Guest post by Rachel Phelps Bayens
The Consensus Forecasting Group (CFG) met for most of yesterday afternoon, reviewing tax receipts and determining which economic models will best forecast Kentucky's revenues for the next several years. This meeting follows last week's CFG meeting when the group of non-partisan economists met to look at economic trends and national forecasts setting the stage for yesterday's meeting. At the end of the four hour meeting, the CFG chose to use the "control' scenario for the estimates during this planning process, in both the General Fund and Road Fund. State law required the group to adopt a forecast, although it's only for preliminary planning purposes. The CFG will reconvene in October and December to put together a more targeted forecast to be used by the Governor and General Assembly in putting together the state's biennial budget during the 2014 legislative session. Here's a break down of the forecast:
General Fund - The Forecast adopted by the CFG yesterday has 2.7% growth in FY 15 and 2.8% in FY 16. The CFG does show a small decline in FY 14 revenues from the enacted forecast, a difference of 4.5 Million. Overall, the coal severance tax and cigarette tax appear to be on a declining path with some growth in individual income and corporate taxes. The sales tax is expected to be flat for the most part. The primary reason is that sales tax growth is in areas that are currently exempt under Kentucky law, like groceries, utilities, and prescription drugs.
Road Fund - The CFG chose the control forecast for the Road Fund as well. The primary takeaway though is that the one area of growth in the Road Fund for the past several years - the motor fuels tax - will not continue to increase. The national forecasts that the CFG uses, predicts fuel prices will moderate, which will prevent the index included in KY law from being triggered. As one of the staffers said in yesterday's meeting "we are likely not going to get any more pennies" within the period of time the group is forecasting. In FY 15 the RF is estimated to decline by 3.1% and increase by 0.1% in FY 16. The CFG also revised their current year (FY 14) estimate to reflect a difference of 28.4 million from the enacted estimate.
The Office of the State Budget Director will put together a preliminary planning document based on yesterday's actions. The CFG will have the opportunity to revise these estimates in October and December, if the landscape changes and as more information becomes available.