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Independent economists forecast $17 million jump in Kentucky’s 2021 General Fund receipts

By Tom Latek
Kentucky Today

Despite the COVID-19 pandemic and its effect on Kentucky’s economy, the Consensus Forecasting Group has raised its estimate on what state revenues will be over the next 18 months.

The 10-member panel, which is independent of state government and consists of economists, met for three and a half hours Friday afternoon in Frankfort before coming up with their consensus.

Greg Harkenrider with the State Budget Director’s office testifies before the Consensus Forecasting Group. (Kentucky Today/Tom Latek)

Their forecast was that the state’s General Fund receipts would increase from $11.712 billion to $11.729 billion for the current 2021 fiscal year, which runs through June 30, a $17 million jump; and from $11.943 billion to $11.996 billion, or $53 million, for the 2022 fiscal year, which covers July 1, 2021, to June 30, 2022.

The panel’s original estimates were made in December 2019, several months before the COVID-19 virus first was reported in Kentucky.

“It’s a little surprising that we can have a pandemic and have revenue estimates that are not too different than the estimates we rendered a while ago,” said Greg Harkenrider with the State Budget Director’s office.  “I think this can be viewed as good news.”

The estimate was completed not knowing if Congress will indeed approve extending the CARES Act or another federal stimulus program, or the amount.

“And we don’t know what form the stimulus will take,” Harkenrider noted, “Whether it will be direct aid to states, checks to individuals, or an increase in unemployment benefits. There’s so much uncertainty, that it was hard to adopt the optimistic forecast sight unseen, without seeing more specifically what the aid is going to look like.

Harkenrider and his budget office colleagues present the Consensus Forecasting Group with three scenarios, Pessimistic, Control (or middle ground), and Optimistic, which is a series of low to high estimates of state revenue. The members adopted the Control Scenario, but increased Coal Severance Tax receipts somewhat, to come up with their final number.

The Consensus Forecasting Group, with little debate, adopted the Control scenario for the Road Fund, which raises the amount from $1.543 billion in their enacted version a year ago, to $1.578 billion for the remainder of this fiscal year and from $1.593 billion to $1.609 billion, for the 2022 fiscal year.

“We’ve been pleasantly surprised by the bounce we’ve seen in the motor vehicle usage in particular,” Harkenrider stated.  “We think fuels are going to start to recover.  It’s been a little slow out of the gate for Fiscal 2021, but it plummeted so far in the 4th quarter of Fiscal 2020, that we think we can post some pretty good growth in the 4th quarter of Fiscal 2021.  Our two biggest accounts, fuel and usage are going to come in.”

Due to uncertainty during the pandemic earlier this year, the General Assembly only enacted a one-year state budget, instead of the normal two years. This means lawmakers will use the estimate from the CFG, along with Gov. Andy Beshear’s proposals, to help craft the second year of the spending plan when they convene next month.

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