Friday, March 09, 2001

Ky. to tap rainy-day fund in face of $91M shortfall




The Associated Press

        FRANKFORT — A brief bump in the state's economy has put a $91 million hole in the General Fund, which will prompt the state to dip into its savings account this fiscal year.

        “It's a rainy-day fund, and it's raining,” budget director James Ramsey said.

        The panel of economists the state uses to make its annual revenue forecasts gathered Thursday to review estimates. Merl Hackbart, a University of Kentucky economist and former state budget director, noted that the revised forecast varies by barely 1 percent from the original $7 billion estimate of January 2000.

        “This is definitely a small one,” Mr. Hackbart said.

        It is larger than it appears.

        In addition to the $91 million revenue shortfall, the budget for this fiscal year spent $15 million more than was expected in revenue receipts. And Mr. Ramsey said the routine expenses of government not covered by a specific appropriation, such as forest firefighting, are running about $10 million more than expected.

        Taken together, Mr. Ramsey said the state will have to cut or find some $115 million by the end of the fiscal year on June 30.

        There is a written schedule for spending cuts. But it will not be enough to make up the shortfall, leaving the $278 million budget reserve fund as a likely source.

        “Right now, it looks like we'll have to take a pretty significant chunk of that,” Mr. Ramsey said.

        House Appropriations and Revenue Committee Chairman Harry Moberly, D-Richmond, said he was not terribly concerned.

        “I think a one-time hit on the budget reserve trust fund is not a big problem,” Mr. Moberly said. “As long as the economy picks up, it won't be a big problem.”

        The Consensus Forecasting Group did not make any changes in the revenue forecast for next fiscal year, but there will have to be budget cuts then as well. Mr. Ramsey said that could mean even more of the rainy-day fund will have to be spent.

        Things will have to turn around dramatically in the next four months just to meet the new, lower forecast. For the eight months of the year, the General Fund has only grown by 3 percent from last year. It must grow by an average of 5.2 percent for March through June to meet the new estimate.

       



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