Sen. Chris McDaniel, R-Ryland Heights, speaks on the Senate floor, Feb, 4, 2025. (LRC Public Information)
A Republican leader has raised concerns about whether political games are being played with budget forecasts that show new revenue amid a very uncertain economic forecast.
At a legislative meeting Wednesday, Senate Appropriations and Revenue Committee chair Chris McDaniel, R-Ryland Heights, said he was worried about a revised state revenue forecast last month that Democratic Gov. Andy Beshear touted as being an extra $1.7 billion that could be spent on Kentuckians.
Beshear cited “strong fiscal management by my administration” and a “surging economy” as reasoning for the extra funding. But the group of economists who revised the state revenue forecast had a more gloomy future outlook on the economy because of “much uncertainty” about artificial intelligence investment and the ongoing war with Iran.
During the Wednesday meeting, McDaniel said that the “the words don’t seem to match the numbers.” Greg Harkenrider, a deputy director within the state budget office, was giving a presentation on the new outlook for state tax revenues.
“I have a concern when the underlying conditions are a continuation of a war, tighter energy markets, higher energy prices, greater uncertainty, erosion of consumer and business confidence, declining consumer demand,” McDaniel said. “And oh, by the way, with all of those — now we’re going to bring in a billion dollars more in taxes.”
Meanwhile, during a Wednesday press conference, Beshear called on state lawmakers to spend the new funding on Medicaid, universal preschool and senior meals.
When asked by a reporter about if he’s spoken with legislative leadership, Beshear said meetings were coming up.
“There is real opportunity to help our people with recurring revenue, because our economy is still surging, even if our families aren’t feeling it. So the General Assembly is going to have a basic question to answer: With additional recurring revenue, are they willing to help people or not?” Beshear said to reporters.
Wednesday’s dueling commentary could be a preview of future debates when the GOP-controlled state legislature meets next year on whether to reopen the state budget during the shorter non-budget session. Lawmakers could reopen the state budget but would need to meet a higher vote threshold on any bill to do so. It would also be the last legislative session where Beshear would be governor because he is term-limited.
GOP-controlled state legislature had already crafted and passed a two-year state budget when they met in early 2026, a budget the minority Democrats and Beshear argued significantly underfunded needs including Medicaid and education. Republican lawmakers have pushed back on those characterizations, seeking to control what they see as unsustainable executive branch spending.
The debate whether to spend new tax revenue is happening as Republicans in the legislature try to eventually eliminate the state’s income tax, traditionally a major source of tax revenue for the state. In a letter last month, Hicks wrote to state lawmakers that the state missed a fiscal trigger by more than $1 billion to further cut the state’s income tax rate.
The Consensus Forecasting Group is the nonpartisan group of economists from around the state who had made the “pessimistic” projection of how much future funding the state will bring in.
State Budget Director John Hicks had requested the group meet again to revise the tax revenue forecast after the state had received hundreds of millions of dollars of “unexpected” corporate income tax payments this summer, according to the governor’s office. At one point, McDaniel asked if those corporate payments were “goosed” by AI investment and whether there was a “bubble.”
McDaniel also questioned the timing of Hicks calling in the Consensus Forecasting Group.
“A lot of us have a worry that what we’re beginning to see is the utilization of CFG in a manner that it’s not intended for,” McDaniel said, mentioning concerns that “important institutions appear to be co-opted for political purposes.”
“If CFG happens to be wrong with this revised forecast and we spend this money, the very governor who’s proposing the spending will not have to stand to account for it because he will be out of office, the budgetary shortfall will fall on the next guy, and it becomes very problematic,” McDaniel said.
In an emailed statement, Beshear spokesperson Scottie Ellis said statements by McDaniels “are baseless and politically motivated.” She pointed to state law that requires the state budget director to “monitor the financial situation” of Kentucky.
“The Consensus Forecasting Group has been called on two other times during the Beshear administration — the only difference is that in this instance, there is a surplus from which dollars can be used to help Kentuckians through Medicaid, senior meals and more,” Ellis said. “While these are the very programs the Republican supermajority cut in the last session, claiming lack of funds, they have no excuse in the upcoming session.”
Courtesy of Kentucky Lantern
