Kentucky has a $138 million budget shortfall for the fiscal year that ended June 30, but a state budget official said Monday it can be erased with a combination of financial moves.
State revenue for fiscal year 2017 was $138.5 million, or 1.3 percent, less than the official revenue estimate, which had projected 2.7 percent growth, said state budget director John Chilton in a news release Monday.
The Kentucky Constitution requires a balanced state budget.
The budget staff will meet with Gov. Matt Bevin to discuss specific actions required to meet that requirement and will release more details later this week, said Greg Harkenrider, deputy executive director of the Governor’s Office for Economic Analysis.
Harkenrider said those actions will likely include Bevin’s order earlier this year for most state agencies to reduce their budgets by 1 percent, diverting restricted funds that are earmarked for specific purposes into the General Fund, collecting unspent money in some agencies, and tapping the state’s $235.8 million rainy day fund for emergencies.
“We have now closed the books on revenues and will close the books on the expenditure side later this month,” Chilton said.
Chilton reported Monday that receipts for the state’s General Fund, which pays for most programs, rose for the seventh consecutive year while the Road Fund grew after two consecutive declining years.
For the fiscal year that ended June 30, General Fund receipts totaled about $10.5 billion, or 1.3 percent more than fiscal year 2016 collections. However, General Fund collections declined 0.3 percent in June, as the state’s two major revenue sources — sales taxes and individual income taxes — were essentially unchanged from a year ago.
Though state receipts have grown seven years straight, the rate of growth has weakened in each of the past three years.
“While I am pleased with the sustained growth, collections for fiscal year 2017 were below forecasted levels by 1.3 percent,” Chilton said. “Looking back to February, General Fund revenues were right on pace to hit the estimate with year-to-date growth of 2.8 percent. However, the period between March and June saw nominal revenues decline by $50.2 million, due in large part to March’s plunge in corporate revenues.”
Chilton said the major challenge now will be predicting when revenues will reverse their current four-month slide.
Chilton noted that coal severance tax collections declined for the fifth consecutive year, reaching an all-time low of $100.5 million. In 2012, the state collected $298.3 million from the coal severance tax.
Road Fund revenues for the last fiscal year totaled about $1.5 billion, an increase of 1.7 percent from the previous fiscal year, Chilton said.