FRANKFORT, Ky. (KT) – Gov. Matt Bevin has taken steps to eliminate a $152 million shortfall, an action necessitated by a constitutional requirement that Kentucky never finish a fiscal year without the budget being balanced.
“This year’s budget shortfall validates the need for conservative spending plans and it dramatically underscores the critical need for fixing Kentucky’s broken pension systems and modernizing the state’s tax code,” Bevin said in a statement. “A solid financial foundation is essential before the commonwealth can reach its full potential.”
In anticipation of the shortfall, State Budget Director John Chilton took several steps, including implementing a 1 percent spending cut across most state agencies and renegotiating contracts with managed care organizations.
Bevin filled the budget hole without dipping into the state’s Budget Reserve Trust Fund, the so-called “Rainy Day Fund.”
“We are expecting an ongoing challenge with revenues in the next fiscal year and the next biennium,” Chilton said. “Today’s actions by the governor responsibly preserves the Rainy Day Fund as we prepare for the tight fiscal environment in front of us.”
Bevin said the state’s financial woes confirms the importance of a special legislative session he plans to call later this year to address tax and pension reform. He has not yet set a date for that.
In a report issued earlier this week, Chilton said final fiscal year 2017 General Fund revenue was $138.5 million less than the official estimate. The prediction was for 2.7 percent growth over last year, but ended up with just a 1.3 percent rise.
If the 2018 revenue shortfall approximates this year’s amount, significant additional spending reductions will be needed to balance the budget in fiscal year 2018. The current balance of the Budget Reserve Trust Fund remains at $150.5 million.