Not Too Big to Fail - By Eric Mitchell

By Eric Mitchell - @EJMitchellKy on Twitter

If Toyota contacted Kentucky Gov. Steve Beshear and said it was moving its manufacturing plant out of the state, would Kentucky legislators sit idly by? Unlikely.

The response would be swift. Millions of dollars in tax incentives would appear. Would the more conservative leaders pound on tables and preach about fiscal irresponsibility when the state needs to cut $350 million out of the budget over the next two years? Would it be shameful for the state to give more money (it gave $147 million in incentives to Toyota beginning in 1985) to a big, multi-national corporation? No. The money would be found. Taxes would be hiked, programs cut, whatever it took would be done in order to preserve the 6,600 jobs the plant provides and the 25,000 jobs from auto-related businesses. The rallying cry would center on jobs and families.

For Kentucky’s Thoroughbred industry, the exodus has begun. Horses, farm operations, and jobs are leaving for other racing states that have adopted casino gaming to enhance purses and breeders’ programs. New York is welcoming “manufacturing plants” from Kentucky in the form of broodmares by the vanload every week.

A majority of Kentucky senators responded to this shifting economy Feb. 23 by killing a proposed constitutional amendment allowing the public to vote on casino gaming. Now mind you, the bill didn’t change the constitution in and of itself; it allowed the public to decide whether to permit up to seven casinos in the state.

Not only did the 21 senators voting against the amendment thumb their collective noses at the Thoroughbred industry, they also sent a clear message that Kentucky voters are not capable of deciding what’s good for their state.

Particularly troubling were the “no” votes cast by Republican Sen. Alice Forgy Kerr of Lexington, whose district covers the southern half of Fayette County, and Democratic Sen. Julian Carroll, whose district includes western Fayette and Woodford counties in the heart of the Bluegrass region. Their constituents are most affected by the decline in the Thoroughbred breeding industry, which directly employed 10,800 people and is responsible for another 6,900 jobs in related businesses in 2010. The total spending by just the Thoroughbred breeding industry was $912 million that same year, according to the Legislative Research Commission based in Frankfort, Ky. The Thoroughbred breeding industry’s total economic impact is estimated at $1.58 billion.

But Kerr, specifically, said allowing seven casinos—some potentially at racetracks (where gambling already takes place)—was “terrible public policy” that would bring a scourge of “darkness and sin and addiction” on the state. Kerr, who was first elected to public office in 1998, has made no similar claims against the state lottery, which offers its games of chance at 2,913 retailers across the state and online. Why hasn’t she called for a repeal to the lottery? Because she was present at an Interim Joint Committee of State Government meeting Oct. 26, 2011, where she heard Kentucky Lottery Corp. president Arch Gleason report that the lottery had generated $3.55 billion since its inception in 1989 and that $1.66 billion had been directed to grants and scholarships and $20.8 million directed to affordable housing. It would have been a good time for Kerr to speak out against this burden on the state and its people, but if she did, it is not recorded in the committee’s minutes.

After the senate vote Carroll told the Frankfort State-Journal he would have supported the amendment had the casinos been limited to racetracks. He was bothered by the concept of stand-alone casinos and didn’t want to see “Kentucky’s bluegrass country converted to neon lights.”

He also said he had heard before the vote from many of his constituents, most of whom favored the amendment.

“From a political standpoint I could have voted for it, but I voted my conscience,” he said. Carroll voted against what a significant number of his constituents said they wanted, voted against a major economic tool for helping a substantial industry in his district, and denied the state’s voters the chance to have their say. His actions are everything we hope for out of a representative government, aren’t they?

If state legislators believe the Thoroughbred industry in Kentucky will somehow hunker down and manage to grow against out-of-state competition, then they have not been paying attention to how commodities like horses can shift. Twenty years ago Kentucky farms stood around 225 commercial Standardbred stallions. In the 1980s New Jersey opened Meadowlands racetrack and beefed up its incentive program. Now less than 20 Standardbred stallions are in Kentucky, according to the Equine Initiative formed as part of the University of Kentucky’s Commonwealth Collaboratives program.

The window of opportunity is closing, and legislators need to take action. If not, maybe we can find a way for the federal government to pay horse farm owners not to grow tobacco.