A report from the Kentucky Chamber of Commerce details how Kentucky’s employment has made significant strides in bouncing back from last year’s pandemic-driven drop. But we still have a long way to go to get back to pre-pandemic levels.
Though the the legislative session is over, lawmakers should be thinking hard about what they can do to help support entrepreneurs and put Kentuckians back to work. One way is to get rid of outdated and flawed laws that create barriers to small business and job creation.
Chief among these bad laws are the state’s Certificate of Need (CON) laws, which require specific businesses to prove to government officials that their services are “needed” before they’re allowed to open their doors. This process takes months or years and can cost tens of thousands of dollars or more, making it impossible for those entrepreneurs on the lowest rungs of the economic ladder to even get started.
It also allows existing companies to weigh in on whether a new business will harm them. Unsurprisingly, the existing companies virtually always deny the need for more services – creating what we call a “competitor’s veto,” since it allows existing businesses to decide if their competition is even allowed to exist.
We know from direct experience how damaging CON laws can be. One of us, Raleigh Bruner, was met with fierce resistance from existing businesses when he started operating Wildcat Moving over a decade ago. Meanwhile, Angela C. Erickson is a researcher based in Shelbyville who has studied how CON laws reduce businesses and jobs.
Raleigh’s case illustrates how CON laws can burden new entrepreneurs and hurt the future of communities. In 2010, he started his moving business with just a Ford Bronco and a Craigslist ad. He didn’t know he needed a certificate of need. After all, why would you need to prove that there is a need for more people to load and unload furniture from trucks? Yet by 2012, his livelihood was threatened when his competitors made it clear they would prevent him from obtaining the certificate and thereby operating his business.
Refusing to give up on his dream, Raleigh, with the help of Pacific Legal Foundation, sued Kentucky, arguing that the CON law violated his right to earn an honest living. In 2014, Raleigh was relieved and elated when the courts agreed, striking down the CON law on constitutional grounds and allowing him to continue growing his business. Though the courts have yet to decide on the use of CON laws in other business sectors, they will likely agree that CON laws in any context are unconstitutional.
Since then, Raleigh’s business has thrived: last year alone, his three Kentucky-based moving companies helped move 10,000 households (in the middle of a pandemic, nonetheless).
Raleigh’s story is a powerful illustration of the difference entrepreneurship can make. In Kentucky, his businesses employed 500 people in 2020. And he elevates his staff by turning movers into managers and managers into business partners – giving others a leg up.
Moreover, his company contributes thousands of dollars of in-kind contributions every year to local charities. Raleigh’s story is a case study in how getting rid of CON laws creates businesses, jobs and opportunities for people to help their communities thrive.
Entrepreneurs shouldn’t have to go through the barrier of begging for permission to operate from the government and their competitors. In fact, numerous other states have already scrapped their outdated CON laws because they realized that the laws created an unnecessary barrier to business creation and job growth.
If Kentucky lawmakers want to make a real difference in healing the economy and putting Kentuckians back to work, it’s time to end “competitor’s veto” laws that are holding back the state’s future small business leaders.