was prepared 10 years ago tucky: Why Does Kentucky Lag Behind the Rest of the the competitiveness of Kentucky businesses in for the General Assembly by University of Tennessee econo- South?” concluded: the national and global marketplace. mist William F. Fox. Although Fox recommended some tax “The empirical analysis contained in this report, our com- increases, he noted that, “tax burdens should be kept rela- parison of Kentucky with other states and our conversations REDUCE THE COST OF CAPITAL tively low to increase the chance that business can be suc- with site consultants all lead to the same conclusion – the pri- The tax code should encourage investment, as it cessful in Kentucky and so that the taxes do not inhibit the mary limitation to economic growth in Kentucky is the low is the key to increased growth and productivity as location or expansion of economic activity in Kentucky.” skills of workers in Kentucky. Until this problem is addressed all well as higher wages for Kentuckians. Several of the recommendations of the Fox report were other efforts at economic development will be unsuccessful.” enacted by the 2005 Gen- The biggest examples of SIMPLIFY TAX CODE eral Assembly as part of a unsustainable spending pat- The tax code should be simplified with the goal of significant overhaul (the terns can be found in the reducing compliance costs for the private sector. most recent major reform) state Medicaid and correc- Complex taxes impose costs on businesses that of the state tax system. tions programs and in public either reduce the return on investment or are These included the tax employee health insurance passed on to consumers and workers. treatment of limited liabil- and pension costs. And, ity corporations and while progress has been PROMOTE FAIRNESS changing the way compa- made in reining in the in- Kentucky’s tax system should promote fairness by nies were classified for pay- creases, spending in these creating a level playing field on which Kentucky ing corporate and sales areas continues to outpace businesses can compete. Double taxation, or taxes. In many circum- the growth in the overall pyramiding, should be prohibited, and tax expendi- stances these changes re- state budget. The Kentucky Chamber’s review of state spending, which began in tures should be carefully studied to determine sulted in higher taxes for 2009 with the Leaky Bucket report and continued in 2011 with It should be noted that effectiveness. businesses, though some Building a Stronger Bucket, has documented a shift in state spending Kentucky ranks 30th in the relief was provided for priorities away from investments in education and toward programs nation in the amount of its that, in several cases, represent what happens when you fall short on SUPPORT REVENUE NEUTRAL CHANGES small businesses the follow- education attainment. residents’ personal income Changes in the state tax code should be revenue ing year. that goes to government neutral and undertaken only to increase fairness Now, because state revenue growth has slowed, some argue spending, but Kentuckians earn less than the residents of 43 and competitiveness and not to simply generate that Kentucky’s business taxes should be increased. But one other states. State government has grown beyond the capac- additional state revenue. While tax changes point that can get lost in these discussions is that the slowing ity of citizens and businesses to support it. cannot guarantee tax neutrality for every revenue growth in the past few years has been the result of the The bottom line: unless this spending is brought under Kentucky business, the goal should be not to worst economic downturn the nation has experienced in more control, it really doesn’t matter how much tax revenue is raise net taxes on the business community. than five decades. It is doubtful that any state could create a raised. The “leaks” in the spending bucket will ensure that system that would protect it from the impact of such a no amount is enough. CONTINUE TO FOCUS ON SPENDING recession. The Chamber supports the long-term need for compre- To keep taxes competitive, it is critical to examine Much of the early rhetoric surrounding the tax commis- hensive tax reform. Our members tell us the tax system is expenditures and align them with economic sion’s deliberations speaks of “tax reform” – a phrase that is too complex and compliance is too costly, while economic realities. Reforming the tax code must be coupled heard by many to mean “tax increase.” But as a practical mat- development experts say our code puts us at a competitive with a continued commitment by the legislature to ter, and as Kentuckians have seen in the past, any benefits re- disadvantage because it punishes economic productivity. For reform and prioritize government spending. sulting from tax reform are likely to dissipate into thin air example, local occupational taxes are putting Kentucky’s unless close and serious attention is paid to state spending. major metropolitan areas at a competitive disadvantage with their peer cities in the South. THE LEAKY BUCKET The most sensible and stable way to increase revenue is The Kentucky Chamber’s review of state spending, by attracting new businesses and growing existing ones. which began in 2009 with the Leaky Bucket report and con- To overcome our competitors, the totality of the current tax tinued in 2011 with Building a Stronger Bucket, has docu- burden on Kentuckians – including state and local taxes – mented a shift in state spending priorities away from must be scrutinized. Chamber’s efforts result in significant cost savings to Kentucky businesses

BY THE NUMBERS These new sales taxes are of particular Nearly $20,000 concern to business because economists at the Legislation Annual Savings to Ky. Average Annual Savings University of Kentucky estimate that 50% of saved per business Business Community per Kentucky Business the sales taxes collected in Kentucky are paid Unemployment insurance THE KENTUCKY CHAMBER’S advocacy $609 million $17,850* by business. during the 2012 Session of the Kentucky Gen- tax avoided (HB 495) That means the estimated $115 million eral Assembly saved the Kentucky business in new sales taxes imposed by HB 127 would Health insurance mandate community an estimated $704.1 million per $3.1 to $7.2 million $996* have cost the Kentucky business community defeated (HB 202) year – an average of $19,790 per year for a over $57.5 million per year in additional Kentucky business with 50 employees, and Expanded sales tax taxes. With approximately 93,000 businesses $57.5 million $618 $395 per employee. Here’s a breakdown of defeated (HB 127) in Kentucky (according to the U.S. Census how the Chamber’s work generated real savings Bureau), the Chamber’s successful opposition for the business community. Spending reductions in to HB 127 saved each business in Kentucky state budget advocated by $30.4 million $326 an average of $618 per year in sales tax. Chamber (HB 265) UNEMPLOYMENT INSURANCE ($57.5 million divided by 93,000 busi- TAX AVOIDED TOTAL SAVINGS $704.1 Million $19,790 nesses.) HB 495 prevents a $609 million tax in- The Chamber was also successful in *Savings estimated for a business with 50 employees. crease on Kentucky employers by creating a supporting HB 1 (passed during the special permanent mechanism to pay back the inter- session of the General Assembly). HB 1 est the state owes to the federal government STATE BUDGET COST SAVINGS addresses the prescription drug epidemic that for unemployment insurance. The bill requires Program Area Average Annual Business Share Avg. Annual Savings drives up medical costs for employers and the governor to seek a cap on federal taxes and Savings (40%) to Ky. Business** creates serious workplace safety issues. provides additional tax relief in future years. Although not included in the above calcula- $68.81 If the bill had not passed and Kentucky did Corrections $16 Million $6.4 Million tions, the business community will also see not repay the interest owed to the federal gov- savings thanks to the passage of this legislation. ernment, an additional federal UI tax of $357 Public Employee $60 Million* $24 Million $258.06 per employee would have been imposed on Health Insurance SPENDING REDUCTIONS Kentucky employers – this translates to IN STATE BUDGET TOTAL SAVINGS $76 Million $30.4 Million $326.87 per business $17,850 per year in additional taxes for an In its 2009 Leaky Bucket report, the employer with 50 employees. *Growth in $1.4 billion public employee health insurance plan reduced from 7.5% per year to 2% per year. Chamber pointed out that half of all growth ** Based on 93,000 businesses in Kentucky’s state budget since 2000 has HEALTH INSURANCE MANDATE been in three areas: corrections, Medicaid and DEFEATED HB 495 prevents an $609 million tax increase on public employee health insurance. HB 202 would have increased health care Kentucky employers by creating a permanent mechanism The Chamber advocated a number of costs, particularly on small business owners, to pay back the interest the state owes the federal common sense solutions for curbing this by mandating a minimum reimbursement rate growth, and the 2010 General Assembly re- and co-pays for chiropractic services. The ac- government for unemployment insurance. sponded and enacted spending reductions in tuary for the Kentucky Department of insur- each of these three areas over the 2011-12 bi- ance estimated that this mandate would key provision impacting Kentucky business • Security services ennium. These actions were continued in the increase health insurance premiums by $10.77 would have imposed the sales tax on the fol- • Exterminating and pest-control services 2013-14 biennial budget with continued sav- to $19.92 per person per year, meaning a busi- lowing services to generate an estimated $115 • Chartered air flight services if a pilot is ings in corrections and the rate of growth in ness with 50 employees would have to pay up million per year in additional state revenue: furnished, including hot air balloon public employee health insurance reduced to to $996 per year in additional health insur- • Golf course greens fees and member- flights 2% per year (down from 7.5% per year in the ance costs. ship fees in private golf clubs and pri- • Landscaping services, excluding lawn- previous budget). vate country clubs care services Based on data compiled by Ernst and EXPANDED SALES TAX AVERTED • Janitorial services, including carpet, • Non-coin operated automotive wash- Young, Kentucky businesses contribute 40% HB 127: This bill would have made a upholstery and window cleaning ing services and waxing services of all Kentucky tax revenue, meaning this $76 number of substantial changes in Kentucky’s • Garment alteration and garment repair • Commercial linen services, excluding million per year in spending reductions will tax code. In addition to increasing individual services uniform services and linen services to save Kentucky businesses $30.4 million per income tax rates for higher incomes and • Non-coin operated laundry and dry- hospitals and nursing homes year, or an average of $860 per business per phasing out the tax exemption (up to cleaning services • Limousine services if a driver is in- year ($30.4 million divided by 93,000 busi- $41,110) for public and private pensions, the • Armored car services cluded nesses in Kentucky).

The Kentucky Chamber of Commerce is the only business association WeWWee make it itour business in the state advocating for companies of all sizes and industries across thethe Commonwealth, oofferingffffefering our members: to protect yours. ACCESS our business to fellow business leaders, lawmakers, business education and savings programs. to protect INFLUENCE through member businesses and our leadership to advance pro-business legislation and shape the dialogue at the Capitol.

yours. PROTECTION from legislation that stifles growth and hurts your bottom line.

EachEach yeayear,rr,, our advocacyadvocacy eeffortsffortsforts helphelp save KentuckyKentucky companies millions of dollars. Get involved in helping us create a better climate for business, and get real results! Visit kychamber.comkychambermberr..com to learn more.