A driving factor in Kentucky’s $91-million budget shortfall is a decline in a form of income primarily used by the nation’s wealthiest individuals.
In 2012, the U.S. Congress was preparing to take the country over the “fiscal cliff” because of rising debt, rising healthcare costs and spending on the wars in Iraq and Afghanistan.
To reduce the deficit, President Obama proposed raising the federal capital gains tax, which largely impacted the nation’s wealthiest, prompting a massive sell-off by 2013. As a result, state budget forecasters anticipated a repeat of such revenue on what was essentially a one-time occurrence.
“All states knew of this change, and they made adjustments in their revenue estimates, but it was a much larger impact nationwide than states planned for,” Kentucky State Budget Director Jane Driskell said.
Kentucky has no need for a special legislative session to address the shortfall, Driskell said. Governor Steve Beshear could issue a budget reduction order to balance the state’s coffers.