Beshear announces $82.5M influx for Budget Reserve Trust Fund after 5.3% revenue growth in FY15
07/21/2015 06:17 PM
FRANKFORT — After revenue growth topped 5 percent in the recently closed fiscal year, Gov. Steve Beshear announced an $82.5 million deposit in the state’s Budget Reserve Trust Fund on Tuesday.
That pushes the balance of Kentucky’s so-called “rainy day” fund to $209.4 million, its highest mark since the state held $214.8 million in reserves in fiscal year 2008.
The $82.5 million represents nearly half of the $165.4 million in excess revenues collected by the state, the remainder of which will cover other necessary government expenses such as emergency relief, according to Jane Driskell, the state budget director. The increased revenues also made the current fiscal year budget structurally balanced, which hasn’t happened since 2006, Beshear said.
Beshear pointed to a number of indicators to demonstrate Kentucky’s economic resurgence, such as June’s 5.1 percent unemployment rate, the state’s receipt of Site Selection Magazine’s Governor’s Cup award in March and a new export record set last year at $27.5 billion. The state’s 5.3 percent increase in general fund tax receipts topped the average national growth of 3.7 percent in fiscal year 2015, according to an analysis by the National Association of State Budget Officers.
“Kentucky’s not only back with a vengeance – our momentum is accelerating rapidly,” Beshear said at a news conference.
Still, a number of fiscal challenges loom for the next gubernatorial administration as Beshear leaves office in December, namely shoring up pension funds for public employees and teachers. While he said the state’s economy has improved, Beshear said more work remains to connect
“I could go on and on, but we’re not here to spike the football in the end zone or to cut down the nets or to declare mission accomplished because we’ve got a lot left to do,” Beshear said.
“Not every Kentuckian who wants and needs a job has one, and some communities in this state are not seeing the kind of growth that other communities are seeing. In addition, here in Frankfort we have some long-term budgetary challenges, including creating a more modern tax system, finding money to increase investments in education and ensuring a long-term reliability of our public pension systems.”
The chairmen of the House and Senate budget committees said they were happy to learn of the budget surplus, but they held differing views on the state of Kentucky’s economy.
Sen. Chris McDaniel, R-Taylor Mill, said while the budget reserve deposit is welcome, Kentucky’s economic growth doesn’t reflect “being extraordinary and being on the cutting edge” compared to the rest of the country.
Unemployment numbers can also be deceiving given the number of Kentuckians that have dropped from the labor force, said McDaniel, chairman of the Senate Appropriations and Revenue Committee.
In June, for instance, 1.878 million Kentuckians held jobs with 101,103 seeking work for an unemployment rate of 5.1 percent, according to the U.S. Bureau of Labor Statistics. In June 2013, 1.879 million Kentuckians had jobs, but 165,666 were unemployed and looking for jobs, giving Kentucky an 8.1 percent unemployment rate at the time, according to BLS data.
“It certainly is good we ended up with a surplus, but the fact is we have a lot more to deal with,” McDaniel said in a phone interview. “We’ve got Kentucky Teachers’ Retirement System as a big problem. We’re going to have additional ARC (actuarially required contributions) in the Kentucky Retirement Systems, so while it is good that we ended up with a surplus, the fact of the matter is the governor’s got to recognize that we still have more expenditures than we do revenues, and we’ve got to get that spending under control.”
But Rep. Rick Rand, D-Bedford, says he can see evidence of economic growth in the insurance and real estate markets in which he works. The House Appropriations and Revenue Committee chairman said Beshear, who took office as the 2007 recession hit, deserves “a lot of credit” for his administration’s budgetary work.
“More people are buying and trading automobiles, adding onto their houses and doing things like that, and in my real estate business it’s just good, steady growth,” Rand said in a phone interview. “People are out shopping, they’re looking, credit markets are more available for potential buyers. Things just seem to be loosening up and moving at a pretty good pace, and I hear that from my colleagues too in the industries I’m in.”
Kentucky’s business climate is a central focus for both gubernatorial campaigns, with Republican Matt Bevin backing a statewide right-to-work law, which would bar unions from collecting fees from non-members.
Beshear called such proposals “artificial political issues” and noted that right-to-work states like Indiana and Tennessee were not recognized for their economic development efforts in 2014 like Kentucky.
“We know how to create jobs,” he said. “We know how to bring industry and companies to Kentucky, and our job is to continue to do that.”
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