FRANKFORT – Gov. Steve Beshear announced Wednesday 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.
The state's rainy day 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 Fiscal Year 2001, but was completely exhausted in 2002 resulting from the economic downturn associated with the Sept. 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, 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.