KENTUCKY ⁠— Retail stores and restaurants are beginning to reopen this week in Kentucky, but experts are warning it could be a slow start before businesses are profitable again. 

“We don't have a vaccine, we don't have a treatment, there's going to be uncertainty and there's going to be a lack of consumer confidence,” said Jason Bailey, executive director of the Kentucky Center for Economic Policy (KCEP). “The economy, even if it begins to improve in the fall, will still be far below where it was before.” 

Kentucky’s unemployment rate is at levels reminiscent of the Great Depression with 743,000 initial claims for unemployment insurance filed since the COVID-19 pandemic began, meaning more than 30 percent of the workforce is unemployed. Kentucky was seeing unemployment rates under 5 percent before the pandemic, but Bailey said forecasters are estimating high unemployment numbers through the end of 2021. 

“That's over a year and a half from now, so this is going to persist for some time, it's not going to just bounce back, and it may not fully bounce back until we get a vaccine,” Bailey said. “We're not sure about the time frame for that but even then, we're seeing businesses go bankrupt. There may be small businesses that just aren't able to go back in business and that's going to cause continued problems in the economy.” 

KCEP is pushing for the federal government to provide more financial aid to states, Bailey said without federal assistance state and local governments could begin layoffs and cuts to essential services.

“They just don't have the cash flow, they don't have the revenue coming in to maintain the services that they have,” Bailey said. “We know that it's going to happen and that's going to worsen the problem, it's going to deepen the recession. And so we really don't have time to wait, I mean the money that has been provided so far is helpful, but it's not adequate, and it's going to run out.”

Kentucky received more than $1.7 billion from the CARES Act to help with the state’s response to the COVID-19 pandemic. 

The United States House of Representatives passed a $3 trillion package last week which would provide financial relief to state and local governments, however, Senate Majority Leader Mitch McConnell (R-Kentucky) dismissed the legislation as a “political messaging bill.”

“The 1,800 page doorstop that Speaker Pelosi dropped last week was appropriately greeted as the legislative equivalent of stand up comedy,” McConnell said on the Senate floor Monday. “There were tax hikes on small businesses in the midsts of a small business crisis, there were targeted tax cuts for the wealthiest people in the bluest states, there were two separate taxpayer funded studies on diversity and inclusion in the market for marijuana—in sum a $3 trillion wishlist slapped together to never let a good crisis go to waste.”

McConnell has seemed reluctant to provide more federal aid to states suggesting in April they should declare bankruptcy however his tone seems to be changing as revenues continue to drop throughout the country and in Kentucky. Recent revenue projections by the Kentucky Office of the State Budget Director suggest Kentucky could lose $500 million in the final months of the fiscal year with losses continuing through the first quarter of fiscal year 2021. In an op-ed in the Courier-Journal, McConnell suggested he may be open to providing another round of aid to states but remains focused on granting liability protection for businesses.

"If Congress considers further legislation in response to the coronavirus, I’ll continue working with city and county officials to keep Kentucky’s priorities at the center of the discussion,” he said. "For example, I’m glad we share a common interest in a narrowly crafted liability protection for hospitals, small businesses and universities"

Advocates for more federal aid to states are urging Congress to move quickly before states are forced to begin making cuts due to the revenue shortfalls. 

“States are starting to cut, Kentucky will start cutting its budget very soon unless that aid comes through,” Bailey said. "And it has to be substantial to address the depth of the crisis that states are now facing."

State Budget Director John Hicks has placed a hiring freeze on any state employees not relating to the COVID-19 pandemic and asked cabinet secretaries and independent agency leaders to reduce their budget by one percent for the remaining two months of the fiscal year which is equivalent to a 12.5 percent cut to the annual budget.