FRANKFORT, Ky. (AP) – Kentucky lawmakers on Tuesday delved into the challenges of crafting a new state budget expected to be strained by spending demands caused by the coronavirus outbreak.
State Budget Director John Hicks, in a presentation to a legislative panel, pointed to rising Medicaid enrollment and lower revenues for state parks as a result of the COVID-19 pandemic.
Besides those and other looming demands, the state’s virus-battered economy lost tens of thousands of jobs that haven’t returned, Hicks said. The service sector has been especially hard hit, especially among leisure and hospitality businesses such as hotels and restaurants.
But the state’s revenue collections remain resilient. General fund receipts in October rose 3% compared with last year’s total, Hicks said. Sales and use tax receipts grew 6.3% last month. General fund receipts were up 5.1% for the first four months of the fiscal year. The general fund pays for most state services, including education, health care and public safety.
“While we have better news on the revenue side, the Kentucky economy is still struggling with recovering from the initial stages of the pandemic,” Hicks told the lawmakers.
Last week, Gov. Andy Beshear said he anticipates being able to balance the state’s current fiscal-year budget without cuts to state agencies or the road fund. He pointed to better-than-expected revenue collections and the influx of virus-related federal aid as key factors to avoid midyear cuts.
Hicks warned Tuesday that the state’s tax collections are expected to weaken without another round of federal aid to assist individuals and businesses.
Beshear is expected to present his budget recommendations to the GOP-dominated legislature in early January for the next fiscal year, which begins next July 1.
Responding to virus-related spending needs will be a big focus in his spending proposal, Beshear told The Associated Press in a phone interview Monday.
But his top priorities remain the same as before the pandemic hit, the Democratic governor said.
“They are a world-class public-school education for our children, access to high-quality health care, jobs that pay a wage that you can raise a family on them, and securing and honoring the retirements of our public servants,” he said. “Those are always going to be my priorities.”
Once Beshear submits his spending plan, the work will shift to lawmakers during the 30-day session. Republicans added to their supermajorities in the House and Senate in last week’s election.
Republican Sen. Chris McDaniel, chairman of the Senate Appropriations and Revenue, said Tuesday that lawmakers will face a “challenging time” in the session – “lots of big things on the agenda, compressed timelines, still a lot of unknowns.”
Kentucky lawmakers passed a slimmed-down, one-year state budget earlier this year because of uncertainties caused by the coronavirus. The state usually operates on a two-year budget cycle.
Although the state faces increased demands on several fronts because of the virus outbreak, it could get some relief in corrections funding, Hicks said. Lower overall inmate populations in prisons and jails compared with prior estimates are expected to continue into the next fiscal year, he said. The reduction stems in part from Beshear’s commutation orders in an effort to limit the spread of COVID-19 in prisons and jail.
Meanwhile, Hicks told lawmakers that Kentucky has borrowed about $475 million from the federal government to keep up with demands on the unemployment insurance trust fund. A record number of Kentuckians turned to the unemployment insurance system for help during the pandemic. Beshear has reserved at least $200 million in federal virus aid to help repay the borrowing.
Follow AP’s pandemic coverage at https://apnews.com/hub/virus-outbreak and https://apnews.com/UnderstandingtheOutbreak.
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