End of Recovery Act Funds Could Mean Serious Budget Challenge for Kentucky

By Jason Bailey
January 10, 2011

Brief Shows Recovery Act Funds Making Major Difference in Kentucky’s Budget

End of funds presents budget challenge for the Commonwealth 

A new report shows that Kentucky’s budget situation would have been much worse without the $3.4 billion in funds provided to the state through the American Recovery and Reinvestment Act over the last few years. The approaching end of these funds in an economy that is only beginning to recover presents Kentucky with a looming budget challenge.

“Kentucky relied heavily on Recovery Act dollars to plug holes in the 2009-2010 state budget and to craft a balanced budget in 2011-2012,” said Jason Bailey, Director of the Kentucky Center for Economic Policy. “Those funds dry up this year, however, at a time when the economy remains in a deep hole.”

Recovery Act funds helped support existing state programs in Medicaid and education in addition to providing supplementary dollars in a range of areas—from transportation and public safety to energy, social services, and environmental protection. These monies helped fill budget holes, stimulate the economy and provide needed investments.

However, those funds are now winding down at the same time that the economy is only beginning to recover from a deep recession, recent budget-balancing acts have passed costs on to future years and additional federal help seems increasingly unlikely.

“It’s time for us to prepare for the end of Recovery Act funds and the serious possibility that we will have a hard time balancing our next budget without new revenues,” said Bailey. “That means ramping up the conversation about long-needed reforms to Kentucky’s tax system that would make it more progressive, adequate and able to sustain revenue over the long term.”

The brief, which includes detailed information about where Recovery Act dollars have been allocated, can be accessed here: End of Recovery Act.pdf.

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The Kentucky Center for Economic Policy (KCEP) was founded in 2011 with the purpose of conducting research, analysis and education on important state fiscal and economic policy issues. KCEP seeks to create economic opportunity and improve the quality of life for all Kentuckians. The Center is an initiative of the Mountain Association for Community Economic Development (MACED) and is supported by foundation grants and individual donors.