FRANKFORT, Ky. — While Kentucky’s General Fund receipts finished below estimates for the fiscal year ending June 30, it won’t be known until later this month if spending cuts will offset the shortfall.
In a report issued late Monday, State Budget Director John Chilton said final FY17 General Fund revenue was $138.5 million less than the official estimate. The prediction was for 2.7 percent growth over last year, but had only a 1.3 percent rise.
“Looking back to February, General Fund revenues were right on pace to hit the estimate, with year to date growth of 2.8 percent,” said Chilton. “However, the period between March and June saw a decline of $50.2 million, due in large part to March’s plunge in corporate revenue.” That includes a 0.3 percent drop in June.
“The forecasting challenge going forward will be predicting when revenues will reverse the current four-month slide and resume collections more closely aligned with underlying economic growth,” Chilton said.
After April numbers were released, showing the decline continuing, Gov. Matt Bevin asked all state agencies to reduce spending by one percent to narrow the gap between spending and revenue during FY17.
Back in May, he said, “This is a state with some real financial problems. This is a state with a failing public employee pension system. This is a state where poor management of financial issues for many, many issues, with people kicking the can down the road, has come home to roost.”
These numbers confirm the importance of a special legislative session he plans to call later this year to address tax and pension reform, Bevin said.
“We’re the worst-funded pension system in America and the hundreds of thousands of people who are depending on those checks to come and the likelihood that those checks are going to stop coming without change,” he said. “We’ve got everyone else in Kentucky on the hook for meeting that legal and moral obligation. This is an urgent situation, so I think this is just affirmation that we had better be serious about this.”
Bevin’s spokesperson Amanda Stamper said Chilton and his budget office is currently preparing a list of options to discuss with the Governor and the decided course of action will be decided later this week.
The last time Kentucky finished the fiscal year with a deficit was in 2014, when there was a $91 million shortfall. Then Gov. Steve Beshear plugged the hole by cutting state spending by $3 million and dipping into the state’s reserve fund.