KentuckyGeneral Assembly

Budget Execution and Oversight

AFTER A SESSION

The Commonwealth Budget Document is compiled and published by the Governor's Office for Policy and Management (GOPM).
The Commonwealth Budget Document includes detail and summary records of the enacted budgets for each agency and branch of state government, summary information about appropriations by budget funds, detailed revenue data based upon final actions on revenue-related measures, debt management and bond authorization information, personnel data, copies of the enacted branch budget bills, and the Final Budget Memorandum.
The Branch Budget Bills and the Memorandum serve as the principal sources of guidance for administrative actions during interim budget execution and oversight.
The Budget Review Office prepares a post- session report of statutes affected by provisions in a budget bill and the Statute Reviser publishes these reference notes in relevant sections of the KRS.

Allotments

The Finance and Administration Cabinet, at the direction of GOPM, establishes a schedule for allotting appropriation authority contained in the branch budget acts.
No allotment may exceed its appropriation unless authorized by interim provisions of the budget law.
Allotments are usually distributed over quarterly intervals during the fiscal year, in reflection of disbursement and cash flow requirements.
General Fund and Road Fund appropriations may be increased only by explicit authority granted in the budget act or law.
Several state laws permit unexpended fund balances to be carried forward at the end of a fiscal year and be made available for additional expenditure.
As a general standard, General Fund and unobligated Road Fund balances lapse to the credit of the respective surplus account when the fiscal year closes.
Limited emergency conditions permit the state budget director to increase the level of appropriation for a budget unit. If this action occurs, notice and documentation must be communicated to the Interim Joint Committee on Appropriations and Revenue.

Expenditures

State expenditures are preaudited for availability of resources, conformity with legislative purpose, and compliance with regulations by the Finance and Administration Cabinet or a delegated agency.
Warrants are issued to the State Treasurer prior to disbursement of funds.
Bond authorizations and issues must be reviewed and approved by the Finance and Administration Cabinet.
The Finance & Administration Cabinet administers the capital projects program.
Universities also have statutory authority for financial and budget administration.
It should be noted that the budget act is the sole authority for some program expenditures and operations.

Fiscal Condition & Outlook Review

The budget act and the KRS now direct the Office of the State Budget Director to review and report to each branch head, on a quarterly schedule, actual and projected receipts for the General Fund and Road Fund, in comparison with enacted revenue estimates, and to note any potential impacts on the state's fiscal condition. This provision is designed:

to alert agency and branch officials, legislators and citizens of any forthcoming adverse fiscal condition which might require budget reductions, and
to enable officials to plan for such conditions in a timely and prudent manner.

Budget Reduction

All budget figures used in appropriations and revenue forecasts are "estimates" predicated upon assumptions about likely conditions and future events.
The General Assembly has enacted statutes to govern interim circumstances in which the originally enacted General and Road Fund revenues are not achieved or may be exceeded.
The branch budget bills include a Budget Reduction Plan, which provides the legislative policy guidelines when a revenue shortfall is officially forecast by the Secretary of Finance for the General Fund or Road Fund.

Each branch head must observe these principles and priorities in determining specific allotment reductions for individual programs and budget units.
The Budget Reduction Plan is activated when a General or Road Fund revenue shortfall of five percent (5%) or less is certified by the Secretary of Finance and unobligated surplus funds are insufficient to resolve the potential deficiency.
Administrative actions implementing a budget reduction plan are reviewed by the Interim Joint Committee on Appropriations and Revenue.

Surplus Expenditure Plan

As authorized in KRS Chapter 48, a General Fund or Road Fund Surplus Expenditure Plan may be proposed by the branch heads and enacted by the General Assembly in the branch budget bills.
Surplus Expenditure Plan is implemented when actual revenues exceed the enacted revenue estimate; a ceiling of 2 1/2% is established in law.
The Surplus Expenditure Plan provides additional appropriations authority for non-recurring expenditures or for a statutory program or service for which the regular appropriation was insufficient.
Past Executive budget bills have regularly included a Road Fund Surplus Expenditure Plan.
The 1994 Special Session of the General Assembly enacted the first implemented General Fund Surplus Expenditure Plan.
Administrative actions undertaken pursuant to a plan are reviewed by the Interim Joint Committee on Appropriations and Revenue.

Interim Budget Review & Revisions

The budget bill and the statutes prohibit the transfer of funds among appropriations, unless authorized by the budget bill. State law permits agencies to charge for services rendered to other state agencies, and funding transfers may be made under temporary reorganization orders.
Typical appropriation items cover multiple services and activities within a budget unit, in accord with the enacted budget plan.
Enacted budgetary allocations are outlined in the Commonwealth Budget Document and serve as the bases of distribution and reporting in the state's financial accounting system.
Interim budget revisions within an appropriation are allowed under law.

Budget allocations within the appropriation unit may be reprogrammed among services/activities or principal categories of expenditure, excluding debt service appropriations.
Allotment changes requested by agency heads must be authorized by the branch fiscal officer and notice of any budget revision, along with documentation of necessity and purpose, must be communicated to the Interim Joint Committee on Appropriations and Revenue prior to expenditure.
Emergency unbudgeted appropriations increases are allowed, when required, due to a declared natural disaster or calamity, judicial order, or an impending deficit in a mandatory expense, as certified by the Governor. Approval by the Finance Secretary and concurrent notice to the Interim Joint Committee on Appropriations and Revenue are stipulated in the law.

Unbudgeted appropriations for Executive Branch agencies may not be authorized or expended without prior review and action by the Interim Joint Committee on Appropriations and Revenue.

If an agency receives unanticipated restricted or federal funds or has available unbudgeted restricted or federal funds resources during the interim, spending authority may be requested of the Committee by an agency head.
This request must be accompanied by documentation of the source and proposed use of the moneys.
On a monthly schedule, the state budget director may recommend a revised appropriation for review and action by the Committee.
The Committee reviews a proposed expenditure of an unbudgeted appropriation for conformity with the purposes of the enacted budget bill, statutory budget memorandum and any relevant statute.
If the Committee disapproves of the proposed change, the budget adjustment may not be made, unless it is revised to comply with the Committee's objections, or the state budget director informs the Committee of a determination not to comply.

Designated branch officials have statutory authority to make administrative interpretations on questioned use or meaning of an appropriation in their respective branch budget bills.

When interpretation matters arise, the Committee must be informed of, and act upon, determinations made by the branch official. Interpretation decisions must conform with the statutory budget memorandum.
If the Committee disapproves an interpretation, the decision may not be implemented, unless it is revised to comply with the Committee's objections or the Committee is informed of a determination not to comply with the objections.

Legislative committees may not exercise powers of the General Assembly during an interim. However, budget revisions and interpretation procedures are reviewed to promote public awareness and inform legislators about interim budget actions.

The Committee and its joint budget review subcommittees also monitor implementation of the biennial budget bills and study fiscal issues and trends which may impact budget development for the forthcoming General Assembly.
The LRC has established a budget review office, with professional fiscal analysts and support staff, to assist LRC, the appropriations committees, and budget review subcommittees in performing their duties and functions throughout Kentucky's budget process and to provide an independent source of budget information for members.