Budget Update - CFG Meeting
The Consensus Forecasting Group (CFG) met this afternoon to revise the official revenue estimate for Fiscal Year (FY) 2020. The group of nonpartisan economists were asked to revise the estimates in today's special meeting due to the impact the COVID-19 pandemic is having on state revenues. It is highly unusual for the CFG to meet outside of what state law requires and the group can only provide revised official estimates at the request of the Legislative Research Commission or the Office of the State Budget Director.
The CFG members were presented with two scenarios - control and pessimistic models. Both the control and pessimistic forecasts assume that the pandemic peaks in the fourth quarter of FY20 and also assumes an identical fiscal and monetary policy response.
After several hours of discussion and debate, the CFG chose to adopt the pessimistic forecasts for both the General Fund and Road Fund. Under these revisions, the General Fund is estimated to be 4% below the official enacted budget, while the Road Fund shortfall will be 10.4% based on today's actions.
The 4% shortfall in the General Fund reflects a decrease of $456.7 Million and the 10.4% shortfall in the Road Fund reflects $161.8 Million less than expected.
Kentucky law allows the Governor to implement budget reduction orders for shortfalls less than 5%. For shortfalls over that, legislative action is required. With these new official estimates, the Governor will be able to adjust spending in the General Fund. It has been reported that state agencies have already been asked to provide information on the impacts of a 12.5% cut to close out the fiscal year June 30. The Road Fund, however, will require legislative action which could trigger a special session. We will update you as additional information is made available.
Documents from today's meeting can be accessed HERE.
Today's actions only impact the remaining days of FY 20, which will end on June 30th. It is likely that revisions to FY 21 will also be needed, but at this time that request has not been issued.