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Kentucky's Projected Shortfall Deepens, Bevin Cuts Expected Soon

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A panel of economists is more pessimistic about Kentucky's tax revenue than it was a few months ago. The group revised downward its prediction of how much Kentucky will make in tax revenue by the end of the fiscal year in June.

The Consensus Forecasting Group on Friday predicted that the state will be $156.1 million short of initial projections, down from $155 million predicted in October.

State Budget Director John Chilton said he expects Gov. Matt Bevin will make cuts to state spending before the end of the calendar year to help avert a budget shortfall.

“Stay tuned,” Chilton said.

Since the state is officially projected to bring in less money than predicted, Bevin can unilaterally make cuts to state spending — he doesn’t have to go through the legislature, which crafts the state budget every two years.

After an unofficial prediction earlier this year that the state would have a $200 million shortfall, 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.

Chilton wouldn’t comment on how much state spending would be cut under Bevin’s budget reduction plan.

“It depends how it’s spread among the various units,” Chilton said. “Those decisions will be made soon and a budget reduction order will come out.”

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.

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

Kentucky has had to set aside more and more money for the state’s public pension systems in recent years, crowding out spending on other state programs and services.

Lawmakers will write a new budget in the legislative session that begins Jan. 2.

Ryland Barton is the Managing Editor for Collaboratives. Email Ryland at rbarton@lpm.org.