Due to strong tax receipts, Kentucky ended its fiscal year with a $320-million budget surplus — a significant turnaround from last year’s poor projections.
General Fund receipts grew over the last year by 1.7%. The rate didn’t keep pace with inflation, but it was an improvement over the projections of a nonpartisan forecasting group. Based on those projections, Kentucky Gov. Andy Beshear had initially announced a $300-million shortfall that he then estimated down to a $156-million gap over the course of last year. The governor announced budget reductions across state government by about 3%, which were mostly accomplished by not filling budgeted-for jobs.
Beshear credited his own “strong fiscal management” for the improvement in tax revenue. It’s the seventh year in a row that Kentucky has experienced such a surplus. Meanwhile, the top Republican leader in the Senate attributed the surplus to the General Assembly’s “responsible budgeting, conservative tax policy and disciplined fiscal management.”
Beshear didn’t pass up the opportunity to call for more funding in the current two-year budget, which he has often criticized as making unnecessary cuts.
“This is great news for our economy, and it also presents our General Assembly with an opportunity, now that we have more financial resources, to address some of the budget cuts,” Beshear said in a statement. “Our goal is to help Kentucky families, and we can do that by taking this good news and turning it into something great.”
Beshear has repeatedly blamed the General Assembly and the new two-year budget for cuts he has implemented across state government, including in Medicaid reimbursement rates.
Senate President Robert Stivers of Manchester said in a statement that last year’s surplus shows lowering the income tax has not undermined financial stability. He said the state must continue to budget conservatively and make decisions “based on fact and reason, not fear and political messaging.”
“By maintaining spending discipline while allowing Kentuckians to keep more of their hard-earned money, we've built a stronger economy and a stronger commonwealth,” Stivers said. “We'll continue taking the long view because our responsibility is not simply to balance the next budget, but to leave Kentucky in a stronger position for the next generation.”
The state narrowly missed a trigger to lower the income tax last year, meaning Kentuckians should expect the rate to remain at 3.5% next year. It is yet unclear if the state met the triggers this year — lawmakers recently made it easier to hit incremental triggers.
In a statement, Jason Bailey, the executive director of the left-leaning Kentucky Center for Economic Policy, said the increase in tax revenue doesn’t keep up with inflation. He laid the blame on income tax cuts.
“This slow growth, the result of the phase-in of state income tax cuts, is beginning to hamper the state's ability to even maintain its support for schools, health care and other services,” Bailey wrote, referring to state budget reductions. "In the face of the trade-offs we now see, lawmakers should halt continued elimination of the individual income tax and focus instead on strengthening the vital services that can make all Kentuckians safe, healthy and educated and our economy strong."
*This story has been updated.
