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This joint report from the Bluegrass Institute and Citizens Against Government Waste examined wasteful spending in Kentucky state government during the 2004-2006 budget period. The report identified systemic overspending as the root cause of Kentucky's fiscal challenges, documenting examples ranging from subsidized convention centers and shrimp farming to generous state employee benefits and inefficient merit-system protections.
Key findings included $12 million in state bonds for a convention center in Corbin (population 8,111), $2.8 million for shrimp farming research in a landlocked state, $87 million in biennial subsidies for money-losing state parks, and an estimated 10-15% cost premium on public construction due to prevailing wage requirements. The report also highlighted Kentucky's comparatively high rate of government employment (17% versus under 15% in neighboring states) and the structural protections that make state workforce reductions difficult.
The authors called for establishing a Kentucky "Grace Commission" to identify waste, adopting constitutional tax-and-expenditure limits, and privatizing operations where private contractors had demonstrated cost savings.
Key takeaways:
1. Local Projects Funded with Statewide Tax Dollars The report documented millions in state appropriations for projects serving narrow constituencies—convention centers, library expansions, and county fairgrounds—arguing these should be locally financed to ensure accountability and appropriate prioritization.
2. Structural Barriers to Efficiency Kentucky's merit employment system guaranteed 5% annual raises regardless of performance and required displaced employees receive comparable positions, while prevailing wage laws added an estimated 10-15% to public construction costs. These structural features limited the state's ability to achieve private-sector efficiency gains.
3. Privatization as a Cost-Control Tool Privately operated prisons in Lee and Marion counties achieved lower per-inmate costs than state-run facilities, with Marion County's $32/day representing the lowest rate in Kentucky. The report argued this model should extend to state parks and other operations where government had demonstrated persistent deficits.
