FRANKFORT, Ky. (AP) - Economic damage caused by the coronavirus will force more than $450 million in cuts to Kentucky’s General Fund, plus a potential special legislative session to downsize the Road Fund.
The necessity for deep budget cuts was officially set in motion Friday when a panel of economists reduced its revenue projections for the current fiscal year, which ends June 30. The panel’s forecasts would result in significant shortfalls in both funds with reduced spending.
The job of cutting about $457 million, or 4%, from the General Fund will fall to Gov. Andy Beshear. The General Fund pays for most state services, including education, health care and public safety.
But a special legislative session is needed for a budget reduction plan for the Road Fund, Beshear said. That’s because the panel’s new projection for Road Fund revenues amounted to a larger percentage drop. The revised forecast will cause cuts of about $161 million from the Road Fund.
Beshear said he’s talked with legislative leaders about what he hopes can be a “short, targeted” special session. The Democratic governor said he wants “buy in” from the GOP-led legislature before calling lawmakers back to the state Capitol.
“We want to talk to them again, make sure we have it all hammered out, make sure we do it in as short of a time as possible,” Beshear said during his daily coronavirus briefing.
As for General Fund cuts, he said he wants to do so in the least painful way for the state.
“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 want to make sure we can minimize that,” the governor said.
The grim budget situation, he said, underscores the need for additional federal relief to cushion state and local governments from plunging tax collections caused by the pandemic. Without another round of federal aid, the cuts will be significant, Beshear said.
The Consensus Forecasting Group on Friday offered a pessimistic outlook for the state’s short-term revenue collections as the battered economy tries to bounce back from the the global pandemic.
The panel agreed to a revised forecast of just under $11 billion in General Fund revenues this fiscal year. That projection necessitates the budget cuts of about $457 million. It reviewed such variables as consumer spending, unemployment, manufacturing and personal income in revising its forecast.
Last month, state budget director John Hicks warned of a potential General Fund shortfall of $318.7 to $495.7 million this fiscal year. Tax collections took a nosedive in April as businesses closed or scaled back amid the virus outbreak. The state’s unemployment rate has surged since the virus hit.
Beshear is gradually reopening the state’s economy, coupled with health guidelines meant to prevent the virus from spreading.
The panel on Friday didn’t take up any new revenue forecasts for the next fiscal year, but it could be asked to do so in coming months. Beshear said it’s premature to do so right now.
“I do believe our economy is going to bounce back, though it’s going to take a little time to bounce back in the way that we want it to, depending on what happens with this virus,” he said.
Earlier this year, Kentucky lawmakers passed a slimmed-down, one-year state budget for the fiscal year starting July 1. It didn’t include pay raises for school teachers or other education priorities that fell victim to the dramatic economic downturn caused by the coronavirus.
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