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Bevin’s case for pension, tax reform boosted by $138.5M shortfall, legislators say

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FRANKFORT, Ky — As Gov. Matt Bevin advocates for pension and tax reform, his administration must grapple with a $138.5 million shortfall in tax revenues for the most recent fiscal year.
The shortfall — announced in a Monday news release from State Budget Director John Chilton — presents a short-term challenge for Bevin’s administration since the state is constitutionally required to have a balanced budget each year.
But State Sen. Chris McDaniel, R-Taylor Mill, said the bigger concern is what will happen if tax revenues once again fall short of expectations for the fiscal year that began July 1.
Balancing the budget for fiscal year 2017-18 could become a tougher challenge than balancing the 2016-17 budget, he said.
“If revenues aren’t going to keep pace, the first thing we’ve got to get a handle on is expenditures,” McDaniel said, noting that Kentucky’s pensions are a big part of that.
Amanda Stamper, Bevin’s spokeswoman, said in an email that the state’s budget office is preparing options for balancing last fiscal year’s budget, which will be discussed with the governor. A course of action will be announced this week, she said.
Bevin has repeatedly said he plans to hold a special legislative session that will tackle pension and tax reform this year.
According to Chilton’s release, Kentucky’s general fund collected 1.3 percent more money for fiscal year 2016-17 than it did for the prior year, but the tax revenue still fell 1.3 percent short of predictions. (The state had projected a growth rate of 2.7 percent.)
Chilton pointed to a steep drop in corporate revenues earlier this year as a key reason for the struggle.
The shortfall wasn’t a total surprise for state officials. The Bevin administration asked state agencies to cut their spending by 1 percent in June because state officials were anticipating a $113 million shortfall.
State Rep. Steven Rudy, R-Paducah, said the governor saw this coming and that’s why his administration pushed for the cuts.
Rudy said he and other lawmakers will soon get a final debriefing on how the state balanced its fiscal year budget. The shortfall strengthens the argument for implementing pension and tax reform in Kentucky, he said.
State Rep. Jim Wayne, D-Louisville, said he commends Bevin for his boldness in pushing tax reform.
“This is all predictable. Even with the economy growing and booming in many parts of the state, the revenues are not keeping pace with expenditures,” he said. “We’re at the edge of a cliff here, and we have a governor who’s willing to lead.”
But whether Republicans in the legislature will follow Bevin’s lead is still in question, Wayne said.