Budget official: Kentucky Economy Shows Promise as FY 2011 Nears End
Third quarter growth of the state’s General Fund in fiscal year 2011 was strong, with $113.6 million in growth in May alone, a state budget official told a legislative committee today.
Greg Harkenrider with the State Budget Director’s Office told the Interim Joint Committee on Appropriations and Revenue that General Fund growth was 17.8 percent in May. Individual income tax receipts--which accounted for an increase of $93 million--showed the most growth, he said. Corporate income tax and coal severance tax revenues are also doing well with the state running in excess of projected revenues, he added.
“The third quarter was a great quarter, and it looks good going forward,” said Harkenrider.
Improvement has come in spite of Kentucky’s lag in personal income and wage growth nationally, he said. Recent growth in personal income for the U.S. was 5.6 percent compared to 4.7 percent for Kentucky. But that Harkenrider said that does not bother him much.
“We never were hurting as badly as the rest of the U.S. during the recession,” he said. “The fact that we had lower growth does not (overly concern) me.”
In fact, he told lawmakers, continued growth is expected in June although how much growth remains to be seen. Housing growth has been slow, but he expects the housing market to grow as jobs expand through increased production.
It was mentioned that Federal Reserve Chairman Ben Bernanke had expressed concern with the national economy earlier today. Recent supply disruptions aside, Harkenrider said he thinks most economists do not expect there to be a “double dip” recession that would hinder economic recovery.
Once the books are closed on fiscal year 2011, Kentucky officials will be able to determine if there will be any state budget surplus. Surplus funds would be classified as non-budgeted necessary government expenses for emergency needs or placed in the state’s Budget Reserve “rainy day” trust fund to be appropriated later.
Rep. Ron Crimm, R-Louisville, said any surplus must be carefully protected.
“Here we are with Medicaid trouble…and we need to guard (that money),” Crimm said.
The state Road Fund is also doing well, Harkenrider said. Revenue from the state motor fuels tax and state usage tax (or sales tax paid on motor vehicles when purchased) has increased, with usage tax revenue exceeding budget estimates by $18.4 million.
State census data was also shared with the committee by Ron Crouch of the state Office of Employment and Training. Crouch’s data indicates that Kentucky is one of four states (Tennessee, North Carolina and Virginia are the other three) that have real potential for growth as the Midwest and Northeast fall into decline. The data also shows a return in manufacturing jobs to the U.S. due to demographic shifts in China and elsewhere, Crouch said.
The U.S. manufacturing sector has been in decline for years.