Governor Steve Beshear has some great news for Kentucky taxpayers! He announced today that the state closed Fiscal Year 2011 with a $156.8 million General Fund surplus, on the strength of positive revenues that exceeded budgeted levels. More than 75 percent of that surplus — $121.8 million — will be deposited into the Budget Reserve Trust Fund, the state’s so-called “rainy day fund.” This is the largest such deposit in state history from an end of year surplus.
“Many of our families are still facing challenges from this economy, but this end of year report shows that Kentucky’s economy continues to grow and improve,” said Gov. Beshear. “I am very pleased we are able to begin replenishing the state’s Budget Reserve Trust Fund, which we had used to protect our key priorities of education, healthcare, public safety, and job creation. True to its name, the “rainy day fund” helped our state weather the economic storm without causing devastating cuts to many of the services our families needed most.”
The Budget Reserve Trust Fund was exhausted during the recession to buffer the depth of budget cuts over Fiscal Years 2008, 2009 and 2010. It had reached a peak of $278.6 million in FY 2001, but was completely exhausted in FY 2002 resulting from the economic downturn associated with the September 11 terror attacks. More recently, the Fund had grown to $231.5 million in FY 2007, but was depleted over the following three years to help offset revenue shortfalls and mitigate deeper budget cuts.
The remainder of the surplus, $35 million, will be used to pay necessary government expenses in Fiscal Year 2012, including costs associated with recovery from natural disasters, such as the spring floods that caused heavy damages to parts of western Kentucky.
Earlier this month, State Budget Director Mary Lassiter reported that Kentucky’s General Fund receipts rose for the first time in three years and posted the highest growth rate since Fiscal Year 2006. Final Fiscal Year 2011 revenues were $166.1 million, or 1.9 percent more than the official revised revenue estimate which projected a 4.5 percent increase in revenues.
Lassiter said Kentucky is in a strong position relative to many other states, thanks to a diverse economy and resilient tax base. In June, the state’s unemployment rate dropped to 9.6 percent – the lowest rate since January 2009.
“The addition of nearly $122 million into the Budget Reserve Trust Fund is a strong message to the nation’s credit rating agencies,” said Lassiter. “The lack of a robust rainy day fund had been a noted concern among rating agencies. This deposit is a clear signal to those agencies that Kentucky is not only rebounding, but is also making prudent fiscal choices.”
For the fiscal year that ended June 30, 2011 (Fiscal Year 2011), General Fund receipts totaled $8.7 billion, or 6.5 percent higher than Fiscal Year 2010 collections. Revenue collections showed solid growth in each of the four quarters throughout the fiscal year with especially strong growth in the final quarter. Growth rates in the four quarters were 4.4 percent, 6.3 percent, 5.2 percent and 9.6 percent.
The state’s Road Fund closed Fiscal Year 2011 with a $67.5 million budget surplus. Those funds will be deposited into the state construction account for projects in the biennial highway construction plan.
“The report is good news for our state, but it does not mean our work is done,” said Gov. Beshear. “I remain committed to steady and measured budgeting that maintains critical services for our citizens. I have rebalanced the budget nine times, cutting more than $1 billion while protecting our highest priorities – education, public safety and job creation. I will keep working to help our families weather the lingering effects of the economic downturn. Attracting and maintaining jobs remains my top priority.”