Kentucky Politics

Due to a steep drop in money gleaned from taxes during the coronavirus pandemic, Kentucky is bracing for a $457 million revenue shortfall by the time it closes its financial books on June 30th.

The shortfall will require Gov. Andy Beshear to make cuts to the current year’s state budget, the spending plan for a wide range of state services like education and health care.

Beshear hasn’t said what he will cut yet, but during his daily news conference on Friday he said cabinet secretaries will help decide.

“We evaluate the amount of harm that would occur to people out there. Because almost every budget cut does result in a little more difficulty or challenge for folks and we want to make sure we can minimize that,” Beshear said.

Last month Beshear’s budget director John Hicks sent a letter asking state agencies to come up with plans to cut spending by 12.5%.

The revenue shortfall is largely due to a drop in returns from income and sales taxes amid business closures and other restrictions designed to slow down the spread of the virus.

On Friday, the Consensus Forecasting Group — a panel of economists the state uses to make revenue predictions — revised the official estimate of how much money the state will bring in by the end of the fiscal year from $11.4 billion to $10.9 billion.

The group also predicted that the state’s Road Fund — the pot of money used to pay for road and bridge construction — will have a nearly $162 million shortfall, about 10.4% of its initial estimate.

That will likely require Beshear to call state lawmakers back to Frankfort for a special legislative session, which he said he hoped would be “short and targeted.”

House Speaker David Osborne released a statement on Friday hinting that the Republican-led legislature would like to be more involved in the state’s coronavirus response.

“Only the Governor can call the legislature into special session and set the agenda for what we address,” Osborne wrote. “I would urge him to consider this an opportunity to involve the legislature in a meaningful way to kick-start the economy and really focus on policies that get people back to work safely.”

The Consensus Forecasting Group hasn’t yet revised its predictions for the next fiscal year, which begins July 1, though budget officials did say that it’s likely that key economic indicators like consumer spending and manufacturing employment will continue to be down.

Beshear continued his plea for the Congress to send financial help to prop up struggling state budgets like it did in the wake of the 2008 economic crisis.

“Moving forward without federal help will devastate the budgets of every state and every local government. No one is unharmed. And this virus has done this nationwide,” Beshear said.

Ryland Barton is the Capitol bureau chief for Kentucky Public Radio.