State revenue dipped more than expected; shortfall must be fixed

By Jack Brammer – jbrammer@herald-leader.com

FRANKFORT — Kentucky’s budget woes continue.

State budget director Mary Lassiter reported Thursday that the state ended the fiscal year on June 30 with $55.7 million less than expected even a few weeks ago.

Since the Kentucky Constitution requires a balanced budget, Lassiter’s office will be looking for unspent money in state programs to make up the shortfall, she said.

It also will raid pots of money other than the General Fund — a practice called fund transfers.

Lassiter said such action will be taken over the next week to reconcile expenses with revenues.

“There will be a balanced budget when we close the books July 17,” she said, “and we will try to do as little harm as possible. But it will be tight.”

The shortfall in the General Fund, which pays for most state programs, materialized despite a modified budget projection last November from the Consensus Forecasting Group.

The group is made up of economists that provide estimates of how much money the state is expected to collect.

After the economists made their revised revenue prediction in November, the 2009 Kentucky General Assembly and the Beshear administration approved a series of cost-cutting steps and tax hikes earlier this year to deal with the resulting $456 million revenue shortfall for the just-completed fiscal year.

“But things have gotten worse since last November’s projection,” Lassiter said.

In June, General Fund tax receipts dropped to $765.2 million, a 12.3 percent decline from June 2008. Revenue was down 9.7 percent in the last three months of the fiscal year.

General Fund receipts for the entire year totaled $8.426 billion, down 2.7 percent from the previous year. Economists had expected a 2.1 percent decline.

“The global recession which has plagued the U.S. for the past 19 months is taking a substantial toll on Kentucky tax receipts,” Lassiter said.

Declining funds from he state’s sales tax, which has now sagged three consecutive quarters, are of particular concern.

The sales tax for fiscal year 2009 fell by 0.7 percent, or $20.1 million, despite the legislature’s move to apply the tax to packaged alcohol in the last quarter of the year.

Meanwhile, receipts from the individual income tax were off 4.8 percent, or $167.8 million.

Corporate income tax collections fell $167.2 million, or 38.4 percent, due to declining corporate profits.

There were, however, some bright spots in the budget for the year.

Receipts from the coal severance tax jumped 25.6 percent. Total collections from the tax were $292.6 million.

Revenue from the cigarette tax, which was increased late in the fiscal year by lawmakers, increased $59.6 million, or 25.6 percent.
Lottery revenue rose 3.2 percent, or $6 million.

The state Road Fund, which relies heavily on gasoline taxes to build and maintain highways, also is suffering.

Lassiter said Road Fund revenues for fiscal year 2009 were $1.192 billion, a decline of 5.6 percent from the previous fiscal year.

Receipts for June were up 9.4 percent — the first monthly increase in 16 months — but total receipts fell $70.8 million as motor vehicle usage and weight distances taxes dropped significantly.

In a special legislative session last month, legislators addressed a projected $996 million shortfall for the new fiscal year, which began July 1. That primarily was accomplished by using federal stimulus dollars.

Filed Under: Featured • State Budget • State Government