State Budget Forecast Hits Mark, Budget in Shape for FY 2010
Way back in November, we asked "So When Are State Revenues Going to Tumble?"
The Consensus Forecasting Group had met, and on November 26, released a forecast of general fund revenues of $8.4299 billion for fiscal year 2009.
We were skeptical of this claim through the first half of the fiscal year, but February revenues took a tumble, causing us to write:
It is unlikely we'll know where we'll end up until we are there.
Revenues were significantly down in April and June as well. Now the fiscal year has concluded, and the revenue number is in. The State Budget Office reports that fiscal year 2009 revenues were $8.4264 billion.
Only $3.5 million off! How's that for accuracy?
Now, because the tax hikes passed in February, the budget office is saying revenues are actually $55 million short:
FY09 General Fund revenues were $55.7 million less than the official revised revenue estimate rendered by the Consensus Forecasting Group and modified by 2009 legislation, which projected a 2.1 percent decline in revenues.
But the new tax is irrelevant when comparing the final revenue number to expectations set when the budget was passed in 2008. This is a misleading way of looking at things that has been used before.
The important numbers are that the 2008 budget expected to spend $9.330 billion in FY 2009 based on revenue that included $8.824 billion in General Fund revenues. The General Fund ended up at $8.426 billion, falling $398 million short of expectations.
To make up that shortfall, Governor Beshear told us he'd make $147 million in cuts, and the General Assembly authorized him to spend the state's rainy day fund (a little over $200 million) and $50 million of the state pension plans' health fund. The total of those funds cover the shortfall almost exactly, but the $50 million of borrowing and spending of reserves budgeted for FY 2010 creates an immediate hole for FY 2010.
Nonetheless, because revenues hit the original revised forecast, our analysis from May still stands: if FY 2010 revenues match FY 2009 revenues at about $8.425 billion, the state would have to answer a $500 million shortfall. (We would compare this to the May CFG estimate, but it does not seem to be an official estimate, or at least there's no forecast online.)
The recent special session provided options that would cover a shortfall of $1 billion. FY 2010 would have to decline by more than 5% versus FY 2009 for that plan to be inadequate.
