Bluegrass Institute recommends a ‘historic downpayment’ on Kentucky's future through the Rainy Day fund
The Bluegrass Institute has recommended the General Assembly make a historic downpayment on Kentucky’s financial future by enacting a budget with a $750 million balance in the state’s “Rainy Day” fund.
In a letter to Rep. Jason Petrie and Sen. Chris McDaniel, the co-chairs of the budget conference committee, the Bluegrass Institute wrote:
Members of the General Assembly have inherited a multi-faceted fiscal mess. A critically important step in righting the ship is a credible Rainy Day fund.
The Bluegrass Institute’s recent report, “The Lost Decades: Kentucky’s Economic Underperformance 1980-2020” recommended structural changes to the state’s reserve fund.
A prior post praised the General Assembly for dismissing Gov. Andy Beshear’s “irresponsible” budget proposal. We wrote:
Beshear’s budget is full of gimmicks and platitudes. Every Governor is expected to propose a budget to meet their agenda but proposing the amount of new and recurring spending based upon one-time money is a recipe for a future reckoning.
For decades, Kentucky has had one of the weaker Rainy Day funds in the nation. The Tax Foundation ranks Kentucky 46th. According to Pew Charitable Trust’s Fiscal 50:
Five states had less than a week’s worth of operating costs in reserve: Kentucky (4 days), New Jersey (3.9), Pennsylvania (0.3), Illinois (less than a tenth of a day), and Kansas which had yet to make a deposit after creating the account in 2016.
For comparison, Indiana’s FY 2020 reserve fund balance was $1.4 billion, Tennessee $1.1 billion, Alabama $945 million. (Tax Foundation)
The BIPPS letter stated, “a healthy balance at the end of this session positions the legislature to consider the necessary statutory reforms to strengthen the fund” in the 2022 session.
It concluded, “We encourage the members of the conference committee to take the necessary steps to put Kentucky on a new, more fiscally responsible path.”
A copy of the letter is available at this link.
Here’s a link to the current budget documents.