Economists cautiously optimistic about KY budget, despite fears of double-dip recession

10/14/2011 02:42 PM

FRANKFORT — Kentucky’s state government could have an additional $137 to play with this fiscal year, economists predicted — with one big caveat. That is if the national economy doesn’t slip into t a double dip recession.

From the onset of their meeting Friday, economists who make up Kentucky’s Consensus Forecasting Group knew they had an odd situation on their hands, with international financial fears balanced with glowing Kentucky revenue receipts.

The group’s chairman Lawrence Lynch said the group would try to make sense of conflicting indicators.

During a two and a half hour meeting, the group listened to the results of forecasts and models set up by members of the executive branch, addressing everything from property, sales and income taxes to road funds.

And in the end, after expressing worries about European and international financial distress, the group continued to take a optimistic stance when it comes to revenue in Kentucky’s road and general funds.

The group adopted a preliminary stance that the road fund would exceed revenue expectations by 5.5 percent, a surplus of $72.2 million dollars, if true. The group had two options that produced lower revenue projections, but passed.

And when it comes to the general fund, the group took a “blend” option mixing the more optimistic and pessimistic forecasts into a 50-50 weighting system. By adopting the blend, the group forecasts the general fund will exceed previous expectations by 2.8 percent or $137 million dollars.

That would push the fiscal year 2012 budget to more than $9 billion dollars.

And in explaining their stance to take a blend, group member Bruce Johnson said that the “pessimistic” forecast did not take into account another worldwide recession.

Therefore, if another recession is on the horizon, all forecasts would have to be done again.

The group plans to meet at least once again before submitting a final revenue forecast to the General Assembly, as Kentucky law requires.

But the group couldn’t decide whether to give that final forecast in December, as members of the Beshear administration requested, or whether to push into January.

-Reporting and video production by Kenny Colston


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