Kentucky is on the verge of surpassing its record for business investments, fueled by three separate billion-dollar announcements in early 2017.
Those investments carry more than $195 million in tax breaks and other incentives for a state struggling to fix a pension system estimated to be facing at least a $35 billion shortfall over the next 30 years. But state officials say the companies only get most of that money if they meet targets, thereby generating more state tax revenue.
On Wednesday, Braidy Industries Inc. announced plans to build a $1.3 billion aluminum plant in eastern Kentucky. Toyota recently said it would spend $1.3 billion to retool its Georgetown plant that produces its flagship Camry sedan and supports more than 8,000 jobs. And in January, online retailer Amazon said it would spend $1.4 billion to build a worldwide cargo hub in northern Kentucky.
Since January, 53 companies have pledged just over $5 billion on new facilities and expansions in Kentucky. The state's record for a calendar year is $5.1 billion in 2015, the final year of former Democratic Gov. Steve Beshear's term. If the businesses deliver as promised, they would add about 8,000 mostly full-time jobs to the state. Those jobs would average annual salaries of about $43,500, according to state records.
"It's only April and the Bevin Administration is already on the cusp of surpassing the all-time, full-year investment total for Kentucky," said Amanda Stamper, a spokeswoman for Gov. Matt Bevin. "This is only the beginning."
State officials are not getting these projects for free.
Taxpayers have pledged $43.5 million in incentives over the next 10 years for Toyota's expansion. Amazon will get a $40 million tax break over the next decade, plus another $3 million per year on jet fuel purchases thanks to a bill passed by the Republican-controlled state legislature. Braidy Industries is set to get $10 million in tax breaks over the next 15 years, plus an extra $15 million that lawmakers approved.
State officials say they don't know if they are setting a record for tax incentives this year because they don't track that statistic. Not all projects get a tax incentive.
Meanwhile, Bevin and state lawmakers are still searching for new revenue. Last year, Bevin signed budget cuts across most of state government, citing the pension crisis. In February, Bevin told lawmakers in his "State of the Commonwealth" address that his plan to overhaul the state's tax code will not be neutral because the state "can't afford it."
And Kentucky is likely to end the year with a small budget deficit that would have to be covered by the state's reserve fund, officials say.
Jason Bailey, executive director of the Kentucky Center for Economic Policy, said research shows businesses make decisions about where to invest based on location, workforce and infrastructure. He said tax breaks are "very low on the list."
"The tax breaks are often most often a windfall for companies for what they would have done anyway," he said.
Bailey said the state should focus more on investing in things proven to grow businesses, including infrastructure and educating the state's workforce. The Bevin administration has made workforce training a priority, borrowing up to $100 million to support training programs.
Bevin's spokeswoman, Stamper, said every project approved for tax incentives receives careful scrutiny. She said the incentives lead to jobs and economic growth, and noted companies only get the money if they keep their promises on spending and hiring.
"At the end of the day, every company that receives performance-based incentives produces far more in new tax revenue for Kentucky and contributes to our economic vitality," Stamper said.