Hi everybody!
There may be little known outside of the Capitol and their subject matter can be dry at times, but the economists collectively known as the Consensus Forecasting Group nonetheless play a major role: They determine how much state government can spend.
It’s not an easy job, given that this group has to peer 30 months into the future to help the governor and General Assembly enact a budget every even-numbered year. The economists’ crystal ball has proven to be quite accurate, however, with projections usually landing within one or two percent of what the final ledger shows.
Getting that close requires sifting through numerous charts and graphs and deciding the likely outcome of policy and economic decisions made at the state, federal and even global level. Even seemingly small changes can change state revenues by millions of dollars.
The current two-year budget totals almost $80 billion, which includes all state and federal tax revenue and restricted funding like college tuition, which must be spent where it is collected.
The governor and General Assembly focus much of their work on the state revenues, which total about $22.3 billion. We call that the General Fund, and like a steering wheel, it directs the flow of the other money. About 90 percent of this fund goes to three main areas – education, health and human service programs like Medicaid and criminal justice. There is a separate highway fund that amounts to $1.5 billion.
The Consensus Forecasting Group met several weeks ago as it prepared for what will be its final meeting late this year that will formally set the size of the upcoming budget. The governor will use that amount for his proposal that he submits to the General Assembly in January, and what ultimately becomes law will be enacted by mid-April and then take effect next July.
A quick review of the Consensus Forecasting Group's reporting gives us a good glimpse at Kentucky’s economy and how it fits within the country’s as a whole.
The United States’ Gross Domestic Product, for example, is expected to grow from $18.4 trillion in 2018 to just over $20 trillion in 2022. Wages are growing at healthy clip, averaging close to five percent annually in inflation-adjusted dollars.
Kentucky’s personal income is expanding, too, but not as quickly. Over the same five-year timeframe, our wages are on track to rise from $184 billion to $216 billion.
As far as the state budget goes, receipts slowed somewhat during the first three months of the current fiscal year. The average growth we saw from July through September was just 1.1 percent, the smallest quarterly increase we’ve seen in two years. Even so, this wasn’t a surprise to the economists, meaning the budget is still on track one-fourth of the way through the fiscal year.
Barring something unforeseen, we’re starting to get a clearer picture of what the next state budget will look like. In short, state revenues will grow about two percent during the budget’s first year and a little under that figure in its second. That makes the governor’s and legislature’s work more challenging, because needs in such areas as education are growing much faster.
I will of course keep you posted as other legislators and I ready for the budget process that will formally get underway in a little less than three months. In the meantime, if you have any questions or concerns about this or any other issue affecting the state, please let me know.
My email is joe.graviss@lrc.ky.gov, and you can leave a message for me or any legislator by calling the General Assembly’s toll-free message line at 800-372-7181. For those with a hearing impairment, the number is 800-896-0305.
Thanks for all you do!
Joe Graviss
56th District Representative
Kentucky House of Representatives
P.O. Box 1002
Versailles, KY 40383
859-433-4392