Kentucky Political News Headlines

Monday, October 31, 2011

Appropriations and Revenue Committee

Meeting Summary
The Appropriations and Revenue Committee met in Frankfort on 10-27.  The Committee heard from LRC staff on the Consensus Forecasting Group's two year economic and revenue forecast.  As you will remember, a few weeks ago CFG met and developed estimates or planning figures in preparation for the development of the 2013-14 Executive Branch Budget.  A good part of today's presentation was a review of what the consensus forecasting group is charged with and the process they go about using to put together their estimates. As part of this discussion, the point was made - and it's worth repeating - that fiscal year 2011 General Fund revenues surpassed the 2008 numbers - which were at pre-recession levels.

As you heard from us following the CFG meeting, it appears that the group will use a blend of the control and pessimistic forecasts for the General Fund estimates.  By using this model, the economists estimate that the state will realize some growth at the rate of 1.8% in 2013 and 2.8% in 2014.  Interestingly, Chairman Leeper had several points that he emphasized to his fellow committee members.  He was very clear that putting the budget together this upcoming session will not be an easy task - and he encouraged the committee to go back home and let their constituents know that even though there appears to be revenue growth for the next biennium, the budget situation is still dire.  Senator Leeper explained that during the last budget cycle roughly $300 million was used in one time money to close the gap and help balance the budget.  He had committee staff put together numbers based on the CFG estimates that there will be 1.8% revenue growth in 2013 and 2.8% in 14.  Based on those numbers, Leeper says that the state will face a deficit of $337 million in 2013 and $224 million in 2014.  Those numbers do not take into account any additional expenses in Medicaid, Corrections, Unemployment Insurance and the SEEK formula.  On November 29th, A&R will meet again and discuss in detail the potential budget deficit for the next biennium.

It appears that the budget dynamics for this next session are beginning to unfold and that the Senate majority could take a position against new spending.  Speaker Stumbo has on several occasions advocated for taking advantage of low interest rates and has said that now may be the time to address projects like building schools and addressing other infrastructure needs.  As you would expect, the potential seems to exist for opposite budgetary priorities from the majority parties in the House and Senate.

Time will tell, but rest assured that the next few months, along with the 2012 session, are bound to get interesting.