So, When are State Revenues Going to Tumble?
Governor Beshear is preparing to tour the state to discuss a potential $300 million revenue shortfall and push for a cigarette tax increase and possibly other tax hikes. I’m not going to claim that no shortfall will materialize, but the expectation of a shortfall seems contrary to current facts.
Here’s what we know.
The state fiscal year runs from July-June, so we are four months into FY 2009.
Despite the economic slowdown, General Fund revenues were up $17 million in the first quarter of this fiscal year versus 2008 and up another $17 million in October 2008 versus October 2007. The Budget Office says that $14 million of October’s $17 million increase is accelerated collections, but that still leaves us with a $20 million increase in state revenues in this first four months of FY 2009 versus FY 2008.
Now, $20 million may not be a large increase, but these four months have been tough economic times. Additionally, the budget for FY 2009 actually CUTS spending. There is a 1.3% reduction in appropriations in FY 2009 as compared to FY 2008. So, so far in this economically difficult year we have a $20 million revenue increase to cover a $120 million reduction in appropriations.
Which roughly means that, over the next eight months, revenues can fall $140 million short of 2008 revenues and still meet budgeted appropriations levels.
Since 1987, there is one year in which state revenues actually declined. Between FY 2001 and FY 2002, revenues dropped 1.4%, from $6.65 billion to $6.56 billion. Today, a 1.4% drop would be $121 million.
Because the FY 2009 budget includes a $120 million reduction in spending and we currently are running $20 million ahead of FY 2008, in order to have a $300 million hole in the budget, revenues over the next eight months will have to fall $440 million short of 2008 levels. FY 2008 actual General Fund receipts were $8.664 billion, so a $440 million drop in eight months is a 7.6% reduction. I know times are tough, but…
