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June 2012
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Kentucky likely to have small budget deficit, officials say

By ADAM BEAM Associated Press

FRANKFORT -- Kentucky is likely to have a small budget shortfall when the fiscal year ends June 30, state officials say.

Tax receipts for March fell 11.4 percent compared with last year, and tax collections are down 3.2 percent for the last three months. Collections would have to increase an additional 6.6 percent over the next three months in order for Kentucky to meet its revenue estimate. State budget director John Chilton said the state would "end the fiscal year somewhere near, yet likely below, the official estimate."

If a shortfall occurs, it would be up to Republican Gov. Matt Bevin to fix it. State law gives him the authority to change the state spending plan in the event of a shortfall. He could order cuts across various state agencies, or he could dip into the state's reserve fund.

Kentucky hasn't had a budget shortfall since 2014, when the state ended the fiscal year with a $90 million deficit. Then-Democratic Gov. Steve Beshear plugged the hole by cutting state spending by $3 million and dipping into the state's reserve fund. Bevin, who took office in January 2015, has not had a budget deficit yet.

The Bevin administration says the problem is not the economy. Wages and employment are growing as Kentucky continues to recover from the effects of the Great Recession. Instead, they say the problem is Kentucky's tax base is too narrow, clipped by hundreds of exemptions across various industry sectors.

"Our tax base is not as broad as it could be, which is why the governor was talking about tax reform to get the tax code broader to broaden the base and lower the rates to make our taxes a little bit more elastic," said Greg Harkenrider, deputy executive director for the Governor's Office of Economic Analysis.

Bevin has said he plans to call a special legislative session later this year to overhaul the state's tax code, but has not said how he would do it. In February, Bevin told lawmakers during his State of the Commonwealth address his plan would "not be a tax neutral plan."

The largest loss in March was corporate income taxes, which were down more than 89 percent. But that's because companies now have an extra month to file their taxes.

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