FRASE—State Snapshot: Kentucky

McLaughlin and Sherouse 2017 FRASE Index, A QuantGov Data Release,

The FRASE Index ranks the 50 states and the District of Columbia according to the impact of federal regulations on the private-sector industries in each state’s economy. However, most states also have their own regulatory codes that impose state-specific legal requirements on businesses and individuals. The State RegData project quantifies the regulations in these state codes. In this section, we examine Kentucky and how both federal and state-specific regulations affect the state’s economy.

Kentucky is a good example of an average American state. Historically, it has remained near the United States’ median geographical center of population, even as the geographical center has shifted westward. It ranks 12th in the FRASE Index, with a constant-basis score of 1.74. Kentucky’s state regulatory code contains 129,575 regulatory restrictions—instances of the terms shallmustmay notprohibited, and required—which places Kentucky at the median of the 19 states analyzed by the State RegData so far. For comparison, New York has 307,636 regulatory restrictions on the books—more than any other state—while Arizona, with 63,919 regulatory restrictions, has the fewest.

While some states have seen the importance of manufacturing decline in their economies, that sector remains very important for Kentucky. The state ranks fifth nationwide in manufacturing’s share of GDP. However, manufacturing is a frequent target of federal regulations. Manufacturing is by far the most federally regulated sector of the 20 high-level sectors in the North American Industry Classification System, with over 217,000 regulatory restrictions. States with relatively large manufacturing sectors will therefore tend to have higher FRASE scores.

Motor vehicle and equipment manufacturing is an important industry in Kentucky. As seen in the figure below, the transportation equipment manufacturing industry is the fourth-largest contributor to Kentucky’s private sector. This industry is targeted by an estimated 33,144 federal regulatory restrictions and by another estimated 1,710 state regulatory restrictions.

Environmental regulations are a significant contributor to the growth of both federal and state regulations. For example, the US Environmental Protection Agency (EPA) has published more than two and a half times as many regulatory restrictions in the Code of Federal Regulations as the agency with the next most regulatory restrictions. The EPA is responsible for more than 15 percent of all federal regulatory restrictions. Many environmental regulations target the manufacturing industry by design, so states with a higher concentration of manufacturing, like Kentucky, are more affected by the EPA. This is certainly the case in Kentucky: as seen in the figure below, about a third of Kentucky’s FRASE score comes from EPA regulatory restrictions.

At the state level, environmental regulations also play a significant role. As seen in the figure below, the Kentucky Department for Environmental Protection is the second-largest regulatory agency in the state, with 13,887 regulatory restrictions. The largest is the Department for Public Health, with 18,245. The industries most often targeted by Kentucky’s environmental regulations are the chemical manufacturing, food manufacturing, and transportation equipment manufacturing industries.