Finding inspiration wherever he can
SB&D's 2012 Person of the Year: Kentucky Gov. Steve Beshear
By Mike Randle
Of the 15 states that make up the American South, there are currently only five governors that are members of the Democratic Party. Just 30 years ago, almost all Southern governors were Democrats. However, in the state of Kentucky only eight Republicans have held the office of governor post reconstruction of the Civil War. Those eight are among 38 Kentucky governors that served during those 147 years. Kentucky Gov. Steve Beshear is one of those Kentucky Democrats.
We believe it doesn't matter to Steve Beshear to which political party he is a member. From what we know of him, Steve Beshear finds inspiration wherever he can, and if that comes from Republicans, Tea Partiers or anyone else, this Southern governor won't let silly partisanship keep him from embracing it.
In a state that is home to U.S. Sen. Mitch McConnell (the ardent conservative and kingmaker in Kentucky, and D.C. Republican politics) as well as U.S. Sen. Rand Paul (a driving member of the Tea Party movement, a constitutional conservative and libertarian), the Democrat Beshear won re-election for a second term on November 8, 2011. Beshear was re-elected with close to 56 percent of the vote in a three-way race.
Yep, nice guys do finish first sometimes as they should. In the little time my wife Stacy and I have spent with Gov. Beshear and First Lady Jane Beshear, we were struck by what genuinely kind and polite human beings they are. We have been fortunate to know similarly genuinely kind governors and their spouses, including former Tennessee Gov. Ned Ray McWherter (D) who died last year, former Alabama Gov. Bob Riley of Alabama (R), Gov. Mary Fallin of Oklahoma (R) and former Louisiana Gov. Kathleen Blanco (D). All of the aforementioned governors are considered moderates by most political experts and media alike.
In fact, all of the governors we just mentioned have embraced inspiration from both sides of the aisle. In other words, they could care less where a great idea comes from in order to gain something politically. They embrace the ideas for the simple reason that those ideas keep their states putting one foot in front of the other in an effort to get somewhere better than where they were the day before.
In an article published by The Huffington Post in the fall of last year, Howard Fineman wrote, "Gov. Beshear and his running mate (former Louisville Mayor Jerry Abramson) are known as can-do moderates. Beshear signed off on construction of a creationist theme park -- not because he is a creationist, but because he is a job creationist."
Rep. Debbie Wasserman Schultz of Florida, the chairwoman of the Democratic National Committee, said about Beshear and Abramson at the time, "What they are showing in Kentucky is that Democrats can sell and prosper by being moderates in the middle. They are not seen as ideologues."
As written, Beshear seems to be driven by inspiration wherever he can find it, not by partisan victories. What inspires him is cutting government spending where it needs to be cut. "We are facing an unprecedented budgetary shortfall," Beshear said in his State of the State address on January 14, 2008, the month when The Great Recession shifted into high gear.
"While this is a situation I inherited, it is my job to fix it. It is not a time for whining or 'woe is us' -- it is a time for leadership, bold action and temporary cost cutting. We have two options: raise taxes or cut spending. If the Commonwealth of Kentucky were a family, and we realized we were spending more than we could afford, we'd have no choice but to tighten our belts. Even though state government is not a family, it's time we began acting more like one. After all, it's the people's money and we need to be as efficient as possible when it comes to taxpayer dollars. Raising taxes is and will continue to be a last resort as long as I'm Governor. So, that leaves cutting government spending."
Education is not one of those government spending sectors Beshear will cut unless it is a last resort. "The need to increase college aid and job training will not go away! The need to send colleges and universities better prepared students will not go away! The need to invest in new 21st century jobs will not go away! I remain fully committed to those priorities," Beshear said in 2008.
To write that Steve Beshear is a proponent for education in his state is a significant understatement. Gov. Beshear's proposed budget for the 2013-2014 biennium represents the 11th time he's had to reduce spending to balance Kentucky's budget since he became governor in December 2007. Many departments and cabinets have had their budgets cut by 25 to 30 percent during that time, with additional proposed cuts of 8.4 percent in Fiscal Year '13. However, one thing Gov. Beshear has not cut is basic classroom funding. Teaching in the classroom is funded in Kentucky by a mechanism called the SEEK formula. Determined that Kentucky will not take steps backward, Gov. Beshear has made protecting SEEK from cuts his top priority through every budget-balancing exercise.
"Gov. Beshear has shown unwavering support for Kentucky's students and educators," said Dennis Van Roekel, president of the National Education Association. "In the midst of budget cuts, he fought to preserve resources for K-12 education and the Commonwealth's students and classrooms. He has repeatedly stood strong for Kentucky's students and schools."
Some of Beshear's inspirations are clearly not pulled out of the Democratic Party's box. He did help establish the Kentucky-Argonne Battery Manufacturing Research and Development Center in Lexington. The center is designed to position Kentucky and U.S. industry as a major player in the lithium-ion battery market for vehicle applications. The center plays a part in Washington's push for more electric cars to help reshape the nation's automotive industry and decrease its dependence on foreign oil.
But he is also an advocate for clean coal technologies, a stance that is not popular in D.C. Democratic Party circles. "Coal provides 90 percent of our electricity and -- because our rates are so low -- has helped us build a robust manufacturing industry (in Kentucky). But all of that is in jeopardy because Washington bureaucrats continue to try and impose arbitrary and unreasonable regulations on the mining of coal. To them I say, 'Get off our backs!' I will fight you for the right to cleanly and safely mine coal. I will fight you on behalf of 18,000 Kentucky coal miners who are working to feed their families. And I will fight you to keep this nation strong by supplying it with the energy it needs to remain the beacon of democracy in a troubled world," Beshear said last year.
We agree with what Ms. Wasserman and Mr. Fineman said earlier in this article. It isn't about the ideology, it's about jobs and that is exactly why Kentucky Gov. Steve Beshear is Southern Business & Development's 2012 Person of the Year.
"He is a very calm individual who is extremely focused," said Larry Hayes, Secretary of Kentucky's Cabinet for Economic Development. "He is an economic developer's dream. He is available any time and will drop things at a moment's notice if it is critical for a project."
That aspect of Gov. Beshear's job has helped Kentucky become one of the most competitive states in economic development in the South, particularly on the manufacturing recruitment playing field. In fact, few states have landed more manufacturing deals across the board -- large and small projects -- than Kentucky has per capita in the South over the last couple of years. Some of those projects are truly monumental.
It was about a decade ago when Ford's facilities in Louisville faced an uncertain future. In 2001 and 2002, Ford lost $6.4 billion and was in a cost-cutting mood. Over 35,000 jobs were cut -- 10 percent of the domestic automaker's work force worldwide -- and Ford announced the closure of its St. Louis plant. Soon after the St. Louis closure, the Atlanta area Ford plant was slated for closure. At the time, Louisville and Kentucky officials scrambled to keep the 6,000-employee Louisville Assembly Plant and Kentucky Truck facilities open by initiating new incentives that were clearly directed at retaining Ford. It worked, at least for awhile.
Then in 2007 the economy turned for the worst and again some automotive experts were predicting that Ford would close its Louisville facilities. But Ford weathered the storm of The Great Recession much better than the other two domestic automakers. In fact, Ford did not receive any bailout money from Washington.
Still, the Ford facilities in Louisville were maintaining and not flourishing. After eight years of Paul Patton and four years of Ernie Fletcher as governors in the state, Ford still hadn't made a real commitment to Kentucky. Through the efforts of Gov. Beshear and the Kentucky Cabinet for Economic Development, the future of Ford's facilities in Louisville finally became known. The years-long retention effort to keep Ford blossomed into a $1.2 billion investment to retool and re-equip both facilities. Ford's long-awaited commitment to Kentucky would mean the creation of 3,100 new jobs. The project was named the top economic development deal of 2011 by Business Facilities magazine.
It's not just the big automakers though Gov. Beshear set his sights on assisting. In the 2009 legislative session, Gov. Beshear championed legislation that would drastically enhance Kentucky's economic development tax incentive toolbox. Signing his Incentives for a New Kentucky or INK legislation into law in the summer of 2009, Gov. Beshear paved the way for hundreds of new and existing companies to create new jobs and make significant investments in the Commonwealth.
"The Governor's vision and leadership in revamping the state's incentive programs has made a world of difference, especially during the recession," said Hayes. "I wouldn't want to think about where we'd be if we had not had the ability to help our existing businesses. Now, we can partner with both new and existing industries in a more strategic and effective way."
The move has paid off. Since the passage of INK, hundreds of companies have received incentive approvals and are implementing or considering investments totaling more than $4 billion with the potential to create or retain more than 30,000 jobs across Kentucky.
Global CEOs have particularly taken note. Last year, almost 30 percent of all capital investment and over 22 percent of the new jobs announced in Kentucky were a direct result of foreign-owned enterprises.
Companies such as UFLEX, Ltd., based in New Delhi, India, selected Kentucky as the home of its first U.S. manufacturing plant – a $180 million investment. UFLEX garnered interest in the Commonwealth after Gov. Beshear's visit to India in the fall of 2010, in which he promoted foreign direct investment opportunities for Indian companies in Kentucky. UFLEX made its first site visit to the state in January 2011, and after a second visit by Gov. Beshear to India in April 2011, UFLEX immediately finalized its plans to invest in Kentucky.
Ashok Chaturvedi, chairman of UFLEX, said at the time of the announcement, "We are very upbeat about our U.S. manufacturing venture and look forward to a life-long and rewarding relationship with the Commonwealth of Kentucky, whom we decided to partner with after a detailed evaluation of several potential sites in the USA, as they eminently fulfilled all our criteria."
Kentucky is also a poster child of the re-shoring event that is occurring much faster than most realize as jobs return to the South from places around the globe, specifically China. In fact, GE's Appliance Park in Louisville may be the image Southern Business & Development would put on that poster if we took it to the printer to distribute it to global manufacturers.
GE has operated its Appliance Park in Louisville since it broke ground on the complex in 1951. That was when the industrial giant decided on Louisville for its major appliances division. In fact, in 1953 at Appliance Park, GE invested $1.2 million in a UNIVAC, which was the first computer operated commercially in the U.S. According to a recent story written by GE CEO Jeffrey R. Immelt in the Harvard Business Review, the computer weighed 30,000 pounds and was the size of a "small garage."
From the Harvard Business Review article in the March 2012 edition: "In fact, in 1954 Roddy F. Osborn predicted in this magazine that GE's use of the UNIVAC for business data processing would lead to a new age of industry," Immelt wrote. Osborn wrote in 1954, "The management planning behind the acquisition of the first UNIVAC to be used in business may eventually be recorded by historians as the foundation of the second industrial revolution, just as Jacquard's automatic loom in 1801 or Taylor's studies of the principles of scientific management a hundred years later marked turning points in business history."
By the 1970s, more than 20,000 workers called Appliance Park home. But things changed. The off-shoring of jobs seemed like a good idea for GE.
"About 30 years ago, as the business became less profitable, GE began moving manufacturing out of Appliance Park to low-cost countries," Immelt wrote in the Harvard Business Review article. "The decision was relatively simple. We had strong brand recognition and customer loyalty -- two things we believed would continue whether our products said 'made in Kentucky' or 'made in Korea.'"
In 2008, GE was close to getting out of the appliance business and explored selling the division. It would have if not for the financial crisis that left potential buyers without suitable financing options.
So, GE took a long, hard look at its off-shoring model and determined that it was an outdated one. "Our business strategy could no longer rely on having employees literally hand off what they were best at doing (to manufacturers in low-cost countries)," Immelt wrote. "At a time when speed to market is everything, separating design and development from manufacturing didn't make sense." The design engineers were still in Louisville at GE's Appliance Park and manufacturing was halfway around the world.
So GE decided to bring back manufacturing in a big way to its 60-year-old campus in Louisville. The re-shoring event was one of the first known in the U.S. and it happened on Kentucky Gov. Steve Beshear's watch.
Beshear and Kentucky are rising above many states in the South with one hand tied behind their backs, or so you would surmise by talking to as many site consultants in the South as we do. And that tied arm got a little tighter when Indiana, Kentucky's big competitor to its north, passed a right-to-work bill in the winter quarter.
Indiana was the first state to pass RTW in more than 15 years. Oklahoma was the last U.S. state to do so. Indiana Gov. Mitch Daniels said that one of the reasons he made a charge to pass right-to-work was because when Volkswagen's site search began a few years ago, he called them and they didn't even return his call. Volkswagen's must-have list included right-to-work states, Gov. Daniels assumed.
Kentucky is one of just three states in the South that do not have right-to-work laws on its books. The other two are Missouri and West Virginia. Gov. Beshear says this about the right-to-work issue that he faces every day in recruiting companies to his state, "There's a perception issue among some companies that it is a problem. Our job is to break through that perception. We deal with site selectors everyday and we are developing close relationships with those site selector companies, and as we do that it gives us the opportunity to really show them the facts about Kentucky."
The quote came from an interview done by the Kentucky Association of Economic Development. Gov. Beshear went on by saying, "More often than not, we can convince them to give Kentucky a look. It's an issue with some companies, but it's based in false perception as opposed to the reality of the situation. The good news about Kentucky is we've got both companies that are unionized and companies that are non-union and they're both very successful."
While Gov. Beshear and Gov. Daniels may not appear to be likely collaborators, both have put aside party politics and competitive pride to tackle one of the country's largest public infrastructure projects – the Ohio River Bridges Project. The project had been discussed for decades, but since these two governors began truly working side by side, it has finally reached the point where shovels will be put in the ground in a matter of months, not years.
Since their collaboration began, they've shaved nearly 40 percent off the original cost of the project and scaled back the scope of the project to accelerate construction.
"Major two-state cooperation is rare because it's hard," said Gov. Daniels. "It can only happen when people on both sides put taxpayers and the public interest ahead of politics and parochialism. That's the kind of guy I've found Steve Beshear to be and why I've developed such a feeling of friendship and respect for him."
Yep, it matters who is a state's governor when it comes to economic development in the South. Kentucky Gov. Steve Beshear is one of those who gets it. And, he is really a nice guy. Even more, Steve Beshear is Southern Business & Development's 2012 Person of the Year.