Kentucky Budget Process

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This is a discussion of the budget planning process in Kentucky.

The Budget Process in General

Kentucky’s budget process is governed by the Kentucky Constitution, various statutes and House and Senate Rules pertaining to the legislative process. The state’s fiscal year runs from July 1st through June 30th. The legislature enacts a new budget every two years, so each budget bill covers two fiscal years. All three branches of the government take part in the budget process. Below, is a brief description of the funds used by the state, a summary of the budget development process, and a summary of the planning/goal-setting processes required by statute.


Section 47 of the Kentucky Constitution grants the legislature the authority to raise revenue.[1] There are several sources of funding for the state budget: the General Fund, the Road Fund, federal funds, restricted funds, bonds, and money earned from various assets.[2]

Money in the General Fund comes from sales and use taxes, licence and privilege taxes, severence taxes, corporate and individual income taxes, property taxes and inheritance taxes. In addition to the general 6% sales tax, other examples of sales and use taxes are taxes on alcohol and tobacco products, insurance premiums, telecommunications, and race track admissions. Examples of license and privilege taxes are taxes on coal severance, corporate licensing, oil production, race tracks, bank franchises, driver licenses, limited liability entities, and natural gas severance. The General Fund also receives money from various fees and fines, interest on investments and the Kentucky Lottery.[3]

The Road Fund is made up of funding from: the motor fuels tax, motor vehicle usage, motor vehicle licensing, motor vehicle operators licensing, and truck decal fees. The Road Fund also receives money from investment income.[4]

Restricted funds consist of money received by a particular agency which is restricted by statute for a particular use within that agency.[5]

Section 171 of the Kentucky Constitution requires the budget to be balanced and requires the General Assembly to provide an “annual tax, which, with other resources, shall be sufficient to defray the estimated expenses of the Commonwealth for each fiscal year.”[6] Therefore, the amount of money budgeted must not exceed available funds. To ensure the budget does not exceed the available funds, the Consensus Forecasting Group provides revenue estimates to each branch of government.[7] For each budget, the general assembly is required to create a reduction plan to be implemented in the instance there is a revenue shortfall of 5% or less which cannot be covered by surplus funds from the general fund or road fund.[8] A revenue shortfall greater than 5% requires action by the legislature. The general assembly is also required to create a plan for use in the instance there is a surplus in the general fund or road fund.[9]

The Legislative Process

The budget development process begins when the Executive, Legislative and Judicial branches summarize their budget requests. The requests are submitted to the House and turned into bill form. The bills first go to the House Appropriations and Revenue Committee (hereafter A & R Committee) where they are reviewed. These committee meetings are open to the public.

In the House of Representatives, there may be no more than twenty-nine members in any particular committee.[10] The exact number is determined by the Committee on Committees.[11] This committee also determines the proportionate number of individuals from the majority and minority parties to be appointed.[12] A chair from any standing committee or statute committee is not allowed to serve as a member of the A & R Committee.[13]

The A & R Committee is divided into seven subcommittees: Economic Development; Natural Resources and Tourism; Primary and Secondary Education; Post-Secondary Education; General Government Finance and Public Protection; Human Resources; Justice, Corrections and Judiciary; and Transportation.[14] For each of the A & R subcommittees, the Committee on Committees appoints no more than four members of the A & R committee and no more than six members of other standing committees.[15]

A & R sub-committees must notify members of any other standing committees whose jurisdictional area would be affected by the action of any meetings or hearings.[16] These individuals are allowed to participate in the A & R sub-committee meetings as non-voting members.”[17] At times, individuals from the branch, cabinet or agency levels might be requested to provide additional information pertaining to their requests.[18] After the bills clear the A & R Committee, they receive a vote from the house as a whole. When the bills receive approval from the House, they are sent to the Senate where they undergo a similar review process. The Senate A & R committee is broken down into the same sub-committees as the House. However, the requirements pertaining to membership numbers are different. Senate Rules state there must be at least three members appointed to each subcommittee.[19]

After the bills clear the Senate, they move to a Conference Committee made up of representatives and senators to resolve any differences between the House and Senate versions. The final bill is then sent to the Governor. He has the authority to approve the bills, veto them in their entirity or to make line-item vetoes.

Planning/Goal Setting

Strategic Planning

Each program cabinet is required by statute to submit a four year strategic plan to meet the broad goals outlined by the Governor.[20] Each plan must at least include:

  • A statement of the cabinet or administrative entity's value, vision, and mission;
  • A statement of how the cabinet or administrative entity's strategic plan is aligned with the Governor's goals and linked to the budget request and the six (6) year capital plan of the cabinet or administrative entity;
  • A brief summary of a situation analysis conducted by the program cabinet or administrative entity;
  • Identification of measurable goals for the next four (4) years;
  • Specification of objectives to meet the stated goals;
  • Identification of performance indicators to be used to measure progress toward meeting goals and objectives; and
  • A progress report providing data and information on the performance indicators set forth in the program cabinet or administrative entity's most recent strategic plan.[21]

During each even-numbered fiscal year, program cabinets are required to submit a progress report which provides information regarding the progress made toward meeting its goals as measured by performance indicators set forth in their most recent strategic plan.[22] A copy of the most recent strategic plans and progress reports can be found on the Personnel Cabinet’s web-site.[23]

Kentucky Long-Term Policy Research Center’s Biennial Report

Each agency is required to ensure their budget priorities address a biennial report published by the Kentucky Long-Term Policy Research Center.[24] The report, currently titled “Visioning Kentucky: Measures and Milestones 2008,” covers trends affecting the Commonwealth and the long-term implications of those trends.[25] The report consists of twenty-six goals within the areas of Community, Education, Economy, Environment and Government.[26] The goals are based on a vision statement developed in 1994 after the center engaged the public in fifteen forums across the state and numerous mailings to the public that sought comment on various drafts of the statement.[27] The vision statement is:

“We envision a future for the Commonwealth of Kentucky that unites us in common purpose and builds on the strengths of our heritage and our resources. We see vibrant, nurturing communicites, lifelong, qualitiy educational opportunities, a sustainable, prosperous economy, a clean beautiful environment, and honest, participatory government at all levels.”[28]

Based on the vision statement, the Long Term Policy Research Center’s Board of Directors then developed twenty-six goals and one-hundred and three measures of progress related to the goals.[29] The goals are measured quantitatively by “The State of the Commonwealth Index,” which ranks Kentucky’s status among other states. This index is based on statistical data covering various “long-term quality-of-life indicators.”[30] The statistical data is derived from state and national studies of indicators such as Home Ownership Rate, Smoking Rate, High School Diploma Attainment Rate, and Home Computer Access.[31] For each of the various surveys, a number is given to show how Kentucky compares to other states. The scores are averaged to give a score for each area of Community, Education, Environment and Government. The final score is based on the weighted average of each area.[32]

The goals within the report are also measured subjectively based on citizen opinion regarding the importance of the twenty-six goals as well as the progress made towards each.

Capital Planning

For capital projects, there is an additional planning process which involveds the Capital Planning Advisory Board of the General Assembly. This board is made up of members appointed by the Governor, the Chief Justice, the Speaker of the House and the President of the Senate.[33] Every two years, the board is required to develop a capital improvement plan to be submitted to the Governor, the Chief Justice, and the Legislative Research Commission.[34] The plan includes a list of all capital projects “the board recommends be underaken or continued during the six year period beginning with the upcoming biennial budget.[35] The plan includes: the board’s recommended prioritization of projects; information regarding the effect the projects would have on operating expenses; A forecast as to the requirements for capital proejcts of state agencies during the six year fiscal period; a review of capital projects which are in the process of completion or have recently been completed; and recommendations for the maintenance of state property and equipment.[36] In order to develop this plan, state agencies are required to provide the relevant information to the board by April 15th of each odd-numbered year.[37]


Pre-Legislative Preparation

Budget Process 1.jpg

Legislative Enactment

Budget Process 2.jpg

Summary of Budget-related Statutes




  1. KY Const. § 47, available at (last visited Sept. 24, 2009).
  2. Legislative Research Commission, Features of the Biennial Budget, available at (last visited Sept. 24, 2009).
  3. To see a record of the monthly General Fund receipts by source, visit the Office of State Budget Director’s website at
  4. To see a record of the monthly Road Fund receipts by source, visit the Office of State Budget Director’s website at
  5. Legislative Research Commission, State Budget Process; Features of the Biennial Budget, available at (last visited Sept. 24, 2009).
  6. KY Const. § 171, available at (last visited Sept. 24, 2009).
  7. Ky. Rev. Stat. Ann. §48.120 (West 2006).
  8. Ky. Rev. Stat. Ann. §48.130 (West 2006 & Supp. 2008).
  9. Ky. Rev. Stat. Ann. §48.140 (West 2006 & Supp. 2008).
  10. Kentucky Legislature, Rules of Procedure for the 2009 Regular Session of the House of Representatives, Rule 39, at 12, availabe at (last visited Sept. 24, 2009).
  11. Id.
  12. Id.
  13. Id. at 12-13.
  14. Id. Rule 42 at 19.
  15. Id.
  16. Id., Rule 42A, at 20.
  17. Id.
  18. Legislative Research Commission, State Budget Process; Enacting the Budget, available at (last visited Sept. 24, 2009).
  19. Kentucky Legislature, Rules of Procedure for the 2009 Regular Session of the Senate, Rule 42, at 19, available at (last visited Sept. 24, 2009).
  20. Ky. Rev. Stat. Ann. § 48.810 (West 2006 & Supp. 2008).
  21. Id.
  22. Id.
  23. (last visited Sept. 24, 2009).
  24. Ky. Rev. Stat. Ann. §48.040 (West 2006). See also Ky. Rev. Stat. Ann § 7B.060 (West 2006).
  25. Michael T. Childress Et Al., Visioning Kentucky’s Future: Measures and Milestones 2008 (Kentucky Long-Term Policy Research Center 2008) available at (last visited Sept. 24, 2009).
  26. Michael T. Childress Et Al., Visioning Kentucky’s Future: Measures and Milestones 2002, at 2 (Kentucky Long-Term Policy Research Center 2002) available at (last visited Sept. 24, 2009).
  27. Id.
  28. Id.
  29. Id. at 3.
  30. Visioning Kentucky's Future: Measures and Milestones 2008, at 187, available at
  31. The 2008 report is based on data from years 1990 through 2007.
  32. Id.
  33. Ky. Rev. Stat. Ann. § 7A.100 (West 2006).
  34. Ky. Rev. Stat. Ann. § 7A.120 (West 2006).
  35. Id.
  36. Id.
  37. Id.
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