FRANKFORT, KY (October 16, 2019)—Preliminary estimates from a group of state economic forecasters predicts that Kentucky will end this fiscal year with a General Fund revenue surplus of $26.7 million.
The preliminary fiscal year 2020 forecast —based on projected revenue growth over the state’s current official revenue estimate, issued in late 2017—adopted on Tuesday by the Consensus Forecasting Group (CFG) reflects 0.8 percent projected General Fund growth by the end of FY 2020. It also predicts 2.0 percent revenue growth in FY 2021 and 1.7 percent growth in FY 2022.
The CFG also adopted revenue estimates yesterday for the state Road Fund which funds state transportation projects. Preliminary estimates suggest FY 2020 Road Fund revenues will exceed the current official estimate by $52.7 million.
The CFG will meet later this year to finalize the state’s FY 2020-2022 revenue estimates for both the General Fund and the Road Fund and issue official estimates in December, giving the 2020 Kentucky General Assembly the information it needs to consider budget legislation for 2020-2022.
One factor influencing current national economic forecasts is the ongoing trade conflict with China, State Budget official Dr. J. Michael Jones told the CFG on Tuesday. He said it is assumed in the economic forecast released by the global firm IHS Markit—which supplies economic information to the CFG—that “all tariffs will be going into effect in the continuing trade war with China,” including expanded tariffs on currently taxed goods and products, and a phase-in of goods not previously covered by tariffs, with the next round of tariffs levied on Dec. 15.
Jones said that IHS Markit is also forecasting a 35-percent chance that there will be a national recession beginning in the first quarter of FY 2021 and lasting three to four quarters. The firm is predicting a short-lived recession, said Jones.
“Nothing like the malaise that we saw 2008 into 2010, the Great Recession, if you will,” he said.
Another factor considered by the CFG is a 1.1 percent increase in FY 2020 first-quarter General Fund revenues. Governor’s Office of Economic Analysis official Greg Harkenrider said the 1.1 percent increase was the lowest growth in first-quarter General Fund receipts since FY 2017.
State law requires the Office of State Budget Director to certify and present the General Assembly with the CFG’s official revenue estimates for the General Fund and Road Fund for the current and next two fiscal years “on or before the fifteenth legislative day” in even-numbered years.