SSTI Digest

Geography: Kentucky

TBED People

John Hindman announced his resignation as secretary of the Kentucky Cabinet for Economic Development.

SSTI Job Corner

Complete descriptions of these opportunities and others are available at

Two Reports Highlight Opportunities for State Broadband Policies

Although the U.S. broadband infrastructure has expanded rapidly over the past decade, 45 percent of rural areas still lack access to high-speed Internet services. A recent issue brief from the National Governors Association (NGA) Center for Best Practices provides a number of strategies that have proven effective in expanding broadband access, particularly in underserved rural areas.
The brief highlights a number of state efforts that have been successful in expanding and improving service in recent years. These include the California Broadband Initiative, ConnectKentucky, Maine's ConnectME Authority and the New York State Council for Universal Broadband. Together, these profiles offer an overview of how states are approaching the digital divide.
NGA also presents a number of specific strategies that can be implemented in states with high-speed Internet gaps to create a comprehensive broadband access initiative. For example, the report provides a guide to 14 state tax credit programs that have been used to increase demand for broadband services or to encourage the development of new broadband infrastructure.
Other strategies discussed in the brief include:

People & TBED Organizations

The U.S. Department of Commerce's Economic Development Administration (EDA) recently announced Ben Franklin Technology Partners (BFTP) as the winner of the "Excellence in Technology-led Economic Development" award, as part of EDA's Excellence in Economic Development Awards 2008. BFTP, created in 1983, has regional offices in Lehigh Valley, Philadelphia, Pittsburgh and State College.

Recent State Budget Actions Produce Mixed Results for TBED

A growing number of state governments face revenue uncertainties in the near future. More than half now expect budget deficits and shortfalls in the upcoming fiscal year and beyond. Despite the bleak outlook, however, legislators nationwide are continuing to invest in science and technology with many lawmakers projecting high returns to their state in the coming years. Following are highlights of TBED investments and reductions in recently approved budgets in Kentucky, Maine and Nebraska.
Recognizing the statewide economic benefits of strategic investments in university research, Kentucky legislators concurred with Gov. Steve Beshear’s proposal to continue support for the Bucks for Brains initiative. Lawmakers approved $60 million in bonds under the fiscal year 2008-10 biennial budget agreement to expand the state’s endowment matching program used to attract high-quality researchers. 
The total funds appropriation under the budget agreement for the Economic Development Cabinet is $29.3 million in FY 2008-09 and $31.8 million in FY 2009-10. The budget agreement also includes language directing interest income earned on the balances in the High Tech Construction/Investment Pool and loan repayments received to be used to support the Department for Commercialization and Innovation. The approved Capital budget provides another $20 million for the Economic Development Cabinet for projects and loans approved by the Kentucky Development Finance Authority.
Gov. Beshear vetoed $1.2 million each fiscal year in New Economy Funds from the High-Tech Investment Pool to administer the ConnectKentucky program, a statewide broadband initiative. The governor expressed support for the initiative in his veto message but objected to the lack of oversight in spending for the program. Instead, he directed the Cabinet for Economic Development to structure a funding plan and identify program needs for the continuation of the initiative.
The Office of Energy Policy would receive $13.4 million over the biennium under the budget agreement, with $3.5 million each fiscal year for the Energy Research and Development Fund. Projects slated for funding include research into clean coal, development of alternative transportation fuels and other coal research targeted solely to Kentucky’s Local Government Economic Development Fund-eligible counties in coordination with state universities and related community and technical college system programs.
Also included in the appropriation to the Office of Energy Policy from the Local Government Economic Development Fund is $2 million over the biennium to be matched with federal or private funds to support R&D activities at the University of Kentucky Center for Applied Energy Research directed toward development and demonstration of technologies for carbon management. Technologies may include chemical or mechanical capture, chemical or biological utilization and mitigation through the use of alternative fuel sources.
The budget agreement cuts base funding for state universities and the Kentucky Community and Technical College System by about 3 percent in FY 2008-09 with level funding remaining in FY 2009-10, the Louisville Courier-Journal reports.
The FY 2008-10 approved biennial budget is available at:
Several state initiatives supporting TBED fell victim to budget cuts in a package of revisions to the fiscal year 2008-09 budget, LD 2289, signed into law earlier this month by Gov. John Baldacci.
Facing a $190 million revenue shortage, legislators reduced funding for numerous state programs, including $220,000 in FY09 for the Office of Innovation’s Maine Technology Institute Innovation Cluster Program. There is an additional reduction in funding for management and operating costs of a bond program administration by the Maine Technology Institute by $300,000 in FY08 and $150,000 in FY09. Funding for research projects at the Centers for Innovation is reduced by $18,000 over the FY08-09 period.
The supplemental budget also reduces Maine Manufacturing Extension Partnership funding within the Department of Economic and Community Development by $50,000 in FY08 and $80,000 in FY09 and reduces funding to the Maine Procurement Technical Assistance Center by $70,000 in FY09.
Lawmakers are expected to pass the final version of Gov. Dave Heineman’s Super Advantage proposal (LB 895) this week, according to the Nebraska Department of Economic Development. The bill aims to lure companies that create high-salary jobs that pay well above the state’s average wage by expanding tax incentives.
The legislation stipulates that all businesses qualify for the tax breaks, excluding retail. Companies are required to create 75 new high-salary jobs with a $10 million investment or 50 new high-salary jobs with a $100 million investment.
The jobs would have to pay 150 percent of the state average wage, which is at least $50,700 based on current wage levels, according to the Omaha World-Herald, or 200 percent of the average wage in the county where the business is located. Qualifying companies will receive a 15 percent tax credit and 10 percent wage credit. Additional benefits include direct sales tax refund and a 10-year exemption on all tangible personal property.

Mayor Proposes City Funded College Scholarships as Economic Development Tool

Lexington, Ky., Mayor Jim Newberry announced last week a college scholarship plan targeting students pursing degrees in science, technology, engineering and math (STEM) fields as a means to transform the local economy into a globally competitive community by investing in the city’s youth.
The proposed Lexington First Fund would provide full tuition to every Fayette County high school graduate for up to four years at any institution of higher education located within an hour’s drive of Lexington. The only requirement is that students must pursue an associate or bachelor’s degree in a STEM field or a teaching degree in one of these fields. The idea is that by encouraging residents to pursue STEM fields, the local economy will reap the benefits of a highly skilled workforce. The plan also aims to promote attendance at local institutes of higher education and attract high-tech industries to the city.
Mayor Newberry hopes to produce the same impact that has already emerged in Michigan from a program still in its infancy, the Kalamazoo Promise scholarship. Beginning with the class of 2006, students enrolled in the Kalamazoo public school system from kindergarten through high school were eligible for four years of tuition and fees at any Michigan public college or university – regardless of their field of study. A report by the Community Foundations of America found that in the first 14 months of the program, enrollment in local high schools increased by 10 percent, 300 small businesses relocated to Kalamazoo, the value of homes increased by 7 percent, and 45 new teaching positions were created.
Since it was unveiled in 2005, the Kalamazoo Promise scholarship program has received widespread media coverage and has prompted several studies into the short- and long-term outcomes. The W.E. Upjohn Institute has been involved in research, evaluation and community mobilization efforts since the program’s inception, and a book is due later this year on the origins and initial impact of the program, including alignment of the community around its goals.
The major difference in the two programs, however, is that Mayor Newberry wants taxpayer money to fund the Lexington scholarships, and in Michigan, the program is entirely funded by a group of anonymous donors. A major part of the mayor’s campaign platform, the Lexington First Fund, is expected to be included in the new budget proposal for the upcoming fiscal year. The plan has received a tepid reception from some Urban County Council members, who must approve the plan, according to an article in the Lexington Herald-Leader. Members of the council questioned using city money to start a new program while facing a projected budget shortfall of $25 million to $30 million, the article states.
While it is undetermined at this point how much the program will cost the city, Mayor Newberry’s plan calls for support by both public and private contributions and requires recipients to seek available financial aid to reduce the scholarship amount. Similar to the Kalamazoo Promise, the Lexington First Fund would offer 100 percent tuition to students who have attended school in the county from kindergarten through 12th grade and provide up to 40 percent for those who have attended at least four years of high school.
A fact sheet with more information on the Lexington First Fund is available at:

2007 Election Results: New Governors Promote TBED Strategies; Ballot Items Reveal Mixed Results

The 2007 state elections resulted in two newly elected governors, both promoting TBED strategies as a means to grow the states’ economies. In both cases, the new governorships reflect a change in party affiliation. A third gubernatorial race resulted in the re-election of Gov. Haley Barbour to a second term in Mississippi.



Democratic candidate Steve Beshear defeated Republican incumbent Ernie Fletcher by a 59-41 percent margin. The former lieutenant governor, attorney general and state representative unveiled an economic development platform during his campaign that consists of three major components -- the Kentucky Jobs First Plan, Fueling Kentucky First and Putting Opportunity First.


Under the Kentucky Jobs First Plan, the state will focus on high-wage job growth through business attraction and retention. The plan will redirect some of the funds now spent on recruiting out-of-state businesses to helping existing businesses grow and expand. Other components of the plan include creating an R&D tax credit to cover a portion of Kentucky businesses’ research expenses and increasing the current venture capital tax credit from 40 percent to 50 percent of the investment.


Fueling Kentucky First, an energy independence plan, promotes the state's energy sector through investments in R&D and deployment of clean coal, alternative fuel and clean technology businesses in Kentucky. Gov.-elect Beshear proposes the creation of a $60 million Kentucky Energy Fund to help jumpstart these industries and $15 million in incentives, grants and research funding each year. The plan also calls for establishing a Secretary of Energy Independence position and creating a public-private partnership to focus on production of corn ethanol, bio-diesel and cellulosic ethanol.


The Putting Opportunity First Plan will establish more early-college high schools, fully fund colleges and universities, and increase advanced training opportunities. More information is available at



Republican Congressman Bobby Jindal was elected Louisiana’s 61st governor on Oct. 20, succeeding outgoing Democratic Gov. Kathleen Blanco, who did not run for a second term. The Governor-elect released an action plan for economic reform that includes investing in higher education, supporting university R&D and developing a quality workforce. Specifically, the plan proposes:

People & TBED Organizations

ConnectKentucky, a public-private partnership leading efforts to accelerate broadband availability and technology literacy throughout the Commonwealth, has formed a national umbrella organization called Connected Nation. In addition, René True has joined ConnectKentucky as director of operations, and Brent Legg has been added as director of state and local initiatives for Connected Nation. True previously served as executive director of the Office of Research and Information Technology in the Kentucky Cabinet for Economic Development.

People & TBED Organizations

The Northern Kentucky E-Zone has become a part of the Northern Kentucky Tri-County Economic Development Corp. The E-Zone will operate as a program of Tri-ED, with Casey Barach, the former head of E-Zone, leading the program as vice president of entrepreneurship services for Tri-ED.


Kentucky Gov. Ernie Fletcher named John Hindman, retired former vice president of strategic communications and public affairs for UPS Airlines, to run the state's Economic Development Cabinet.

Patents, Graduates Key to Fighting Kentucky's Persistent Poverty?

It’s no secret that research and education are important to a state’s economy, but for many poorer states, they may be even more vital than previously believed. A few recent studies suggest that increasing the number of patents and the education level of residents in a state could be a valuable first step in overcoming persistent poverty.

In a May 2006 working paper, Paul Bauer and Mark Schweitzer of the Federal Bank of Cleveland and Scott Shane of Case Western University argue that a state's stocks of knowledge, as measured by its patents and its high school and university graduation rates, are the most important determinants of state per capita income. The authors conclude that policymakers in states with lower incomes should focus their efforts on boosting these stocks of knowledge in order to build in-state wealth.


Economic development leaders in Kentucky also have been examining the Commonwealth’s consistent low ranking for personal wealth, and it would appear to be a prime candidate for such an approach. Kentucky is the sixth-poorest state in per capita income -- the same rank the state held 27 years ago. It also has struggled with low levels of educational attainment. In 2004, the state ranked 49th in the percent of adults with high school degrees and 44th in college graduates.


Researchers at the University of Kentucky's Center for Business and Economic Research (CBER) recently examined the impact of patents and educational attainment on the state’s economy in a report for the Kentucky Economic Development Partnership. CBER Director Kenneth Troske and researcher Kenneth Sanford collected data on Kentucky and its neighboring states over the past 35 years to find out why the Commonwealth has suffered from persistently low incomes and one of the slowest growth rates in the nation. The study reaffirmed the findings of the Bauer, Schweitzer and Shane study, concluding that although many factors have a significant impact on per capita income, stocks of knowledge – including patent capital per capita and percent of high school and college graduates – appear to be the most influential.


Sanford and Troske believe that, by building stocks of knowledge, Kentucky may finally be able to improve the incomes of more of its citizens. Their study reports that in 2004 the state earned only 85 percent of the U.S. average for per capita gross state product (GSP), a reflection of its low income levels. The authors’ model, however, estimates that if the state had possessed the U.S. average for patents and educational attainment, its per capita GSP might have been 96 percent of the U.S. average. Other variables, such as business climate, infrastructure, and state industrial structure, also correlated with income growth, but were less significant.


Future statewide economic development initiatives, Troske and Sanford conclude, should place a high priority on increasing the state's number of college-educated workers and encouraging innovative research. Kentucky currently offers several programs to encourage university and private R&D, such as the Kentucky Enterprise Fund and the Research Challenge Trust Fund. These programs have helped the state make progress in generating profitable intellectual property and introducing new technologies to the marketplace. Education levels, however, have long been a problem for Kentucky, and, according to another study, show little signs of improvement.


Tuition, Enrollment & the State Economy

A report from State Auditor Crit Luallen indicates that rising tuitions may be one factor to blame for the slow growth of the number of Kentucky's college graduates. In 1997, the state established a long-term goal for its efforts to improve higher education. The Kentucky Postsecondary Education Improvement Act declared that by 2020, the state would double its number of residents with a bachelor's degree. In a recent update on Kentucky's progress, however, Luallen predicts the state will not be able to reach that goal if current trends continue. In fact, the number of full-time undergraduate students enrolled at two- and four-year institutions had decreased by 900 since 2003. Though some growth has occurred at four-year colleges and universities, 45 percent of that increase was due to nonresident students, who frequently leave the state following graduation.


Luallen reports that high tuition may be discouraging many Kentucky residents from pursuing an undergraduate education. Since 2001, resident tuition at the state's four-year universities have risen more than 80 percent, compared with just 35 percent for the U.S. as a whole. During the same period, full-time undergraduate resident enrollment has significantly slowed. Much of the growth that has occurred has favored nonresident students who often find that even with the recent tuition hikes, Kentucky universities remain an affordable option among universities in the region. The report recommends restructuring the state's tuition levels to help residents enroll in the state's universities and to eventually improve the state's overall education level.


The Kentucky Long-Term Policy Research Center confirms Sanford and Troske's claim that improving the education level of the state's workforce could have substantial benefits for the economy. The group estimates that reaching the U.S. average in educational attainment by 2020 could result in a $71 billion increase in personal income and a $5.3 billion increase in state revenue. Luallen's findings suggest that adjusting tuition levels may help the state finally start generating that kind of growth.


Read "Why is Kentucky So Poor?: A Look at the Factors Affecting Cross-State Differences in Income," at:


Read the Kentucky State Auditor report on Tuition at:


Marvin Strong, Jr. announced he will resign as secretary of the Kentucky Cabinet for Economic Development, effective Jan. 31.