TheTimesTribune.com, Corbin, KY

State News

June 11, 2014

State budget officials predict ‘significant shortfall’

CORBIN — By Ronnie Ellis / CNHI News Service

With only 20 days left in the 2014 fiscal year, state budget officials announced Tuesday Kentucky faces an “inevitable” and “significant” revenue shortfall in both the General and Road Funds.

State Budget Director Jane Driskell said May’s General Fund receipts were $777.3 million, $16.6 million or 2.1 percent less than the $793.9 million collected in May 2013. For the first 11 months of the fiscal year which ends June 30, receipts have grown only 1.1 percent over 2013.

That’s half the projected rate in the current budget which called for a 2.2 percent increase in General Fund revenues for the year.

Driskell estimated that June receipts would have to grow by 11.7 percent over June 2013 receipts in order to meet the projection of 2.2 percent growth for the year.

June 2013 receipts were $957.7 million. An 11.7 percent increase for June 2014 would require receipts of nearly $1.07 billion which isn’t likely.

June is typically one of the two best months of the year because of reporting deadlines for corporate and limited liability corporation taxes. Nearly half the yearly corporate receipts are collected in June each year.

But those taxes decreased in May by $5.6 million although they are up for the entire year by about 28.6 percent.

The budget office declined to estimate the likely shortfall — but Driskell’s office estimated a $27.7 million shortfall in its last quarterly estimate. But following receipts in both April and May below budget estimates, that’s almost certain to grow.

“We expect a significantly larger shortfall,” Driskell said Tuesday. “However, we will not know the magnitude until early July.”

Gov. Steve Beshear said he is already looking at how to close the gap.

“It appears General Fund revenues will end the fiscal year short of budgeted amounts; however, we won’t know the magnitude until we close the books,” Beshear said in a statement released by his press office. “We are assessing all options to balance the budget and will take necessary actions to close the gap in early July.”

But Rep. Rick Rand, D-Bedford, chairman of the House Appropriations and Revenue Committee, doubts the shortfall will require a special session of the General Assembly or employee layoffs.

“The governor has demonstrated he knows how to manage these things,” Rand said Tuesday afternoon. “I don’t expect a special session or layoffs.”

He said government agencies may be asked to hold off on any plans to hire and money budgeted for debt payments which haven’t yet been incurred can be used to offset the shortfall as well as other belt-tightening measures.

While corporate tax receipts declined in May, sales and use tax receipts increased 3.6 percent, slightly over the 3.5 percent increase for the year to date. Individual income tax receipts fell 2.1 percent in May and are down by half of one percent for the year.

Those were projected to grow 2.4 percent for the year after having increased by an average of 5.7 percent the previous three years, Driskell said.

Coal severance taxes fell 8 percent in May and are down 14.6 percent for the first 11 months of the year. Property taxes have also declined 2.1 percent year to date after projections of a 1.9 percent growth. Cigarette taxes are also down for the year.

The bad news isn’t limited to the General Fund. Receipts in the Road Fund were down 1.8 percent in May and have increased by just under 5 percent for the entire 11 months. But the budgeted estimates called for a 6.1 percent for fiscal year 2014.

Driskell said receipts would have to grow by 18.4 percent in June to meet budgeted forecasts. The most recent quarterly estimate placed the likely Road Fund shortfall at $11 million.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

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