Economists predict KY will bring in more revenue than expected as uncertainty abounds
A panel of economists Friday estimated that Kentucky will bring in $125.9 million more in General Fund revenue than originally projected for the current fiscal year, which began July 1, and an additional $34.3 million for the Road Fund.
The projection comes amid a litany of uncertainties about the COVID-19 pandemic — from how vaccines are distributed, to whether Congress will pass additional stimulus, to which political party will control the U.S. Senate next year.
“It’s almost like dart throwing,” said Eugenia Froedge Toma, one of the 10 members of the state’s Consensus Forecasting Group.
The state has a roughly $11 billion General Fund to pay for services like education, environmental regulation and public safety.
In May, the group anticipated that Gov. Andy Beshear would have to slash more than $450 million from the General Fund and another $161 million from the Road Fund. But after a stimulus bill from the federal government propped up the economy through the first part of the fiscal year, the state actually saw its revenue increase slightly.
The assumption that economists used Friday anticipates no additional stimulus package (despite ongoing talks for a relief package in Congress) and that the vaccine won’t be widely available until the end of the fiscal year, which would be June.
“It’s entirely plausible that we will be back here in another unscheduled session to adjust the forecast again,” said Bruce Johnson, a member of the forecasting group.
Overall, the General Fund was up 5.1 percent through October, with both income tax and sales tax performing better than projected. The state saw increases in taxes on online sales, motor vehicles and building materials outweigh declines in taxes on things like movies, laundry services and the performing arts.
Those gains come with a caveat: with the federal stimulus set to expire and many Kentuckians already exhausting their unemployment benefits, experts say the increases may not be sustained through the second half of the fiscal year.
“While we’re still increasing, the rate of increase is declining,” said Greg Harkenrider, of the state’s budget office.
But with a vaccine on the way and a glimmer of hope at some semblance of normalcy returning by the end of the fiscal year, the economic outlook looked relatively rosy. The economists also projected the state would see a $53.2 million increase in the upcoming fiscal year for the Feneral Fund and a $16.1 million increase for the 2022 Road Fund.
Lawmakers will use those projections to build a budget for the upcoming fiscal year when the gather for the 2021 General Assembly in January.
The road fund collected $409.4 million from July to September, an increase of 1.9 percent.
