State ends fiscal year with surprise surplus balance

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There have been several positive signs in recent months that the worst of the recession may finally be behind us, but perhaps the best indication yet for Kentucky came late last week. That’s when Governor Beshear announced that state government ended the just-completed fiscal year with nearly $157 million more than expected.

After taking out about a fourth for such unplanned expenses as clean-up for this past spring’s devastating floods, the remainder was put into the Budget Reserve Trust Fund. It’s the biggest one-time deposit since the General Assembly created this “Rainy Day” fund in 1989.

Overall, the budget for the 2011 fiscal year, which ended June 30th, was 6.5 percent larger than it was in 2010. That’s well above the 5.2 percent growth for states on average, according to the National Association of State Budget Directors, and it’s far ahead of what was seen during the two previous years, when the combined losses for the states amounted to about a tenth of spending.

It’s worth noting that Kentucky was able to achieve its surplus without raising new revenue. Other states, meanwhile, hiked their taxes and fees by about $5.5 billion last year.

When taking a closer look at the drivers behind our surplus, there is reason to believe that this uptick will not be short-term. That’s because the added revenue came in part from people buying more and businesses posting better bottom lines.  Coal also saw a significant jump.

Vehicle sales, which had been in a three-year decline, also went up, which helped our Road Fund top expectations; its surplus was more than $67 million.

Another major contributor to the bump in our budget is the fact that state government is continuing to do more with less. Our workforce, for example, is about the same size it was 20 years ago.

We have also reduced spending by several percent – without touching the classroom – and we’ve cut back on contracts and re-focused our efforts on core services.

Additional help the federal government provided states in 2009 has also kept us from having to make steep cuts during the last two years.  Our share totaled $3.5 billion, and it went  chiefly to education, infrastructure and maintaining Medicaid as its eligible population skyrocketed.

In the coming days, the Consensus Forecasting Group will meet to give us a glimpse of what we can expect in the upcoming two-year budget cycle, which begins next July.  This group of economists provides the official estimate of how much revenue the state can expect, and it has proven to be fairly accurate over the years.

The budget process will formally begin in January, when the governor provides his plan and the General Assembly then takes over.  It is always the most important thing we do during even-year legislative sessions, and it is projected to be finalized by mid-April.

I will of course keep you updated as that process unfolds in the months ahead.  For now, I encourage you to contact me if you have any thoughts or concerns about this issue or any other involving state government. I hope to hear from you soon.

Rick Rand, D-Bedford, represents the 47th House District in the Kentucky General Assembly. He may be reached by writing to Room 351C, Capitol Annex, 702 Capitol Avenue, Frankfort, KY 40601, or leave a message at (800) 372-7181 – TTY (800) 896-0305.