1997 Kentucky Annual Economic Report
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Contents
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| Kentucky’s
Per Capita Income: Catching Up to the Rest of the Country |
| Mark C. Berger |
| "A goal among many leaders in Kentucky is to
see the state’s per capita income equal or exceed the national per capita income
average. Although Kentucky has narrowed the income gap recently, its per capita income
still stands at only 81 percent of the national average. Matching this national level
would require significant changes in Kentucky. The state would need large increases in the
number of high school and college graduates in the state, and/or in the percentage of
private sector employment per capita. Based on previous rates of increase, it will still
be many years before Kentucky’s per capita income is equal to the national
average."
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| Quarterly
Forecasts for the Kentucky Economy, 1997-1999 |
| Eric C. Thompson |
| "The Kentucky economy should see
moderate growth in 1997. Gross state product is forecast to grow 2.4 percent, and total
employment and personal income are expected to grow by 1.8 percent and 2.2 percent,
respectively. The services and retail trade should experience the largest growth among all
industries, and the manufacturing sector is forecast to be a source of major improvement
in the Kentucky economy. The most rapid occupation growth is forecast for service
occupations, with marketing and sales occupations also showing strong growth. Professional
specialty occupations that require a high level of education are also expected to grow
substantially over the next three years. Finally, over the next three years, population in
Kentucky is forecast to grow by 0.8 percent annually with the largest increases in older
age groups."
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| Kentucky
General Fund Revenue Estimates and Accuracy |
| Manoj Shanker |
| "Providing accurate revenue
forecasts is an important part of the budget process for the Commonwealth of Kentucky.
Kentucky’s process of estimating state revenues comprises models which take into
account the economic environment, including national conditions, in which revenues will be
collected. These models then provide forecasts for all the major sources of general
revenue, including individual income tax, sales and use tax, corporate income tax, coal
severance tax, property tax, and several other revenue sources. Since the late 1970s,
accurate revenue forecasts have become increasingly important as state law now requires
state funds to be budgeted before they are spent. For fiscal year 1996, the absolute
percentage error between the estimated and actual revenues was 1.27 percent."
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| U.S.
Economy Performs Relatively Well in 1996 |
| J. Robert Gillette |
| "During 1996, the U.S. economy saw
moderately high growth with low inflation and historically low unemployment. Gross
domestic product is forecast to have grown 2.8 percent for 1996. The economy created
approximately 2.5 million additional jobs in 1996, a 2.1 percent increase from 1995
levels. Inflation again remained low, around 3.0 percent, and the Federal Reserve was
reluctant to change interest rates throughout the year on signs of a slowing economy. The
forecast for 1997 also calls for moderate growth with low unemployment and low inflation.
Gross domestic product should average just above 2 percent growth. Unemployment rates
should stay in the mid-5 percent range, and inflation will again remain low, hovering
around 3.0 percent."
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| Welfare
Reform in Kentucky: Has “Welfare as We Know It” Changed? |
| William H. Hoyt and
Kathleen Toma |
| "The recently passed welfare
reform act will place greater responsibility for welfare programs on states, changing
funding from entitlements to block grants, imposing strict limits on receiving welfare
benefits, and creating work requirements. Many recipients will likely have difficulty in
the transition from welfare to work. Many of them have never held a job, and low education
levels among recipients will also be a barrier to work. Furthermore, some regions in the
state will not be able to absorb these former recipients into the labor market. The large
urban areas of the state will have the best employment opportunities, and migration out of
rural areas may occur as former recipients there may not find work. The work participation
requirements will also place a burden on the state. Perhaps the greatest difficulty will
be finding and paying for child care for recipients who must work."
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| More
Efficient Financing of Higher Education in Kentucky: The Case for Tuition Increases |
| Dan A. Black and Amitabh
Chandra |
| "A case for the elimination of
tuition subsidies at public universities in Kentucky can be made after studying their
impact on equity, efficiency, competition, and the level of educational quality. We
describe the rationale for determining tuition schedules in Kentucky and demonstrate
various inefficient consequences of the current system. Insofar as higher education in the
state should be subsidized because certain students are financially constrained, it makes
little sense to provide that subsidy to all students regardless of income levels.
Eliminating the “need-blind” component of this subsidy would be the first
requirement of any response to the current problem of funding. It would also free up
millions of dollars of revenues that could be returned to taxpayers or used for
expenditures in other areas of need."
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| The
Internationalization of the Kentucky Economy |
| Michael Webb |
| "In the 1980s and continuing into
the 1990s, Kentucky has seen a growing export boom, driven largely by automobiles and
industrial machinery. Direct merchandise exports account for about seven percent of state
income. Including indirect exports, which are Kentucky products processed elsewhere, that
number probably doubles. In addition, by 1995 foreign-affiliated firms were providing
almost 61,000 jobs in Kentucky. While manufactured exports have increased, Kentucky
agricultural goods and commodities fell during the first half of the 1990s. Most of the
goods exported from Kentucky went to Canada and East Asia, which replaced Western Europe
as the second most important destination. Likewise, Canadian and Japanese firms have been
the key new foreign investors in Kentucky from 1991 to 1995, respectively providing 33
percent and 42 percent of the rise in foreign investment."
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