FRANKFORT, KY— The state is bracing for a $456.7 million – or four percent – General Fund revenue shortfall and a nearly $162 million shortfall in the state Road Fund this fiscal year, based on revised estimates from the group responsible for the state’s revenue forecasts.
The Consensus Forecasting Group—a panel of independent economists whose forecasts are used in state budget decisions – today revised its estimates for both funds for Fiscal Year 2020 at the request of State Budget Director John Hicks.
Hicks requested the revisions in an April 30 letter amid economic disruptions tied to the COVID-19 pandemic.
State budget officials told the CFG that the projected General Fund shortfall can be addressed through a budget reduction plan. That plan was included in the enacted FY 2020-21 Executive Branch budget found in 2020 House Bill 352, according to Office of the State Budget Director official Greg Harkenrider.
Budget reduction plans can be used when an “actual or projected” General Fund or Road Fund shortfall is five percent or less below the official enacted estimate approved by the Kentucky General Assembly, said Harkenrider.
With the projected Road Fund shortfall for fiscal year 2020 expected to fall 10.4 percent below the official enacted estimate, that shortfall would not fall under the enacted budget reduction plan in HB 352. It must instead be addressed by future action of the General Assembly, said Harkenrider.
That could precipitate the need for the Governor to call lawmakers into special session “given (that) there is less than six weeks left in FY 20,” he told the panel.
The revised estimates agreed to by the CFG were based on “pessimistic” scenarios that anticipate steep declines in consumer spending, real GDP, manufacturing employment, and other key economic indicators – a reflection of the current national recession, which OSBD official J. Michael Jones, PhD said began the third quarter of this fiscal year.
Although the recession is only expected to last for three quarters, Jones said overall recovery time is expected to be “significantly longer” than in more optimistic scenarios.
Kentucky’s General Fund collections were up 6.4 percent in the third quarter of Fiscal Year 2020 with year-to-date General Fund growth of 3.9 percent after March. That growth fell 1.2 percent after April, according to the OSBD. Total receipts fell 33.6 percent for April, a decline of $432.9 million, the agency reports.
For the Road Fund, the revised estimate largely reflects April receipts in motor fuels, motor vehicle usage revenue, and motor vehicle license revenue. Motor fuels receipts fell $7.5 million, or 11.8 percent, while motor vehicle usage receipts dropped $29.9 million or 60.1 percent per the OSBD. Receipts for motor vehicle licenses fell 20.2 percent.
The revised revenue estimate for the state’s General Fund for FY 2020 is $10.9 billion, down from the official enacted estimate of $11.4 billion. The revised revenue estimate for the Road Fund for FY 2020 is $1.39 billion, down from an estimated $1.55 billion in the official enacted estimate.