A QUILA G ROUP OF F UNDS ® Update on the Kentucky Economy Dr. James R. Ramsey April 29, 2011 1.

AQUILA GROUP OF FUNDS®

Update on theKentucky Economy

Dr. James R. Ramsey

April 29, 2011

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Honored to serve as a Trustee of theChurchill Tax-Free Fund of Kentucky

since its inception in 1987

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Last year when we met, we said 2009 was another crummy economic

year…2010 was better…

not great, but better

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Economy Picks Up Steam Output Returns to ‘07 Levels

GDP

4* Source – Chamber of Commerce


• A successful rebellion in Tunisia

• A successful rebellion in Egypt

• An apparently unsuccessful civil war in Libya

• Armed uprising in Bahrain and Yemen

• One of the largest earthquakes on record in Japan

• One of the most devastating tsunamis ever to strike Japan

• A high level nuclear accident in Japan

• Impact on energy prices/stability and of course

• Weak housing markets

A Flock of Black Swans(National concerns…)

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In Kentucky, things were better in 2010 than

2009

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Kentucky Non-Agriculture Employment

(employment in thousands)

7But still a ways to go…

Addi

ng jo

bs


Loss of Manufacturing Jobsin KY Continues to be a Major Concern

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Kentucky Education & Health Services Employment

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% of Kentucky Employees by Industry

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2000 Industry 2011

17.1% Manufacturing 12.0%

11.8% Education & Health

Services

14.2%


• Recessionary impact not as bad in Kentucky as some other states

• Seems as if we hit bottom and are coming back (albeit slowly)• How long will it take to regain the 120,000 lost jobs during

recession?– Where will new jobs come from?

• Healthcare• Logistics• Business Services• Energy

• Impact on state budget – state services– Improving revenue growth– But structural imbalance

Observation on Kentucky Economy April 2011

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• Medicaid

• Corrections

• Public employee benefits

So we will face state budget problems for a while

(at least another three years)

Adding to the problem we have the “Leaky Bucket”

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$6,945

$9,207

$19,031

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

Higher Education

K-12 Education Inmates

Spending Priorities

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• Modest recovery continues to take place in Kentucky

• We will continue to add jobs, but …

• Probably 2013 before we see as many jobs in Kentucky as we had in 2007, still…

– We will

•Continue to face difficult public policy choices that impact our long term future

Forecasting / Guessing The Future

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Since forecasting is a tough business.

I am going to keep my day job at least one more year.

Reminder

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A QUILA G ROUP OF F UNDS ® Update on the Kentucky Economy Dr. James R. Ramsey April 29, 2011 1.

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