Kentucky Politics

Kentucky’s top budget official says the state’s financial future is uncertain as federal programs like the $600 supplement to unemployment benefits and the Paycheck Protection Program expire during the pandemic.

Part of why Kentucky has been able to weather the financial storm is federal assistance, according to John Hicks, the state budget director in Gov. Andy Beshear’s administration.

“We’ve got many strong signals that fiscal [year] 21 will be a significant budget challenge and will have lower revenues than in fiscal 20,” Hicks said during a legislative hearing on Wednesday.

“One of the reasons that federal stimulus relief to individuals and businesses has supported Kentucky’s economy in the last few months…most of that has expired.”

Kentucky finished the last fiscal year—which ended on June 30—with a $178 million budget surplus, partly because of preemptive budget cuts and partly because the state made more money than expected from taxes on internet sales and unemployment benefits.

Hicks says the state’s economy was also propped up by the more than $3.3 billion given to unemployed workers and $5.2 billion given to Kentucky businesses through the Paycheck Protection Program.

Both programs expired at the end of July and so far, attempts to extend them through a new coronavirus relief package have failed to pass out of Congress.

Rep. Steve Rudy, a Republican from Paducah and chair of the Kentucky House Appropriations and Revenue Committee, said that the state needs to be cautious about getting more financial help from the federal government.

“As we continue to ask for more and more and more money, we the people owe that money,” Rudy said.

“I just caution the members, before we just beg the feds for more money, what that really means.”

Efforts to pass a new coronavirus bill stalled after Senate Majority Leader Mitch McConnell unveiled a $1 trillion plan in late July. Democrats prefer the $3 trillion plan that passed the House in May. Some Republican members argue that both plans are too expensive.

Beshear has joined other governors calling for states to get direct financial help to prop up budgets that are facing lost revenues during the pandemic.

Beshear has said that Kentucky could have a $1.1 billion shortfall—about 10% of the state’s annual discretionary budget.

Kentucky received $1.6 billion earlier this year to help pay for coronavirus-related expenses. On Wednesday, Hicks said the state had committed about 45% of those funds, about half of which has gone to cities and counties.

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