Kentucky State Budget Grew 12 Times More Than Population Growth From 2000 to 2018

By Austin Dillon

New data compiled by Americans for Tax Reform shows drastic growth in Kentucky’s state budget in the past eighteen years, outpacing both population growth and inflation.

Between 2000 and 2018, Kentucky experienced 9.4% growth in population. Kentucky’s state budget, however, grew 116.12% – more than double the 18-year inflation rate (45.8%). In fact, Kentucky’s budget growth is more than double the inflation rate and population growth rate combined.

Kentucky’s ratio of budget growth to population growth is also significantly higher than the 50-state aggregate ratio. The 50-state population growth rate was 16.49% and was accompanied by a 118.43% increase in budget size, so the 50-state aggregate budget increase was a little over seven times the size of the increase in population. In comparison, Kentucky’s state budget increase was over twelve times the size of the increase in population.

How is Kentucky making use of these massive budget increases? Data from the National Association of State Budget Officers and the U.S. Census Bureau show that Kentucky’s top three per capita expenditures in Fiscal Year 2018 were Medicaid, primary and secondary education, and higher education. Kentucky spends more per capita on higher education and Medicaid than any of its neighbors and more per capita on elementary and secondary education than all neighboring states other than Indiana. Kentucky’s total per capita expenditures also exceeded both the individual total per capita expenditures of all neighboring states other than West Virginia and the average total per capita expenditures of all neighboring states.

Kentucky’s increased spending, however, does not appear to yield significant results. U.S. News and World Report recently ranked Kentucky 43rd in the nation for higher education and 32nd in the nation for Pre-K through12 education. All of Kentucky’s neighboring states – but West Virginia – outrank Kentucky in higher education, and all neighboring states but West Virginia and Tennessee outrank Kentucky in Pre-K through 12 education. Moreover, U.S. News and World Report ranked Kentucky 47th in the nation for health care quality, again only outranking West Virginia among its neighbors. Nonetheless, Kentucky continues to spend significant resources on education and Medicaid expenses with little demonstrable return on investment.

This trend of growing state spending will likely stall in the wake of the COVID-19 economic shutdown. As Kentucky begins to rebound from coronavirus-induced economic problems, it faces an estimated revenue shortfall between $318.7 million and $495.7 million through the current fiscal year. During the first two quarters of the 2021 fiscal year, revenues are anticipated to fall an additional 10.5% to 17.2%. Discussions of economic recovery from COVID-19 will likely lead to more questions regarding the future of the state budget. The one-year state budget passed in April was stripped of earlier provisions to provide raises to state employees and increase funding for K-12 schools and colleges. On April 29, the state budget director sent a letter asking state agencies to make preparations to cut spending by 12.5%.

Whatever the future holds for the state budget, state officials must recognize that inflating government spending at more than double the rate of population growth and inflation is irresponsible.