FRANKFORT – Governor Steve Beshear gave Kentuckians another boost of confidence in the state’s ongoing economic progress on Wednesday by placing $82.5 million of surplus into the “rainy day fund,” increasing the fund balance to $209.4 million.
The $82.5 million surplus is the product of a 5.3 percent increase in general fund revenues for Fiscal Year 2015 from growth in individual income and sales taxes and business tax receipts.
“Over the last seven-plus years, I have partnered with lawmakers, business leaders and local officials to grow Kentucky’s economy and to manage us through the worst recession of our lifetime,” Gov. Beshear said. “We have made steady progress, but in the last several months, Kentucky has seen its recovery accelerate thanks to a dipping unemployment rate and an increase in business investment.”
Gov. Beshear said because revenues came in $165.4 million higher than predicted, “we grew our revenues – not by raising taxes – but the old-fashioned way: We earned it. We earned it by growing our economy. In fact, it appears that our economic recovery was even stronger than we thought when this two-year budget was written.”
An official Federal Reserve evaluation concludes that Kentucky’s economy has not only recovered losses suffered during the recession but has moved on to its highest-ever economic activity.
“Here’s an interesting pair of numbers – since Fiscal Year 2008, General Fund revenues have increased by 15 percent,” Gov. Beshear said. “Meanwhile, expenditures, not counting the inflationary effect, increased only 7.6 percent – less than half as much. That’s strong financial management. And it’s a sign of growth in our economy.”
This is supported by Kentucky’s June unemployment rate that held steady at 5.1 percent, which is the 11th consecutive month it was below the national average. Kentucky’s seasonally adjusted nonfarm employment increased by 2,200 jobs in June from the month before, and jumped by 40,100 positions since June 2014.
Last year’s record economic development investment helped pave the way for the most recent results. In March, Kentucky was presented with the historic Governor’s Cup for most economic development projects per capita for 2014 from Site Selection Magazine. Last year, Kentucky announced more than 350 new location and expansion projects, which are projected to create nearly 15,000 jobs and more than $3.7 billion in new investment. That is the most business investment in Kentucky since the state started recording investment data in 1987.
In June, Area Development magazine recognized Kentucky with a Silver Shovel Award for being one of the most successful states in creating jobs and securing investments in 2014. Earlier this year, the magazine ranked Kentucky first in state workforce development for the Southeast.
The Governor’s aggressive efforts in attracting foreign direct investment and increasing Kentucky’s exports have aided the state’s recovery.
In the past two years, 35 percent of new investment and 27 percent of new jobs came from foreign direct investment projects, accounting for 20 percent of Kentucky’s newly announced economic development projects. Kentucky is currently home to 436 foreign-owned facilities from 31 nations, employing more than 85,000 people.
Kentucky has shattered export records for four years running, which shows that the state’s ongoing initiatives to help businesses succeed are working. The Commonwealth exported a state-record $27.5 billion in 2014.
The Governor announced last week that the state ended fiscal year 2015 with $165.4 million in excess revenues when General Fund receipts grew more than 5 percent. The amount of excess revenues exceeded budgetary projections making the current fiscal year (2016) budget structurally balanced. This is the first time since 2006 this has occurred.
After taking out fiscal year 2015 necessary government expense, the $165.4 million in excess revenues resulted in a $139.1 million General Fund surplus. After adjustments for current fiscal year necessary government expense, the remaining $82.5 million will be deposited into the Budget Reserve Trust Fund.
The balance of the rainy day fund, known as the Budget Reserve Trust Fund, was $63.4 million, but grew to $209.4 million with the infusion of the $82.5 million in surplus and the addition of $63.5 million captured from House Bill 510 during the most recent legislative session.
The Road Fund revenues were down $20 million in fiscal year 2015 from the official revenue estimate. The Road Fund, however, finished the fiscal year with a small surplus, $6.3 million, as a result of spending less than anticipated by the administration.
Gov. Beshear has been aggressive in road building and maintenance programs throughout his administration. In fact, the Kentucky Transportation Cabinet, under Gov. Beshear, has contracted for about $1 billion each year in needed bridge and highway projects that improve safety and performance and enhance economic development.
The Beshear administration has awarded $7.5 billion in highway contracts in the last seven years. Major projects include the Mountain Parkway, Interstate 69, the Ohio River Bridges Project, widening of I-65 and I-64, and – after many years of waiting – modern new bridges over Lake Barkley and Kentucky Lake.
The Budget Reserve Trust Fund is used by state leaders as a resource during difficult fiscal times. Gov. Beshear has managed 15 budget shortfalls totaling $1.6 billion throughout his administration brought on by the recession.
“Lawmakers and I have used the fund to protect our key priorities of education, health care, public safety, and job creation,” Gov. Beshear said. “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 Governor said he realizes that despite the state’s progress, Kentucky still faces economic and budgetary challenges, including necessary investments in education and ensuring the long-term reliability of public pensions.
“We’re obviously not where we want to be and we won’t stop our aggressive work to strengthen the economy, build a stronger workforce, advance education programs and offer affordable, quality, comprehensive health care to all Kentuckians” Gov. Beshear said. “Finishing the 2015 fiscal year with a significant surplus, however, better positions our next Governor to build on our successes for generations to come.”