A Legislative Perspective on the Kentucky General Assembly with State Representative Rick Rand October 30, 2017

FRANKFORT – They may be unknown to the general public, and their subject matter may be a little dry, but the seven economists who comprise the Consensus Forecasting Group have a powerful role to play: They determine just how much money state government can expect.

As anyone who has ever put a budget together knows, it can be tough to predict what a year will bring.  Their job, however, is even more difficult: They have to look more than 30 months ahead, to cover not just the two-year span for state government’s budget but also the six additional months needed to prepare, pass and implement it.

It is not an exact science, of course, but with billions of dollars to consider, their predictions historically have been very close to the mark.

This group only meets a handful of times in a year, with the most recent being a couple of weeks ago.  In December, it will issue final figures in time for a budget process that formally kicks off when the governor presents his proposed spending plan to the General Assembly in January.

The charts and bullet points that the economists use to make their predictions can cause eyes to glaze over, but a closer look at the data offers some telling insights into the nation’s and, more specifically, Kentucky’s economy.

By 2020, for example, the nation’s non-farm labor market is expected to reach 150 million jobs, a significant increase from the 130 million we had in 2010, the low point of the Great Recession.

Manufacturers have been part of that same upward trend, but still have a long way to go to match the employment levels they had in 2006.  The same goes for new-housing starts.

At the same time, consumer spending, when adjusted for inflation, saw a much smaller decline during the recession and a steeper increase since then.  A decade ago, we were spending $8.5 trillion, a figure that excludes food and energy costs; now we’re nearing $11 trillion, and even pessimistic forecasts don’t show that slowing much.

In Kentucky, we’ve added about 150,000 jobs since 2012, and personal income that was around $150 billion that year should top $200 billion by the end of the decade.

Kentucky’s current two-year budget – every federal, state and restricted dollar that flows through state government – totals about $74 billion.  About 30 percent of that is what we call the General Fund, the portion of state funding that largely determines how the rest is spent.  Most of that goes to three main areas: education, public safety and health and human services.

According to the Consensus Forecasting Group, the General Fund is running about $150 million short this fiscal year, which will end next June 30th.  That’ll be tough to cover in light of numerous budget cuts we’ve made over the past decade, but there is hope the economy is improving enough that the final shortfall will be smaller.  In August, it was forecast to be $200 million, so we’re at least moving in the right direction.

Last week, legislators that write the budget in the House and Senate heard from some state officials about what spending changes they would like to see.

In his presentation, the leader of the Council on Postsecondary Education said our colleges and universities have spent about three times as much on new buildings over the past two decades as they have on maintaining existing ones.  As such, postsecondary leaders are hoping legislators will provide a significant amount of money for upkeep rather than groundbreakings.

A presentation by the Kentucky State Police commissioner called for greater spending on equipment.  He said the average mileage on his agency’s cruisers is more than 140,000.  Some of their rifles are decades old, while parts are unavailable for some of their radio systems.

These are just some of the challenges that will have to be considered when other legislators and I begin working on the budget early next year.  It’s not going to be easy, but we will work on finding a way to balance what we have with what we need.

If you have any thoughts on this, please let me know.  You can write to me at Room 432F, Capitol Annex, 702 Capitol Avenue, Frankfort KY 40601; or you can email me at Rick.Rand@lrc.ky.gov.

To leave a message for me or for any legislator, call toll-free at 800-372-7181. For those with a hearing impairment, the number is 800-896-0305.

I hope to hear from you soon.

Paid for by Rick Rand for State Representative, Regina Rand, Treasurer