State Budget Process
Features of the Biennial Budget
Budget Bills | Operating Budget | Capital Budget | Budget Info Reporting
Budget Bills & Appropriations
- Kentucky employs omnibus branch budget bills or general appropriation bills in its process.
- A separate branch budget bill is enacted for each branch -- legislative, executive and judicial -- and includes operating and capital appropriations and related fiscal provisions for all agencies and budget units in the respective branch.
- The Commonwealth's budget is the complete financial plan for the expenditure of public funds in each fiscal year of a biennium, as contained in the branch budget bills.
- Branch budget bills, unlike other acts, become law when approved by the Governor or, if vetoed, when finally acted upon by the General Assembly.
- An appropriation means the authority to spend a maximum sum of public funds for a particular purpose.
- A budget bill is law which is effective for the duration of a biennium.
- Budget bills are printed in the Acts of the General Assembly for each session.
- Budget acts are published in KRS Chapter 47.
- Provisions of a budget bill may modify or suspend, for the duration of a biennium, any statute which is germane to the broad subject of state government finance.
- The Constitution requires the legislature to enact a budget that balances spending within available resources by each budget fund or account. While the Constitution permits the state to incur a casual or unplanned deficit, tradition and state law prohibit a deficit in operations.
- The budget bill is organized into two appropriations sections -- the Operating Budget and the Capital Budget -- and additional parts which concern fiscal administration and policy.
The standard unit for appropriation in the budget bill is a department or agency;
Sometimes a division, program, or consolidated organizational units within a department or cabinet may constitute an appropriation unit in the Operating Budget.
Appropriations may not be transferred from one appropriation unit to another unit unless authorized by the budget bill, by charges for services, by statute, or by provisions of a temporary reorganization order.
Expenditures must be based upon an appropriation enacted by the General Assembly.
Capital project or debt service appropriations may not be used for another purpose.
Operating Budget
Fund Classification
The Budget Fund classification in the Operating Budget consists of the General Fund, the Road Fund, federal funds accounts and restricted funds accounts.
- The General Fund - consists of state tax revenue collected under general tax laws and other designated receipts available for the activities, operations and services of state government.
- The Road Fund - consists of money from excise or license taxation relating to gasoline or other motor fuel products, and moneys derived from fees, excise or license taxes relating to registration, operation or use of vehicles on public highways. The Constitution dedicates these revenues for highways and bridges, vehicle regulation and related state administrative purposes.
- Federal Funds - moneys received by state agencies in the form of grants, contracts or other assistance from the federal government for specified purposes.
- Restricted Funds - moneys collected by state agencies which are restricted by statute or budget bill for expenditure toward general or specific use by an agency. Restricted sources include regulatory or occupational licenses and fees, tuition, service charges, sales of goods or products, donations or grants from non-state sources and expendable receipts and earnings of trust type programs.
These fund sources, and proceeds from highway bond issues when authorized by the General Assembly, comprise the total operating budget of the Commonwealth.
Capital Budget
The Capital Budget lists line-item capital projects and associated appropriations by budget fund source. Road construction projects are excluded.
- Capital Budget projects are defined as acquisition or construction of a building, structure, property or utility estimated to cost $400,000 or more, acquisition of a major item of equipment or systems estimated to cost $100,000 or more, leased space costing more than $200,000, information technology systems costing $400,000 or more, and state use allowance payments of $200,000 or more for local court facilities.
- State budget law requires any project meeting these definitions to be authorized by line-item in a budget bill or other enabling act before public funds may be spent.
- Any bond project which is supported by state-appropriated debt service must be authorized by the General Assembly before bonds may be issued. The annual debt service and related fund source must be specified in the Operating Budget.
- In addition to the standard funds for the Operating Budget, other capital funds include moneys earned by assets, allocated receipts, and other project resources provided by off-budget entities and local jurisdictions.
Budget Information Reporting
- Budget information about services/activities and funding is organized and reported in budget documents at the budget unit level and summarized by major budget function or cabinet.
- Appropriation information in a branch budget act is organized at the agency, its consolidated budget units or significant program level, and summarized by major budget functions for state government.
- Operating
expenditures are classified by principal categories:
- personnel costs - salaries, wages and per diem payments, fringe benefits, personal services contracts and other similar expenses;
- operating expenses;
- grants and other financial assistance to persons, other jurisdictions and organizations;
- debt service for retirement of bond principal, interest and related costs; and
- capital outlay for equipment items and capital projects which do not exceed the Capital Budget threshold.
- The budget law requires that debt service appropriations not be used for any other purpose; excess General Fund and Road Fund supported debt service appropriations due to project cancellation and bond issue requirements lapse to the surplus account of the respective Fund.