State budget deficit could be more than $28 million

Big cuts to come from Beshear to end year with balanced books

Staff and wire report, Published:

Kentucky’s budget director said Tuesday she expects the state to end the year with a deficit “significantly larger” than $28 million.

State economists predicted Kentucky would collect $9.6 billion in taxes for the 2014 fiscal year that ends June 30. As of May 31, the state has collected $8.5 billion in taxes, meaning the state would need to collect an extra $1 billion in June — equivalent to revenue growth of 11.7 percent — to prevent a shortfall.

The state collected $777.3 million in May, $16.6 million less than it collected in May last year, leading State Budget Director Jane Driskell to say a shortfall is “inevitable.”

“It’s been a tough time with the recession,” Driskell said. “We have alerted our agencies and we are working with them to look at all possible options to address the shortfall.”

Because the Kentucky Constitution requires the state to end the year with a balanced budget, Gov. Steve Beshear will have to decide what to cut. It will be a familiar task for Beshear, who has had to cut $1.6 billion in state spending since he took office in 2007 because of declining state revenues.

“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 Tuesday. “We are assessing all options to balance the budget and will take necessary actions to close the gap in early July.”

Kentucky’s revenues have been hurt by the declines in the coal industry, as coal severance taxes are down 14.6 percent this year.

But the biggest reason for the shortfall is the General Fund’s largest source of revenue: the individual income tax. State officials predicted income tax collections would grow by 2.4 percent. Instead, they have grown by 0.5 percent.

“While disappointing, this appears to be a trend of poor income tax growth in several states this fiscal year,” a news release from the budget office states.

Progress in other revenue streams for the state mostly declined, according to budget office figures. Property tax collections have dipped 2.1 percent as of May after anticipated growth of 1.9 percent this fiscal year, and cigarette taxes are down 4.4 percent thus far. Sales and use taxes have improved 3.5 percent, and corporate income taxes have climbed 28.6 percent this fiscal year despite a loss of $5.6 million in receipts.

Driskell said she anticipates a shortfall in the state’s Road Fund because of decreases in state gas tax collections. The most recent internal estimate predicted an $11 million shortfall, with 18.4 percent revenue growth in June to meet year-end projections, she said.

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  • Medicare/Medicaid is killing this State.

  • State employees haven't received raises, yet.  They do not go into effect until the next fiscal year.  The funding base the legislature OK'd for giving them was on "anticipated money," not money actually in the reserve.  If anything, Peter will be robbed to pay Paul, and the funding will either come out of state's contribution to retirement or health insurance.

  • With deficit of 28 million dollars, how did state employees get their much needed raises ?  Just wondering