State Budget Director Says Gov. Bevin Will Make Mid-Year Cuts Soon

Oct 26, 2017

Credit J. Tyler Franklin

Kentucky’s state budget director said Gov. Matt Bevin will soon enact mid-year budget cuts to help avoid a projected revenue shortfall at the end of the fiscal year.

Earlier this month, a panel of economists tasked with predicting how much money the state will bring in projected the state would be about $155 million short of its initial estimates.

That move cleared the way for Bevin to make an official budget reduction plan — spending cuts to state agencies that don’t have to go through the conventional budgeting process.

Budget Director John Chilton said Bevin’s plan is imminent.

“We’re working through those plans and I think that the governor will actually make a direction to reduce spending in certain ways in the very near future,” Chilton told the Interim Joint Committee On Appropriations and Revenue.

In August, Bevin asked most state agencies to make plans for cutting spending by 17.4 percent — a move that was met with concern from groups ranging from prosecutors to the Department of Education.

That request came after an earlier prediction that the state would have a $200 million shortfall at the end of the fiscal year.

Now that the estimate is smaller, Chilton said the cuts “would be somewhat less if we recomputed it today.”

Kentucky has fallen short of its revenue predictions in eight of the last 14 years.

In the fiscal year that ended on June 30 of this year, the state had a $138.5 million revenue shortfall. Officials blamed the performance on underwhelming growth from sales and income tax returns.

During the hearing on Thursday, Paducah Republican Sen. Danny Carroll said the state needs to change its tax system to bring in more revenue.

“I think it’s obvious that it’s time for us to make some structural changes in the way we operate. I don’t think we have any choice or we’re going to continue to lose ground,” Carroll said.

Earlier this year, Bevin promised to call a special legislative session to change Kentucky’s tax code, but many Republican legislators were unwilling to pursue the proposal out of fear that it would lead to tax increases.

Instead, Bevin is likely to call lawmakers back to Frankfort to make changes to the state’s pension systems later this year. Combined, the state has the worst-funded pension systems in the nation, leading to swelling demands on the state budget.