KY Policy Blog

State Releases More Pessimistic Revenue Forecast

By Jason Bailey
October 14, 2011

The official body that approves state revenue estimates released a preliminary forecast today that projects nearly $500 million less in General Fund revenue for the upcoming two-year budget than the draft forecast back in August. Troubling questions about the economic outlook are resulting in less optimistic estimates.

The new estimate suggests growth in the General Fund of only 1.8 percent in 2013 and 2.4 percent in 2014. That translates to revenue growth of $164 million in 2013 and $224 million in 2014.1

In addition to possibly weak revenues, costs will come due in the 2013-2014 budget that were passed forward to balance current and previous budgets. For example:

  • The state is delaying payment of the last payroll of 2012 until the start of 2013, meaning a $72 million hole in the 2013 budget
  • Kentucky restructured debt in the 2011-2012 budget that will mean $23 million more in interest payments in 2013 and $26 million more in 2014.2
  • Kentucky must come up with new monies each year to continue paying back the growing debt in the pension system in part because past legislatures chose not to make the required contributions.

Also, continued high unemployment and poverty levels will mean ongoing elevated demand for a variety of public services, including Medicaid.

In better news, the state is still projecting that revenues will exceed the official forecast for fiscal year 2012. The new projected revenue surplus is $138 million, although that is less than the $192 million projected in August.

A final, official estimate that the state will use for the new two-year budget is due in January.

  1. Consensus Forecasting Group, materials from the October 14, 2011 meeting.
  2. See Kristi Culpepper, “Kentucky’s Bonded Indebtedness,” Memorandum to the Interim Joint Committee on Appropriations and Revenue, September 22, 2011.

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