A publication of the Kentucky Center for Public Service Journalism

State agencies get 1.3 percent across-the-board spending cuts for rest of fiscal year

By Tom Latek
Kentucky Today

State Budget Director John Chilton has issued a 1.3 percent across-the-board spending reduction for all state agencies to deal with the anticipated revenue shortfall during the 2018 fiscal year that runs through June 30, 2018.

John Chilton

The order, issued Thursday afternoon, is based on the Dec. 3 Consensus Forecasting Group’s prediction of a $156 million shortfall, along with an addition $2 million in dedicated revenue, making the total $158 million.

The order states that in accordance with the budget bill, the shortfall, after adjustment for dedicated severance tax revenue, is allocated to the three branches of government in proportion to their share of General Fund spending for the fiscal year.

Here is the breakdown for the $158 million:
• Executive Branch: $152,523,900
• Legislative Branch: $807,900
• Judicial Branch: $4,668,200

How the Legislative Branch and the Judicial Branch implement reductions is up to the heads of each of those branches.

Within the Executive Branch budget, reductions are allocated among the Executive Branch agencies and the Constitutional officers in proportion to their share of General Fund spending for the fiscal year:

Constitutional officers

•    Attorney General: $141,000
•    Auditor of Public Accounts: $63,30023 •    Department of Agriculture: $217,800
•    Secretary of State: $22,800
•    State Treasurer: $25,400
•    Other Executive branch budget units: $152,523,600

The order notes that the FY 2018 spending reductions are less than requested by Gov. Matt Bevin when he asked for planning estimates in September of 17.4% spending cuts because the budget reduction order addresses only the revenue shortfall and cannot be used to replenish the so-called “Rainy Day” Fund.

In addition, spending reductions specified in the order affect more agencies, thereby reducing the percentage applicable to most agencies.

However, the outlook is worse for the next two years. 

The Consensus Forecasting Group during its December meeting predicted revenue growth of only 2.7% in FY 2019 and 2.6% in FY 2020. When lawmakers convene for the 2018 General Assembly on Tuesday, one of their duties will be to pass a state budget for the upcoming biennium. 

The budget reduction order warns that with only modest increases in revenue, state government will be addressing various budgetary strains associated with pension funding, Medicaid, and other funding requests.

Furthermore, responsible budgeting demands that the Budget Reserve Trust Fund be replenished to a reasonable level. As a result, it is certain that there will be a need to reduce spending well beyond the reductions implemented in the order. Those spending reductions are likely to approximate $1 billion.

The budget reduction order points out that, as in the past, spending reductions have not been ordered in cases that would jeopardize important governmental activities such as K-12 education (including the funding of the SEEK formula), corrections, Commonwealth and County Attorneys, Election Finance, Kentucky Retirement Systems, Teachers Retirement Systems, Board of Elections, Executive Branch Ethics Commission, School Facilities Construction Commission, Local Government Economic Assistance and Development Funds, Economic Development, Kentucky Higher Education Assistance Authority, etc.

Chilton warns that protecting those categories from reductions in the next biennium will be difficult, if not impossible, because there is just not enough revenue to satisfy all the funding needs.

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