Gov. Beshear Signs Budget Reduction Orders to Manage 2014 Year-end Revenue Shortfalls

General Fund Shortfall is $91 Million; Road Fund Shortfall is $22 Million

Budget plan avoids cuts to education, health care, public safety

FRANKFORT, Ky.  (July 16, 2014) – Governor Steve Beshear today signed a budget reduction order for Fiscal Year 2014 to fill a $91 million General Fund budget deficit in accordance with state law.

The budget enacted by the General Assembly includes a General Fund Budget Reduction Plan that authorizes the Governor to manage a revenue shortfall in the 2012-2014 budget biennium.

With the current shortfall, the Governor will have implemented 14 separate budget reductions totaling nearly $1.7 billion since he has been in office.

“We were somewhat limited in our approach to fill this budget hole given it occurred at the end of the 2014 Fiscal Year,” Gov. Beshear said. “But as in previous reductions, two goals guided our decisions – to take steps to make government as efficient and as lean as possible, and to protect as best we can the core services that offer help and hope to our people and represent important long-term investments in Kentucky’s future: education, health care and public safety.”

The state budget office announced the $90.9 million shortfall last week when Fiscal Year 2014 General Fund revenues were reported 1 percent less than official revenue estimates.

The Governor’s reduction order uses excess funds that are surplus to the budgets of state agencies; year-end, unexpended General Funds in the operating budgets of state agencies; and money from the Budget Reserve Trust Fund to fill the revenue gap. The Governor avoided using “carry forward” funds that are budgeted for spending in Fiscal Year 2015.

Budget Reduction

In dealing with the shortfall, and in accordance with the Budget Reduction Plan enacted by the General Assembly, the Governor’s order includes transferring $50 million from various state agency funds that are in excess of budgeted amounts.

“The use of fund transfers is a valuable tool in how we manage and balance the overall budget of the Commonwealth, and one that keeps us from making deeper cuts to state agencies,” Gov. Beshear said. “The recent ruling by the Kentucky Supreme Court again affirms the constitutionality of this practice, thus ensuring much needed flexibility for the executive and legislative branches.”

Nearly $15 million will come from unspent General Fund appropriations that are expected to lapse to the General Fund in excess of the amount budgeted.

General Fund appropriations in executive branch agencies’ operating budgets will be reduced by $3 million, including participating constitutional offices. Additionally, $1.5 million will come from the judicial branch and $287,600 will come from the legislative branch.

The Governor will use $21.2 million from the Budget Reserve Trust Fund, also known as the Rainy Day Fund. After this reduction, the Rainy Day Fund will have a $77.1 million balance. The Rainy Day Fund is also the sole source of financing for authorized but unbudgeted necessary government expenses in Fiscal Year 2015.

Gov. Beshear also signed a budget reduction order for the 2012-2014 Road Fund to fill a $22.2 million shortfall. The Governor’s order relies primarily on year-end, unexpended Road Fund appropriations, the automatic budget adjustment due to actual fuel tax receipts, and Road Fund appropriation reductions.

“No budgeted road projects will be negatively impacted by this necessary balancing action,” Gov. Beshear said.

The two budget reduction documents can be viewed at www.osbd.ky.gov.