Commentary: Kentucky's budget lacked reserves

This editorial appeared in The Lexington Herald-Leader.

It's not the fault of state lawmakers and Gov. Kathleen Sebelius that a global economic downturn is creating budget problems for the state. But they do deserve some blame for not ensuring that the state was in a better financial position to deal with the downturn.

State law requires that the state budget include a reserve of at least 7.5 percent of its expenditures. A main purpose of this ending balance is to help the state respond to unexpected budget challenges.

For example, state revenue dropped more than 7 percent in the months after the Sept. 11 attacks. State government was able to make it through that fiscal year in large part because it had a $365 million ending balance that it could dip into.

But since then lawmakers haven't followed the ending-balance law and have passed budgets with much smaller reserves.

Initially, that was a risky but understandable move, as the state was trying to get through a rough economic patch and didn't have the money to build up the ending balance. But in recent years, when the economy was doing well, lawmakers still lowered the ending balance as a way to help pay for increased spending on schools and Medicaid and tax cuts for businesses. As a result, this fiscal year's budget has an ending balance of less than 2 percent of expenditures, or $120 million. That's not nearly enough to cover the $230 million projected drop in state revenue this year.

To read the complete editorial, visit The Lexington Herald-Leader.